Frans van de Pol is not easily impressed. In fact, you might say that the president of Fokker Aerotron, a LaGrange, Ga., company specializing in maintenance, repair and overhaul of aerospace parts and part of the Fokker Aerospace Group, has been around the block when it comes to the MRO industry -- a block that includes management assignments in the area of aircraft manufacturing, engineering, aircraft conversions and MRO. Still, despite 23 years on the job, he admits to being awed by the results of a process improvement initiative that began shortly before he joined Fokker Aerotron at the end of 2008.
"When I arrived, our on-time delivery performance was unacceptable," says van de Pol. "Today, we've cut our turnaround time by half, and our on-time delivery is up to more than 57%. In fact, I fully expect it to be at world-class performance by the end of the year."
Needless to say, these drastic improvements in turnaround time and on-time delivery translate to a nearly priceless impact on the company's bottom line. It's an impact directly attributable to the application of lean process improvement techniques, which comes as no big surprise. No, the surprise is that the lean process improvements were focused not on the shop floor, but rather on the company's administrative processes.
A New Paradigm for Lean Application
"Administrative processes are often a bottleneck -- a huge source of inefficiency and waste, not to mention a hindrance to the revenue-producing components of the business."
-- Bill Peterson, faculty member, the University of Tennessee
Under Russell-Karr's direction and with guidance from the University of Tennessee's Center for Executive Education, Fokker Aerotron has applied lean to six targeted administrative areas and now possesses documented proof that improvements in administrative processes have a direct impact on bottom-line performance.
For example, after two years of applying lean to administrative processes, Fokker Aerotron's gross profit margins are up by 5%, late delivery penalties have dropped by 93%, warranty repairs have been reduced 50%, work-in-process (WIP) is down 72% and inventory has been pared 39%. Moreover, the company now has excess capacity in facilities and staff, which enables future growth and expansion without additional capital outlay.
"When we started our lean adventure in 2008, we had a lot of processes that existed simply because we had always done them that way," describes Russell-Karr. "When we sought to improve our on-time delivery, we typically looked to the manufacturing end -- how could we push our technicians to turn the wrenches faster? It had never occurred to us that we could improve the entire operation by improving things in the office. Now, we've proven it several times over."
From the outset, the roots of lean have been grounded in manufacturing processes -- from as far back as Henry Ford's production of the Model T to Taiichi Ohno's modern-day Toyota Production System.
Given its origins, it is no wonder that the preponderance of lean application (and documented success) has been focused on the shop floor. Nevertheless, in the early 2000s, lean made its way to a few non-manufacturing venues such as call centers, software development, and, to a certain extent, the service sector. Still, the storehouse of success stories beyond the manufacturing arena is woefully lacking. Concrete, replicable implementation approaches for non-manufacturing scenarios are few and far between, and skepticism abounds as to whether manufacturing-based lean tools and techniques can be translated and sustained in a service or administrative setting.
Yet, the impetus for successful translation is enormous. The administrative expenses of running a business are a large part of the cost of an organization. In fact, average overhead expenses of manufacturing organizations have risen from 10% to more than 50% since the early days of manufacturing. Yet, those same administrative processes are often a bottleneck -- a huge source of inefficiency and waste, not to mention a hindrance to the revenue-producing components of the business.
Those overhead activities are supposed to serve as levers in the organization, enabling the production side of the business to more easily lift the heavy weight. Unfortunately, in many organizations, the servant becomes master, and administrative processes bog everything down. However, if those administrative processes are made better, all other operations also will improve.
Same Tools, New Venue
To be sure, Fokker Aerotron is no stranger to process improvement techniques. With its sights set on being an industry leader, the company embraces a variety of improvement programs such as lean, Six Sigma and 5S as a part of its "World-Class Performance" initiative. However, these efforts historically have focused directly on the shop floor.
Fokker Aerotron's adventure in applying lean to business processes began when the author was invited to consult with the company about improving invoicing and inspection processes. Shortly thereafter, Russell-Karr attended the Lean Applied to Business Processes course at the University of Tennessee.
