Implementing Six Sigma - Saudi Airlines Experience by Allen Mackay PDF

GE Aircraft Engines
Allen Mackay
Mgr. MMQA Saudi Arabian Airlines
INVENTORY MOVEMENT FMSZ
Green Belt Project
Six Sigma
A Project Review
Saudi Arabian Airlines/GEAE Partners in Productivity 1

GE Aircraft Engines
SV MM
SV MM OVERVIEW
1. 550 multi national staff (mainly Saudi)

2. Offices in 4 countries
• (USA, UK, Germany, Saudi Arabia)
3. MRP, IC, Purchase, Transport, Warehouse,
Vendor Control, Packaging, IT, QA, Shipping,
Receiving, etc…

GE Aircraft Engines
WHY SV MM ADOPTED : 6-SIGMA

SV MM QUALITY HISTORY
(Always had quality, lacked a single strategy)
1993 .. Adopted TQM - Methods

1994 + New Policy Manual - 704 pages to 54
1994 + Quality for Life - Empowerment
1998 + Dashboard - Measurement
1999 + ISO9002-1994 - Control
2000 + Six Sigma - Improve Processes
2002 + ISO9001-2000 - Revised Standard
2003 + ISO14001 - Environment

GE Aircraft Engines
SIX SIGMA – Status Today
6-Sigma Green-Belt (Use it)

1. 18 Staff trained by GE (9 months)
2. 20 Projects completed
3. Next 21 staff, start 20 Jan 2002
6-Sigma Black-Belt (Train Others)
1. One in April 2002 at GE USA
2. One in May 2002 at GE USA
3. One in Sept 2002 at GE USA

GE Aircraft Engines
SIX SIGMA
5 Phases of training
GE 6-Sigma Greenbelt
1. Define
2. Measure
3. Analyze
4. Control
5. Improve

GE Aircraft Engines
DEFINE PHASE

GE Aircraft Engines
EXAMPLE…TODAY
Expendable Materials
FAST MEDIUM SLOW ZERO TOTAL
Qty SR Qty SR Qty SR Qty SR Qty SR
P (>SR 100k) 0 0 0 0 0 0 2 450,000 2 450,000

A (100k-50k) 0 0 0 0 1 60,000 4 300,000 5 360,000
B (50k-15k) 0 0 0 0 2 55,000 10 400,000 12 455,000
C (15k-1k) 1 5,000 25 95,000 60 90,000 300 650,000 386 840,000
D (<SR 1k) 15 60,000 110 120,000 100 175,000 600 545,000 825 900,000
Totals 16 65,000 135 215,000 163 380,000 916 2,345,000 1,230 3,005,000
(%) of Total 1% 2% 11% 7% 13% 13% 74% 78% 100% 100%
Why is such a high percentage of consumable materials

found in Slow and Zero movement areas (91%)

GE Aircraft Engines
What could be
causing high levels of
SLOW and ZERO
moving stocks ?

Six Sigma -- Define Phase GE Aircraft Engines
Project Summary Project Title: INVENTORY MOVEMENT FMSZ

D M A I C T
Team
Problem Statement
Allen Mackay
Current ‘FM’ movement by QUANTITY =
QQ% and by VALUE = VV% of the total
Dave Entz
EXPENDABLE inventory of Aircraft & Shannon Korson
Systems Procurement. Brian Jarvis
Mission Statement Leadership

Through 6-Sigma methodology, Allen Mackay
improvements shall be achieved in this area. Sponsor(s)
GM MRP/IC and GM Aircraft Procurement
Goal/Objective Key Performance Metric Affected:

Improve FM movement by 5% by Qty
B2 - Stock Turn Rate
Improve FM movement by 5% by Value 01 - Assured Supply
Constraints
Availability of data from MEMIS system

and Time.

Six Sigma -- Define Phase GE Aircraft Engines

D M A I C T
Defect(s)
Project High Level Program Plan • When EXPENDABLE ‘FM’ inventory is
M: All Procurement areas
A: Select the area with most opportunity
<QQ% by quantity
I: Define methods to improve • When EXPENDABLE ‘FM’ inventory is
C: Define methods of control <VV% by value.
Data Sources
• MEMIS using various focus reports
• TIS using focus reports
• PC’s of AOG Desk
Risks & Abatements Funding Source

• Available data detail
• Have some data set aside in mainframe. Any required funding from VP MM
Issues/Concerns Estimated Financial Savings
• Ability for MMIS Dept to produce data
• Will provide simple report requests where SR___ million of stock moved to active
possible

