Outsourced in aerospace
America's largest machine shop uses ERP to get lean and keep busy
By Kevin Parker, editorial director -- Manufacturing Business Technology, 8/1/2004 6:00:00 AM
When GKN Aerospace bought Boeing's St. Louis-based metal and composites fabrication operations—and what is said to be the largest machine shop in North America—it had to quickly disconnect from the aircraft manufacturer's information systems.
Only 10 months later, the new management was live on its own enterprise system, one specifically developed for use in sophisticated manufacturing environments. And the system implementation itself took less than five months.
"It's difficult to articulate how complex it was to implement the ERP system while at the same time disengaging from Boeing's systems," says James Fitzsimmons, president and CEO of GKN Aerospace (GKNA) North America East.
But for GKNA, implementing Cincinnati-based Cincom Systems' Enterprise Management solution was more than just a way to meet a contractual obligation pursuant to the purchase from Boeing. Enterprise resources planning (ERP) would be a big part of how Fitzsimmons would execute his plan to grow the business. In other words, ERP embodied the strategies he intended to pursue.
"Lean is fundamental to everything we do here, and ERP is the enabler. You start with a push system, and ERP is the means by which you get to the point where you understand your transactions, capacity, constraints, and lead times. Then you look in-house and at your supply chain. You pick your targets and move more and more to a pull system."
In fact, Fitzsimmons had used ERP this way—having been involved in six prior implementations—in other facilities during his career. And besides getting a handle on its operations, standardizing on Cincom served other of GKNA's purposes as well.
"Our business has grown 25 percent in three years," says Fitzsimmons, "and GKNA's presence in North America will continue to increase. We need to quickly bring acquisitions into our systems environment. That's why we believe in 'plain-vanilla' systems. Any customizations are achieved by means of report-writing capabilities."
The plan is to implement the ERP system next in a GKNA plant in Alabama. Benefits will follow. "Purchases can then be made at the unit level rather than the site level," says Fitzsimmons. "Standard KPIs [key performance indicators] can be applied across plants."
White-knuckle moments
While implementing ERP as expeditiously as it did was an undisputed triumph for GKNA, it wasn't without its white-knuckle moments. As the go-live date neared, so many doubts raged as to readiness that Fanny Sloan, IT director, and Gregg McDaniels, ERP project manager, chose to stage an elaborate multimedia show for senior management meant to dispel those doubts.
Based on the familiar opening of the Mission Impossible TV series and movie, the presentation—which included a light show—ticked off the milestones met and the many missions already accomplished. At the end—with all systems signaling go—senior management agreed to move ahead.
While Sloan is a long-time associate of Fitzsimmons and a manager of other ERP implementations, McDaniels had been a veteran production manager in what are now GKNA's facilities, with seemingly encyclopedic knowledge of the production and supply chain processes involved. These unique individuals from diverse backgrounds demonstrated a remarkable ability to work well together.
"We were successful," says Sloan, "because from the beginning we formed a team from the best people available and had a detailed plan. Each day we started at four a.m., outlining a plan of action for that day. That plan was shared in a six a.m. team meeting that included executive sponsors. A final meeting, at four p.m., was to review what had been accomplished. All needed decisions had to be made during that meeting so as not to delay the project."
The sale of the St. Louis operations was completed in January 2001. The ERP system went live October 1, 2001, with, as noted earlier, the actual implementation taking less than five months.
Maxing capacity
GKN Aerospace's parent, U.K.-based GKN PLC, has a heritage that runs clear back to 1759. And in 1902, as Guest, Keen & Nettlefolds Ltd., it was the world's largest producer of nails. Today, with revenues of about $7.8 billion in 2003, it's primarily known as an automotive parts supplier. About one-third of revenues come from its growing presence in aerospace.
Before GKNA's takeover, the St. Louis-based fabrication operations—covering 1.7 million square feet of space—made aerospace parts exclusively for Boeing's military aircraft. According to press reports, when Boeing sold the business, the operation ran at about 35-percent capacity. Annual sales totaled about $300 million.
With GKNA now an outsourced supplier to Boeing, other options exist for making use of that excess capacity, and GKNA attracts orders from military, commercial, and regional jet manufacturers throughout the world. It also has moved work to St. Louis from other facilities. Today, GKNA specializes in four product areas—metal, composite, and resin structures; and supply chain management services.
For aircraft manufacturers—such as Boeing—spinning off first-tier supplier operations allows greater focus on the core business, improved working capital, and reduced inventory costs. At the same time, manufacturers retain close ties with suppliers and form supply chain links based on just-in-time and lean.
For GKNA to apply lean production and supply chain techniques is especially challenging—given the long cycle times of its complex, multilevel, structural products. To do so—besides standardizing on Cincom's ERP system—GKNA developed in-house a Web-based application called Sentinel, which analyzes data pulled from a customer's production system portal prior to entry into the enterprise system.
Blanket purchase orders are established that cover the contractual obligations of the customer and GKNA, but don't include quantities and schedules. EDI could be used to download those missing requirements from the customer portal directly into the ERP system. Instead, GKNA uses the Web application to compare the data downloaded on any given day—comprising about 67,000 rows of data—to that of the previous day; identify the net changes; and review and act upon them.
Convert data, go lean
In implementing its ERP system, GKNA faced the additional challenges of separating from Boeing's systems and establishing its own data center. It also chose at the same time to redo its network, and upgrade PCs and the phone system, thus achieving a single integrated information system.
The scope of the data conversion from Boeing's system to Cincom was, in McDaniel's words, "massive," involving more than 3,500 products, 48,000 parts, and millions of data elements associated with financials, inventory, item masters, bills of material, routings, purchasing, shipping, and receiving.
But the data conversion offered additional opportunities for implementing lean.
"Instead of merely transferring data," says McDaniels, "we analyzed our business process flows to make changes that would support our business strategies. What had been cost centers became profit centers."
Other changes included the following:
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eliminating 30 percent of work centers on the shop floor to reduce queue times;
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reducing planning sequences on shop routings 75 percent by combining numerous smaller ones;
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eliminating multilevel bills of material for some products by combining subassemblies using critical path-based planning; and
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instituting resident work plans and standard operating procedures for product families, thereby simplifying routings.
The data hand-over involved mock conversions to test the import/export process and the data mapping success. The last mock conversion—one month prior to the go-live—was treated as a live conversion. The old and new systems were then run concurrently. Performing system updates in the old system and then duplicating them in the new proved the new system's functionality.
Pulling in the primes
With the new ERP system live, GKNA is free to seek business from other aerospace manufacturers, and sells its high-performance structures to prime contractors including Airbus, Northrop Grumman, and Lockheed Martin—in addition to Boeing—and to jet engine manufacturers Rolls Royce, GE, and Pratt & Whitney. Its revenues today are about $350 million.
The ERP system, combined with Sentinel—which doesn't eliminate, limit, or override any enterprise functionality—allows event-driven scheduling. It has reduced cycle time by 38 percent and inventory by 35 percent, while increasing inventory turns 42 percent. All 1,400 employees are said to use some part of the system every day.
"In aerospace, the 'primes' want suppliers to manage their inventories. We need state-of the-art IT systems to manage pull systems and extend them out into the supply chain," concludes Fitzsimmons. "Costing has to be complementary with pull, and IT has to support good working capital management."
In the future, Fitzsimmons sees aerospace manufacturers moving to industrial versions of e-Bay to make commodity purchases. "We need to keep moving up the value chain," he says. "The relationship begins in the design phase, although the primes will keep final assembly and the aftermarket in their own hands. GKN's goal is to create value for the primes through reduced costs and cycle times enabled through our IT systems."
