Implementing Dynamic Replenishment for Higher Availability with Less Inventory: Results from Turkish Airlines Technic

Transcription

1 Implementing Dynamic Replenishment for Higher Availability with Less Inventory: Results from Turkish Airlines Technic Presented By: H. Bilal Pandül and İbrahim Taş, Turkish Airlines Technic Inc. Bahadir Inozu, Ph.D., NOVACES, LLC, Henry Camp, IDEA, LLC Date: 6/11/2014 1

2 Agenda What to Change? What to Change to? How to cause the Change? Results Lessons Learned Recommendations 2

3 About Turkish Airlines Technic In Aviation Maintenance business for more than 75 years Founded in May 2006 as a subsidiary of Turkish Airlines Inc. 4 main facilities, 8 hangars, 38 aircraft maintenance slots ~5000 employees 9000 aircraft maintenance per year (300 heavy maintenance) 3

4 What to Change? Too much inventory Too many shortages Long cycle times High Variation in supplier replenishment times for required repair parts One of the major contributors to stock out conditions Waiting for parts in stock out condition was the biggest component of long maintenance and repair lead times. 4

5 Goals of Proof of Concept 1. Improve availability of parts Complete maintenance faster More planes in the air Better faster service to external customers 2. Improve inventory turns Recover inventory to cash Finance investment in wider parts availability 3. Reduce workloads and chaos 5

6 Proof of Concept At the commencement of the improvement effort, the inventory system held parts representing a total value of over $10.4 million. For the first phase of implementation, 1010 line items were selected from the 45,000 inventory items. These selected items were of high dollar value and had high consumption. The overall availability of these 1010 line items was 90.4% at the outset. 6

7 Proof of Concept: Phase I Timeline Data Collection & Simulation Proof of Concept Proposal Visit Expansion with additional suppliers Strategy & Tactics Workshop January February March April May June July August September October Simulation Results Contract Agreement Proof of Concept Begins with two suppliers 7 7

8 What to Change to? Proof of Concept Step 1 Internal Pull Distribution 1.1. Internal Daily Ordering 1.2. Setting Ordering Targets 1.3. Behavior to Target 1.4. Managing Distribution Centers 1.5. Dynamic Buffer Management Step 2 Dealing with Suppliers 2.1. Supplier Meetings 2.2. Daily Ordering 2.3. Support Supplier Effectiveness Step 3 - Proceeding to Full Implementation 8 8

9 End-to-End Supply Chain Flow How to increase the speed? Order Production Transportation Analyze need Select vendor Create Purchase Order Transmit Purchase Order Receive Purchase Order Process Purchase Order Make or fulfill Pick and pack Shipment Receive and unload Shelf placement Buyer Seller Buyer 9 Copyright 2012 NOVACES, LLC. All rights reserved. 9

10 What to Change to: A New Reality Replenishment to consumption results in smaller, more frequent orders 10 10

11 New Challenges Order delay to select supplier has increased impact Shipping costs may increase Load on purchase order processing may increase Increased load on picking, packing and receiving Volume discounts may be lost Smaller, more frequent orders Buy-in challenges Replenishment to consumption Copyright 2012 NOVACES, LLC. All rights reserved.

12 Results: Phase II Availability for just over 1000 high usage parts 12

13 Phase II Results: Inventory Levels To reduce shortages inventory is ordered and received Surplus inventory is sold down over time $1,200,000 Reduction Inventory turns increased from 3.6x to 5.0x Final Value 13 During this timeframe consumption rose 30% & inventory dropped 10%

14 Phase II Results 14 14

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16 Over Ordering Days when over ordering occurred, 16 which kept turns from improving more

17 Under Ordering Days when under ordering occurred, which kept availability from increasing 17

18 Phase III Inventory Value 148 SKUs Inventory dropped by about 40% Availability increased to 98% or higher End of Phase II 18

19 Lessons Learned: Intuition vs. Formulae 19 What Paul Meehl called my disturbing little book Clinical vs. Statistical Prediction: A Theoretical and Review of the Evidence proved: Simple statistical rules are superior to intuitive clinical judgments Doctors Hiring Managers Inventory Managers Experts do worse, even when given the formula s result Whenever we can, we should consider replacing human judgment with a formula, especially in statistically noisy environments

20 Recommendation: Volume Discounts PROBLEM Ordering in smaller quantities endangers bulk purchasing and threatens volume discounts SOLUTION Blanket orders = RESULT Volume discounts with smaller order quantities Copyright 2012 NOVACES, LLC. All rights reserved.

21 Recommendation: Purchase Order Processing PROBLEM Ordering more frequently increases the load on Purchase Order processing SOLUTION Lean (value stream analysis) + electronic data interchange (EDI) RESULT Order automation yields an order lead time of < 1 day 21

22 Recommendation: Supplier Selection PROBLEM Selecting a supplier via lowest price search elongates order lead time SOLUTION Pre-select suppliers (understanding that longer lead times could offset price benefits), adjust buffers if necessary RESULT Supplier selection decoupled from ordering process 22 22

23 Recommendation: Shipping Costs PROBLEM Ordering more frequently and in smaller quantities increases shipping costs SOLUTION Local managers fill diverse palettes, containers and trucks according to buffer status, FIFO RESULT Containers and trucks are still full 23 23

24 How to Cause the Change: Buy-In PROBLEM Resistance to change, lack of agreement SOLUTION ROI validation, layers of resistance stakeholder analysis RESULT Commitment to focus resources on the best opportunity 24 24

25 Recommendation Automation replenishment advice: Planes will spend more time in the air, bringing in new revenue and reducing the costs associated with interrupted travel You gain a competitive edge in aircraft maintenance Investment in inventory is recovered to cash Workloads drops dramatically, which allow finding better prices and more reliable suppliers 25

26 Summary More accurate needs assessment Shorter Replenishment Time Better on time delivery Without paying for expedited shipment & price premiums Without expensive forecasting tools Without burdening suppliers Silver Bullet Stop forecasting: reduce lead time by replenishing with greater frequency according to actual consumption rather than forecasted demand Hold inventory centrally: Don t push down the supply chain Supply according to consumption Right Size Inventory through the strategic inventory positioning process Increase Inventory Levels Limit Inventory Levels 26

27 Questions? Contact Information