GE Aircraft Engines
THREATS & OPPORTUNITIES

THREAT OPPORTUNITY
.Purchase of needed parts limited .Can release cash of current stocks
if high levels of cash tied up in S/Z. and apply these to buying new
Short .It is impossible to plan these parts parts and supporting projects.
Term manually, and attention is diverted .With less parts, planners will plan
from key planning requirements. a greater percentage by ratio.
.Stores locations can be released
for new parts & additional stocks.
1 3
2 4
.Parts position will not improve .Can release full cash potential
.Materials will continue to reduce Zero & Slow
in market value, again impacting .Planners will daily review the few
financial value. ‘Zero’ moving items
Long .More will move into ‘S/Z .Stores will rationalize
Term .More Stores areas will needed warehousing to few central areas
.Productivity will continue to get
worse

GE Aircraft Engines
OVERVIEW OF PARTS
Y2000 PABCD [Expendable] >6 Sigma<
800,000 120%
2000
719,024
700,000 98%
100% 100%
85%
600,000
QTY of ITEMS
80%
Percentage
500,000
70%
400,000 60%
300,000
40%
200,000 151,255 133,534
20%
100,000
18,798
0 0%
2000 Zero Slow Medium Fast

2000
Movement
By SR VALUE OF Quantity Percentage By QUANTITY OF
ITEMS ITEMS
Y2000PABCD >
6 Sigma< Y2000 >PABCD 6-Sigma <
60% 80%
70%
50% 70%
50%
Percentage of TOTAL
Percentage of TOTAL 60%

40%
50%
TOTAL35%
30% F+M 40%
24%
30% TOTAL 15% F+M
20%
15%
15%
11% 20%
10% 13%
10%
2%
0% 0%
Zero Slow Medium Fast Zero Slow Medium Fast
Movemen
Movments

GE Aircraft Engines
RISK ASSESSMENT
INCLUDES EXCLUDES
What All Expendable Materials All Repairable, Rotables,
Uniforms, Stationary
Where All materials located in MM All materials that have been
areas of responsibilities issued to Customers, but not yet
returned.
When All time frames where None.
materials have been bought
since the airline started.
Who MRP & IC SFPS
TSV Planning VP MM office
Stores MM Support.
Procurement
MMIS
Time All times where materials None

have been bought since the
airline started.
GE Aircraft Engines
KEY CONSTITUENTS MAP

KEY Constituents M AP >6 Sigma<
TSV
18% Mtrls Sales

25%
Proc 10%
13% 18%
MR P
Stores
18%
I/C

GE Aircraft Engines
Project Title: INVENTORY MOVEMENT FMSZ
MEASURE and
ANALYSE
PHASES

GE Aircraft Engines
PROCESS CAPABILITY : ALL STUFF

Process Capability Analysis for (%)SR
Fast+Medium (New+Old)
LSL Target USL
Process Data
USL 50.0000
Within
Target 45.0000
LSL 40.0000 Overall
Mean 28.6005
Sample N 20
StDev (Within) 2.79162
StDev (Overall) 9.38270
Potential (Within) Capability

Cp 0.60
CPU 2.56
CPL -1.36
Cpk -1.36
0 10 20 30 40 50 60
Cpm 0.09
(35 width)
Overall Capability Observed Performance Exp. "Within" Performance Exp. "Overall" Performance
Pp 0.18 PPM < LSL 1000000.00 PPM < LSL 999977.82 PPM < LSL 887807.12
PPU 0.76 PPM > USL 0.00 PPM > USL 0.00 PPM > USL 11281.93
PPL -0.40 PPM Total 1000000.00 PPM Total 999977.82 PPM Total 899089.05
Ppk -0.40

GE Aircraft Engines
ALL THE STUFF
LONG & SHORT TERM PROCESS CAPABILITIES
Descriptive Statistics: (%)SR
Variable N Mean Median TrMean StDev SE Mean

(%)SR 40 50.00 50.00 50.00 23.52 3.72
Variable Minimum Maximum Q1 Q3

(%)SR 11.15 88.85 29.98 70.02
Long Term Capability = Zlt

= Ppk * 3 = -0.40 * 3 = -1.20 (very poor)[the higher the better]
Short Term Capability = Zst

= Cp * 3 = 0.60 * 3 = 1.80 (needs improvement)

GE Aircraft Engines
GOOD STUFF : 10 Best Consecutive Points

Process Capability Analysis for (%)SR
BEST - From 10 best points
Grouped as 1 sub-group.
LSL Target USL
Process Data
USL 50.000
Within
Target 45.000
LSL 40.000 Overall
Mean 36.807
Sample N 10
StDev (Within) 0.811071
StDev (Overall) 0.811071
Potential (Within) Capability

