Change offers opportunity

Citation

Galvin, G. (2003), "Change offers opportunity", Aircraft Engineering and Aerospace Technology, Vol. 75 No. 5. https://doi.org/10.1108/aeat.2003.12775eaf.001

Change offers opportunity

Change offers opportunity

Keywords: Aerospace industry, UK

Faced with changes and downturns in the aerospace market plus a need to expand the business, specialised contract manufacturer Sermatech Mal UK had to diversify and look for work in other sectors. But to do this it had to review its resources, think laterally and increase investments in new methods and equipment, including an advanced enterprise resource planning (ERP) system to support initiatives such as e-business.

As we all know, a number of recent and significant events have all combined to adversely affect growth in the aerospace industry. In the civil sector, the tragic events of September 2001 in New York have had far-reaching consequences. This and other reasons have affected air travel volumes, consolidation has taken place amongst airline operators and generally, investments have been delayed; but at least the low-cost, regional airline business is burgeoning.

For Sermatech Mal UK, the effects of the depression were felt acutely. The division's main focus was on making high-performance turbine and compressor blades for aerospace and industrial applications. With a down-turn in the market, other areas needed to be explored to increase revenue. The company is a division of a larger multi-national group that is part of the Teleflex corporation and there was real pressure to contribute strong results.

The company possesses highly developed skills: the manufacture of turbine and compressor blades, especially in the context of sophisticated commercial and military jet engines in use, places great demands on manufacturing and quality control. The components are complex three-dimensional shapes requiring sophisticated machining operations. In a set or batch, each blade must be identical to another in shape, weight and material composition. To achieve this level of quality, the best possible resources need to be provided including production machinery, testing, quality control, and people.

Customers such as Rolls Royce, Alsthom Lincoln, Alsthom Ludvika, Snecma and many other important companies would not place orders unless they knew that Sermatech Mal's performance was impeccable. If the company could meet these customers' demanding standards, it could compete in related markets and make different types of component requiring similar manufacturing processes. Diversification became essential and while the aerospace market still remained vital to the company, the quest for new business in other industrial sectors became an equal priority.

The company took a long hard look at itself and came to an obvious conclusion. In a strictly general sense, the business could be seen as a machining centre of excellence, focused on the processes of grinding, milling and electro discharge machining (EDM). Over the years, it had developed an expertise and capability that few others could match in the aerospace industry. Clearly, these features could be offered to related or different industries.

The managing director of the company's UK operations, Bob Rich, had to make a shrewd decision. He and his board could see the potential for more business and set themselves a demanding objective. They knew that they had the potential to expand, by around 30 per cent. However, they were also aware that to achieve it, they had to re-organise and re-equip in order to significantly increase their current manufacturing output of 20-25,000 pieces per annum.

Integrating business processes with IT

The key issue on the operations side was that a number of existing tasks and processes were performed through a combination of manual and computer-based steps. However, the computers were not fully networked and their functions were not integrated. In addition, sales order and related downstream documentation involved a good deal of paper and duplication of data input; what was more, various databases were operated in different departments.

A legacy of methods and geographically dispersed plants meant that the whole business needed streamlining. In addition, dealing with a number of different customers, and suppliers of sub-contracted services had produced a supply chain that was complicated. In the UK, Rich and his colleagues also knew that, like trends in the aerospace industry, the internet and market exchanges on the web were forcing through changes. In other words, it was clear that the company had to radically reform itself to meet the challenge.

Sermatech Mal decided to find and implement a central information management system, eliminating its previously disparate set of business control systems. The new investment had to be networked and accessible throughout the organisation. It would be based on industry standard computing and communication technologies, specifically designed to support the requirements of a manufacturing business.

An ERP system offered the best range of facilities needed – an integrated set of software applications or packages to serve all the functions in the supply chain. It would let data flow seamlessly from sales order entry to warehousing and distribution, and all the vital functions in between. It would link all departments together, improve communication, minimise errors and eliminate duplication. The whole organisation could share one database and use it to provide better customer service. In addition, it would speed transactions with other external parties, such as sub-contractors or suppliers, both up and down the external supply chain. Sermatech Mal also wanted an open system that would allow data to be exchanged with the manufacturing group's headquarters in the USA, and others in the organisation, all of which used different ERP systems.

Shortlisting candidate vendors was made easier because the company's criteria dictated that the system should be affordable, offer good value for money in terms of cost related to function, be installed in the shortest possible time, and allow work to be conducted easily and efficiently. Economical maintenance was also an imperative; a system that required dedicated human resources would be ruled out. In other words, ERP had to earn its keep and provide a rapid return on investment (RoI).

Industry-specific features

A function that was of supreme importance to Sermatech Mal was lot traceability, or the means to identify and trace the source and progress through the factory of one particular item and its relevant records. The company is in a market that demands extremely exacting standards. One flaw in a cast material, in a weld or machining operation can lead to fatal consequences. If a turbine or compressor blade breaks because of crack-propagation, a power plant can fail. This can lead to tragic and costly results, involve litigation, loss of reputation and many other damaging effects.

Consequently, the ERP system has to enable records to be kept of each and every component made. If a part in a batch is rejected or fails, perhaps one component out of 1000s produced, it must be possible to find out the exact composition of the material, who supplied it, in which machine it had been produced, who were the operators, who inspected it and how it was tested. In other words, a precise record or audit trail of the material or part and its journey through the organisation had to be available quickly and easily.