"The Lean Applied to Business Processes course emphasizes practical application, so the entire week I was experimenting with applying lean techniques to our purchasing activities. The more I learned, the more applications I could envision," says Russell-Karr.
Back at Fokker Aerotron, Russell-Karr assembled a team that included her purchasing staff and upper management; she launched the first "event" in August 2008. Described broadly, the process comprised three phases:
- Identifying key administrative wastes and the constraints limiting performance;
- Analyzing potential root causes; and
- Applying the proper continuous-improvement countermeasures.
"Our first meeting was rather quiet," recalls Russell-Karr, but van de Pol encouraged her to forge ahead. "Sometimes employees are very skeptical about these projects because they think that they have to work harder, but ultimately it is about working smarter, sometimes even eliminating unnecessary tasks," van de Pol explains.
Russell-Karr says "buy-in" by the staff came rather quickly. "As we worked through the process, our meetings got very animated and productive. Now, my group is so good that they often work through the process and use the tools on their own, which frees me to manage additional lean events."
Buffy Smith, senior buyer, shares the impact lean has made on her professional life. "I used to spend a good part of my day literally walking invoices around in circles, not being as productive as I could have been, because we had so much wasted motion in our processes," says the purchasing supervisor. She cites the path of an invoice as an example: 3.1 days of processing; 80 steps in the invoicing process, including 30 handoffs among employees and 12 trips to the printer; 1,080 feet of travel per invoice, with 17,540 feet (that's 3.3 miles!) of average transport by purchasing agents on any given day.
That was then -- before the company applied lean improvement techniques to its administrative processes. This is now: one day to process an invoice, requiring half the steps and one-third the number of handoffs. Moreover, Fokker Aerotron discovered that 30% of the total invoicing paperwork volume for customer parts was not needed at all.
The new flow of work has eliminated altogether the paper copies of purchase orders, likewise removing the need for a four-drawer filing cabinet and an entire warehouse of paper files. Says Smith: "We've now eliminated wasted motion; I have time to focus on things that really add value to this company, such as pre-planning and negotiation."
Another lean event honed in on "the cage" (the company's spare parts inventory) and the process of ordering not-in-stock (NIS) parts. Through the efforts of the lean team, the number of NIS orders was pared by 34%, the turnaround time on ordered parts fell by more than 50% and the stock-out rate improved from 30% to less than 3%. Moreover, the team eliminated more than 100 shelves of no-longer-needed parts and reduced its inventory of spare parts by 39%. This, in turn, freed up 2,375 square feet of floor space, so an expensive warehouse addition once thought to be a necessity is no longer needed.
Wouter van Dis, director of operations, cites an additional impact, albeit indirect, of Lean Applied to Business Processes that perhaps is its most significant contribution to Fokker Aerotron. "What we were really able to do on the work floor because of the administrative improvements was to put in lean cells, where our technicians have every tool and component at their disposal to fix the exact component they are working on at the time. If we had not leaned out' our purchasing processes, lean cells would have failed. Instead, because our purchasing processes are so efficient, we're using lean cells successfully, and the impact on turnaround time, on-time delivery and customer satisfaction is enormous."
Scott Whittaker, Fokker Aerotron director of business development, says customers have noticed that something wonderful is going on at the company. "Our quality has improved, our service has improved, and our attitude has improved -- what's not to love about that?" Continues Whittaker: "Without a doubt, Lean Applied to Business Processes has made my job immensely easier because I have a quality product to sell and a quality company standing behind it."
Bill Peterson is the creator and lead faculty member of the University of Tennessee's Center for Executive Education (CEE) Lean Applied to Business Processes course. He also is a lecturer in CEE's Supply Chain Management and Lean Enterprise System Design Institute courses. A 30-year veteran of the aircraft MRO industry, Peterson has been on a quest to document the applicability of lean to business processes since discovering its positive effects while working at Delta Air Lines.