Business Excellence at Aerosystems Supply Chain Management

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1 Business Excellence at Aerosystems Supply Chain Management Bilateraler Arbeitskreis / Fachgruppe Aerospace Supply Chain Fliegermuseum Altenrhein, Schweiz Wolfgang Bieber

2 Agenda DIEHL Aerosystems at a glance Supply Chain Management as an enabler for a efficient operations organization Organizational structures Supply Chain - Organization follows process CFC/MC - an efficient approach for cooperation Integrated Performance Management Management by Objectives KPI-Suite Results & Achievements Summary & Outlook 1

3 One of Five Corporate Divisions within the Diehl Group Family-owned company since 1902 Turnover: 3,045 m Employees: 14,640 Turnover: 945 m Employees: 3,090 Turnover: 325 m Employees: 2,350 Turnover: 560 m Employees: 2,950 Turnover: 930 m* Employees: 4,300* Turnover: 285 m Employees: 1,950 * Trend

4 Corporate Division Diehl Aerosystems: Four operational units Sales: over 930 m Employees: 4,300 Headquarters: Laupheim, Germany Sales: 300 m Sales: 420 m Sales: 180 m Sales: 40 m Employees: 1,300 Employees: 2,100 Employees: 700 Employees: 300 Shareholders: 51% Diehl, 49% Thales joint venture with Trend

5 Building Blocks Aircraft Systems Cabin Interiors From cockpit to cabin. Fully integrated or individual packages. 4

6 Agenda DIEHL Aerosystems at a glance Supply Chain Management as an enabler for a efficient operations organization Organizational structures Supply Chain - Organization follows process CFC/MC - an efficient approach for cooperation Integrated Performance Management Management by Objectives KPI-Suite Results & Achievements Summary & Outlook 5

7 DAs Operations Strategy Management of the entire Supply Chain based on integrated & efficient information and material flows Success Factors: Efficient Organization & Processes Optimized internal added value provides... High potential for international sourcing activities (global footprint) Reduced complexity & effort in direct & indirect labor areas Risk mitigation by defined core competencies DAs Products Made by DIEHL 6

8 DAs Improvement Roadmap Operations Lean Administration in Operations SCM Customer Focus Center Integrated Performance Management Manufacturing Cells DAs Production System 5S, VSM/VSD, 7W, Visual Mgmt.,... Continuous improvement of internal production depth Focus on Core Competencies time

9 Lean Administration in Operations Supply Chain Management Organization follows process - From the department-oriented way of working to process orientation: Introduction of a Supply Chain Management Organization Management of the entire Supply Chain with its material and information flows from customer over internal processes, down to suppliers and sub-suppliers Clear & comprehensive responsibilities with reduced number of interfaces Supplier Customer Sub-Supplier 8

10 Lean Administration in Operations Supply Chain Management Experiences Strengths Comprehensive responsibility within one organization Simplified processes with less interfaces Improved operational performance Higher level of transparency throughout the entire Supply Chain Challenges Cultural change - from a departmental focus to a process focus Interdisciplinary cooperation and reactivity still not on an appropriate level Transparency based on standardized KPIs not yet fully implemented 9

11 Agenda DIEHL Aerosystems at a glance Supply Chain Management as an enabler for a efficient operations organization Organizational structures Supply Chain - Organization follows process CFC/MC - an efficient approach for cooperation Integrated Performance Management Management by Objectives KPI-Suite Results & Achievements Summary & Outlook 10

12 Lean Administration in Operations Customer Focus Center Implementation of interdisciplinary teams for the management of the entire Supply Chain and the immediate solution of upcoming problems/interruptions Teams are working within customer-oriented team offices, close to the assigned manufacturing cells on the shop-floor Each CFC Team is responsible for a dedicated product portfolio and certain customers Team Mission: Cost of Sales Non-Quality Costs On Time Delivery Turn Around Time TTGF (Time to get a fix) Product Quality Reject Rate 11