Several ERP systems met this specification, but there was only one with a lot traceability function that satisfied Sermatech Mal's stringent requirements. The shortlisted supplier was Lilly Software Associates and the traceability module within its comprehensive VISUAL Manufacturing product suite. The US-based supplier has a worldwide presence and a portfolio of significant customers in several industry sectors, including aerospace. It markets a system specifically for the aerospace industry, featuring powerful project management facilities. Members of its European office met with Sermatech Mal and amongst other requirements, the imperative of lot traceability was discussed.

Lilly's module for this purpose would need adaption to meet Sermatech Mal's specification, but the supplier was prepared and able to do that. The order was placed with the ERP company, not only because it could provide traceability, but also due to the fact that the system offered fully integrated modules that addressed all the essential functions in the supply chain – from sales order entry, through manufacturing and distribution to field service.

Based on standard and ubiquitous Microsoft technology, the ERP system would mesh with commonly used administrative or back-office software, further ensuring an unimpeded flow of data throughout the enterprise and each department. Similarly, owing to these common standards, it would be possible to readily exchange data with external parties in the supply chain, including parent and sister companies. The system's supplier is an authorised partner of Microsoft and, as a result, has access to the latest advances in that company's range of technologies and toolsets, including internet developments.

Realising early benefits

The first module to be installed was that for handling financial functions within the UK operation. Next, the modules serving manufacturing processes were implemented. Benefits are already significantly and measurably evident. Bob Rich confirms this on financials: "We now have better visibility, we can see what we are spending immediately."

Before, data about a contract took too long to acquire, by which time it was too late to take corrective action. It was all recorded manually in a ledger and only periodically or at the end of the work it was possible to review profitability. Some of these projects might last for several years. Rich's management team can track costs in real-time, see whether a job is profitable or not and act accordingly.

Key measurables, like tracking receivables, reviewing supplier performance, checking time and attendance, and monitoring cashflow, are all easily accessed and immediately possible to check, enhancing the reporting, decision-making and control process.

The status of inventory is another important performance indicator that is easier to call up, from the time a purchase order is generated to the time an order is despatched to the customer. This can be checked at will – hourly, daily, weekly, monthly, quarterly – all via the keyboard and screen, in minutes rather than hours or days, in any format required by the individuals who use the system.

Embracing e-business

On the subject of e-business, Sermatech Mal has already set up a pilot e-business project for a major aerospace customer. Purchase orders are sent by the customer over the Internet. An interface to the ERP system enables it to directly and automatically process these orders into the business and manufacturing cycle. Lilly Software Associates provided assistance to expedite the implementation. The next step will be to allow the aerospace customer to monitor progress of orders via the web. After that Sermatech Mal plans to introduce a request for quote (RFQ) facility.

This three-step development will substantially reduce the time required for order entry, progress monitoring and delivery to promise. It will improve service to the customer concerned and soon, to many more customers as the scheme evolves from its trial phase to full implementation. It will be possible – at any time, from anywhere in the world with an Internet connection – to place orders, check on work in progress, delivery dates and other desired information. In time, suppliers to the manufacturer itself, such as sub-contractors, will also be able to access, under security, certain kinds of data that will be available via the company's Web site and a browser.

On general productivity improvements, the company expects that there will be a number of discrete, but significant gains in every part of the business. Lot traceability is a case in point and demonstrates the value of the investment. Before, if a part and its associated records needed to be checked, it could take up to 4 or 5 days to find all the details. With the software solution, the necessary data and a report can be delivered to the screen almost instantaneously. This is a major productivity gain. But the most noticeable benefit is having all the data about the business including order entry, work in progress and completion, on one system – that makes a big difference.

Further plans on the ERP side will be the purchase of a training package and software modules for adopting the Theory of Constraints (ToC). Lilly offers a production planning package based on the business management philosophy developed by Dr Eli Goldratt. Incorporating the principles known as Drum-Buffer-Rope, it enables companies to maximise the use of a capacity constrained resource, reveal other hidden capacity, and use time buffers to create schedules that help deliver products as promised. It is an approach to regulate the flow of work-in-process (WiP) at or near the full capacity of the most restricted resource in the manufacturing chain.

ERP is not the only investment and change that Sermatech Mal has introduced. Lean manufacturing methods have also been implemented. These are not especially IT-based techniques, but have contributed to the turnaround of the company's fortunes and prospects. Besides the initiatives of the business itself in this area, the corporate parent, Teleflex, has provided a methodology based on the Toyota Production System (TPS).

In summary, although the downturn in the market was unwelcome, it forced Sermatech Mal to transform its business. It is broadening its scope of work in the aerospace sector, but at the same time bringing the company's expertise to new areas of industry. In doing so it is able to bring fresh ideas, experience and benefits from one sector to another, adding considerable value to the services provided.

But this manufacturing expertise and capability could not be effectively applied and supported without investment in new working methods, such as the better use of IT. Nor could it attempt to achieve the ambitious business target it has set itself without these resources. In this respect, Sermatech Mal UK is especially pleased with the performance of Lilly's VISUAL Manufacturing ERP system and the help that it receives from the vendor.

Details available from: Lilly Software Associates Ltd. Tel: +44 (0)1763 232222; Fax: +44 (0) 1763 233333; E-mail: sale@lillysoftware.co.uk

Geoff GalvinSystems ManagerSermatech Mal UK