Benchmarking helps can help your organization identify the gaps between you and your competitors and improve your market position.
By Dan Harrison
My machine shop had been producing repair parts for aircraft maintenance for decades without any need to produce competitive cost estimates. We knew that some of our machining equipment was old and inefficient, and we had replaced some older equipment with updated Computer Numerical Controlled (CNC) machining tools that were showing substantial savings. Yet, this appeared to have been done more out of embarrassment than for competitiveness until…
I received direction from my Vice President to lay off at least two of my eight machine shop form-modelers, with justification, for the hydroforming press around which our facility had been built. This direction would soon be reinforced by an opportunity to bid on aircraft overflow parts for an early version of the Boeing 777 aircraft.
First, I had to find out how many modelers we really needed. I decided not to keep this layoff secret from the union or our employees. This was not a large layoff that would have impacts beyond our machine shop. My decision to be open proved to be the right decision and would soon lead to other opportunities for this large aircraft maintenance facility.
I spoke to my machine shop foreman and his supervisors as a group letting them know that I needed to justify the number of modelers we would keep on the payroll full time. Two modelers would approach me just a couple of days later saying that they had been expecting a layoff for a couple of years. There were too many, and they never had enough work to do. But I still had to develop a rationale for the number of modelers we would retain.
That’s when our lax, or non-existent, basis of estimate for machine shop work hit me. In spite of an experienced Production Planning & Control (PP&C) function, we did not have a consistent process to estimate work in our large machine shop, as our work was incidental to the aircraft maintenance going on in the multiple other bays on both sides of our shop. That’s when I received a request from our proposal office to develop a large bid for overflow parts for the new Boeing 777 aircraft through Lockheed Martin.
I had been discussing the state of our machining capabilities with my foreman, along with our absence of a consistent estimating process, when I received this request. He simply referred me to PP&C with whom I spoke…to no avail. So, I started to think about conducting a benchmarking project. I suggested to our shop foreman that we might approach some local shops in the area with full disclosure of our objectives. Following his practical objection to asking our “competitors” to assist us, I pointed out that we could not possibly produce the full quantity of parts this proposal would require. So, we would be looking for work from outside of our machine shop.
Several of our “competitors” agreed to prepare bids with basis of estimates for a number of parts we had selected. In reviewing these bids, we could determine what equipment they were using, and compare their costs to ours. Perhaps more immediate, we were able to develop a consistent bidding process for our Lockheed-Martin proposal. Basically, our new bidding process identified all “cuts” and “processes”, including laboratory “test processes”, plus “materials” required to produce these parts.
I was asked to take a team to Lockheed Martin in Marietta, Georgia, to prepare bids on-site for a select number of parts. This was part of Lockheed Martin’s process to evaluate bidders. Our new bidding process was consistent, efficient, and believable. We were later complimented by Lockheed Martin repeatedly on our bidding approach. Ultimately, Boeing would not proceed with this early version of the 777 aircraft; however, our machine shop and our facilities would benefit in multiple ways from our benchmarking project.
PP&C adopted our new estimating process for replacement parts, which was complimented by our military customers who had been grumbling about our facility’s lack of a consistent estimating process for replacement parts. Our openness during this benchmarking project and lay off improved our relationship with the union. It was the union who subsequently showed me, and then all of management, how to shift workers temporarily (per our union agreement) to lower skilled assignments with substantial cost savings and improved schedule performance on many programs.
We did have to lay off two of our eight modelers, but no one was upset about this. It was done essentially on a volunteer basis. Finally, benchmarking had become a useful tool that could be used in other areas.
Dan Harrison is an SMA Principal Associate in our Technical Management & Engineering Services Practice, and has over 35 years of experience in aerospace engineering.
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