13 Interdisciplinary matrix-oriented Customer Focus Center customer-oriented crossfunctional 12

14 Coverage SCM Process by Interdisciplinary CFC Teams 13

15 Lean Administration in Operations Customer Focus Center Experiences Strengths Direct communication and interdisciplinary cooperation Enhanced process transparency and knowledge Challenges Willingness to change (Team offices, way of cooperation) Ability to think and work in team structures Significant increase of reactivity Targets and KPI measurement not yet fully transparent Improvement of personal commitment and customer and product orientation 14

16 Agenda DIEHL Aerosystems at a glance Supply Chain Management as an enabler for a efficient operations organization Organizational structures Supply Chain - Organization follows process CFC/MC - an efficient approach for cooperation Integrated Performance Management Management by Objectives KPI-Suite Results & Achievements Summary & Outlook 15

17 Integrated Performance Management Management by Objectives & KPI Suite MbO Bild Kaskade BU Ziele Bereich - Abteilung Team Enhanced transparency and comparability (Benchmarks) Appropriate level of information on each decision level Standardized reporting methodology and process Cascading of objectives (Division - Business Unit - Department - Process / Team) KPIs as a management tool One responsible person for each KPI (sponsorship) Reduction of Power Point Engineering and higher efficiency of regular meetings Standardized visualization 16

18 KPI Suite - Hierarchical KPI-Structure running Operational Excellence project 17

19 KPI Suite - Definition - Example Drill Down KPI Actual month 6-months rolling Trend 18

20 Single KPI with Targets & Thresholds 19

21 Agenda DIEHL Aerosystems at a glance Supply Chain Management as an enabler for a efficient operations organization Organizational structures Supply Chain - Organization follows process CFC/MC - an efficient approach for cooperation Integrated Performance Management Management by Objectives KPI-Suite Results & Achievements Summary & Outlook 20

22 Results and Achievements - Example DAs Überlingen +61% +278% -49% -85% +38,7% 64,6 M 5,56 13,5 M 40,8 % 40,1 M 6,9 M 3,3 M 1,47 0,5 M 2,1 % Sales (production related only) Inventory Turnover Gross Inventory Depreciation Consignment Stock Quota Positive effect on financial situation 21

23 Results and Achievements - Example DAs Überlingen +163% +56% +75% +6,9% +11,8% k 91,7 % 98,6 % 94,4 % k 627 k k 82,6 % Outbound Logistics Volumes (products) Turnover per Employee SCM Turnover per Employee Production/IE On Time Delivery Internal Order Fulfillment Significant improvement of organization & process efficiency 22

24 Diehl Aerospace Evolution of in-house Added Value 10,1% 8,9% Überlingen Optimized internal production depth provides... High potential for international sourcing activities (global footprint) Reduced complexity & effort in direct & indirect labor areas Risk mitigation by defined core competencies DAs Products Made by DIEHL 23

25 Agenda DIEHL Aerosystems at a glance Supply Chain Management as an enabler for a efficient operations organization Organizational structures Supply Chain - Organization follows process CFC/MC - an efficient approach for cooperation Integrated Performance Management Management by Objectives KPI-Suite Results & Achievements Summary & Outlook 24

26 Summary & Outlook Success Factors Evolutionary instead of revolutionary approach - change needs time! Leadership by sustainability and consequence Governance Model Strengthening of team responsibility Delegation of competencies and responsibilities to the right organizational levels Performance Management is essential - What gets measured, gets managed! Value Chain Management by focusing on core activities with reduced complexity Roll-Out Integrated Performance Management within Aerosystems division Lean Administration From Operations to the whole organization DAs Standardized methodology with deployment throughout Aerosystems 25

27 Together, we make it fly! 26

CSR / Sustainability Governance and Management Assessment By Coro Strandberg Principal, Strandberg Consulting www.corostrandberg.

Introduction CSR / Sustainability Governance and Management Assessment By Coro Strandberg Principal, Strandberg Consulting www.corostrandberg.com June 2015 Companies which adopt CSR or sustainability 1