In this Case Study, Cogent Analytics discusses how a client was experiencing issues with their operations and work flow, which caused them to be severely inefficient and miss deadlines and back up production on new repair requests coming in.
The company highlighted in this case study is a maintenance, repair, and operations (MRO) company that completed significant repair and upgraded on large commercial aircraft. The company is a worldwide company with five domestic locations spread out within the United States. This case study focuses on 1 of these locations that continuously did not meet local or company objectives and profitability.
Imagine your company staying stagnant with no growth in revenue and losing net profitability month over month and not knowing why. That is the case for this hangar, which primarily focused on significant aircraft upgrades and modification, with mid-level services required.
The local hangar continues to lose profitability due to jobs not getting done on time. The hangar believed that they did not have enough skilled technicians to do all of the work; therefore, they thought by adding more employees with specific skill sets that they would be able to turn more aircraft on a weekly/monthly basis. However, what took place was that they added more hours on each plane, causing the issue to increase and multiply. Not only were aircraft still not going out on time, but now more hours were put on the airplanes causing profitability on each on to decline significantly.
The client was unsure what else they could do because they felt that they were trying everything they could to make a positive change in the organization. Therefore, they looked for alternative methods to resolve their issues, one of them being this one.
To gain a better understanding of the operations, we created a process-flow from receiving an aircraft to when a plane was released back to the airlines. After several minor tweaks and changes to the process flow, we wrote out what the “Reasonable Expectation” (RE) for specific tasks should be and then compared them to the actuals. This exercise was the first eye-opening experience with my client because they had never looked at their data in hours per step, but an overall “Effective Labor Rate” per aircraft. They felt that as long as they were within the hours provided through the contract that they were doing “good”; but never thought about looking at each step to determine if they could make the process better and reduce the time to gain profitability.
Addressing the Challenges
This brought us to our first challenge; how do we address these steps? Do we focus on all or just the significant steps? To address this issue, we created a Pareto (analysis using the 80/20 rule of decision making), breaking out each step into descending order based on the average time per activity. The client then realized where to focus their efforts but had to be provided with the right approach because they immediately started discussing technical issues vs. the operations and people side of the activities. To overcome this issue, several assignments and tools were provided to guide them through the step-by-step approach for potential process improvement.
We started with observations of the process. This included writing out each step, identified barriers, and time associated with the action. After each observation, the client was asked, what they saw, what were the issues, and what is the next step. At which time, they realized they had to make changes and help their mechanics by eliminating or mitigate the barriers they face daily.
The observation process also allowed us to start discussing Key Performance Indicators and what metrics were essential to understand if we were having a good day or a bad day (week). KPI’s that were implemented were Productivity, Plan Adherence and Attainment, OT%, and time allocations between departments (Interiors, Structures, & Airframe and Powerplant).
Once the observations were completed, the client created Standard Operating Procedures (SOPs), which outlined each step-by-step process, the number of mechanics for each step, and the time associated. These SOPs were introduced to all mechanics during their morning huddle to make sure all mechanics received the same message and that everyone agreed with how to accomplish specific tasks.
To focus on the continuous improvement process, the client started to provide specific work assignments to each mechanic. Mechanics were introduced to production sheets to track barriers and the time associated with those barriers. Additionally, my clients started bi-hourly Short Interval Follow-Up Tours that allowed them to track on and off schedule conditions and determine any additional issues affecting the work being performed. The data from the production sheets were used to feed that data in the client’s KPI / Metric Dashboard to provide added traceability in how they were performing day over day and week over week. Based on all of the information, my clients now had they were able to start developing an Action Items Log and create Action Plans to address cross-departmental or long-term issues. This allowed them to mitigate or eliminate barriers that were previously seen as “part of the job.”
The solutions that were implemented resulted in significant operations improvements throughout the facility, not only for the company itself but also for the mechanics. The mechanics understood what they had to accomplish for the day by being provided specific work assignments, and they were also building a stronger relationship with their management team by being involved in the process and having a clear 2-way communication channel set up with the management team. The managers and planners knew what was involved in each step and how long each step should take, allowing them to ask the appropriate questions to address any potential issues. Lastly, the company saw the improvements not only in the morale but actual dollars being saved.
Through this process, while on the project site, the company saw an improvement of 67.56% in their “Effective Labor Rate,” which translates into a difference of $37.16 per hour. With each aircraft having ~1,200 hours associated with it, this resulted in an overall savings of $980,964. This was accomplished by focusing our efforts on workforce utilization, understanding the process, setting reasonable expectations, following-up, and eliminating barriers on significant portions of the operations.