Cp 2.05
CPU 5.42
CPL -1.31
Cpk -1.31
34 36 38 40 42 44 46 48 50
Cpm 0.19
(2 width)
Overall Capability Observed Performance Exp. "Within" Performance Exp. "Overall" Performance
Pp 2.05 PPM < LSL 1000000.00 PPM < LSL 999958.71 PPM < LSL 999958.71
PPU 5.42 PPM > USL 0.00 PPM > USL 0.00 PPM > USL 0.00
PPL -1.31 PPM Total 1000000.00 PPM Total 999958.71 PPM Total 999958.71
Ppk -1.31

GE Aircraft Engines
VARIENCE (Zshift)
Descriptive Statistics: (%)SR
Variable N Mean Median TrMean StDev SE Mean

(%)SR 10 36.807 36.735 36.793 0.789 0.249
Variable Minimum Maximum Q1 Q3

(%)SR 35.330 38.400 36.440 37.205
Long Term Capability = Zlt

= Ppk * 3 = -0.40 * 3 = -1.20 (from original analysis)
Short Term Capability = Zst
= Cp * 3 = 2.05 * 3 = 6.15 (from 10 Best points in the Time Series)
· Zshift = Zst - Zlt = 6.15 - (-1.20) = 7.35

GE Aircraft Engines
CONTROL vers TECHNOLOGY PLOT

7.35
CONTROL VS. TECHNOLOGY PLOT
Poor 3.0
Zst = 6.15 Poor control Need better
Poor factory control
Zlt = -1.20 Technology is
fine
Zshift = 7.35 A B
Zshift 1.5
Control C D
Control is fine World
Bad factory or Class
technology
Good Goal
0 3 6
Zst
Poor Good
Technology

GE Aircraft Engines
ONE-WAY ANOVA (%)SR versus GROUP

Analysis of Variance for (%)SR
Source DF SS MS F P
Group 7 28654.55 4093.51 414.36 0.000
Error 72 711.29 9.88
Total 79 29365.84
Individual 95% CIs For Mean
Based on Pooled StDev
Level N Mean StDev ---------+---------+---------+-------
new fast 10 5.550 1.877 (*)
new medi 10 14.820 4.029 (*)
new slow 10 16.030 3.481 (*)
new zero 10 63.560 6.720 (*)
old fast 10 12.340 0.867 (*)
old medi 10 24.480 0.588 (*)
old slow 10 14.740 0.470 (*)
old zero 10 48.460 0.826 (*)
---------+---------+---------+-------
Pooled StDev = 3.143 20 40 60
CONCLUSIONS
1. With P value = 0.000 (less than 0.05) shows they are statistically significant.
2. The means in (2) are significantly different.
3. (SS area / SS Total)* 100 = % variation explained by "Groups"
· (28654.55 / 29365.84)*100 = 97.58%, therefore if we correct
the differences in 'Groups' we should expect to see our
variation go down by 97.58%.
GE Aircraft Engines
BOX PLOTS by (%SR) by GROUP

BOX PLOTS - (%)SR by Group
70
60
50
(%)SR
40
30
20
10
0
new new new new old old old old
fast medium slow zero fast medium slow zero
Group

Six Sigma -- Analyze Phase GE Aircraft Engines
MEASURE & ANALYSE Summary

Pareto Graph, showing Denied Box plots of IIC by Buyer Code
Requests by Acft Procurement Solid circles indicate (Means)
area for 5 Months Boxplots of IIC by BC
(means are indicated by solid circles)
Number of Denied Requests
(Expendable Mtrls) Y2001
2409
3000 3.00E+11
2500
2000 1457
1500 1128
736 723
1000
500 32 22 2.00E+11
0
IIC
SE
e
al
rd
nt
s
m
nt
er
.. .
da
la
G
ra
ne
rm
en
rp
an
rf
1.00E+11
po
we
ifo
Ai
G
St
m
Un
Po
Co
Airframe Proc 0
BC
P20
P21
P22
P23
P24
P25
TOTAL IICs - WITH SD's
2000
1500
QTY
1000 Buyer 21
500
0
P22 P23 P21 P20 P24 P10 P25
SD IIC's 1642 1325 1075 1008 767 492 481
BUYER CODES
Airframe Buyers

GE Aircraft Engines
IMPROVE PHASE

Six Sigma -- Improve/Control Phase GE Aircraft Engines
Process Fixes & Controls

Main Causes
of Variation Process Fix Control System
Review & Improve Monitor through:
Stock Depleted Math Model
when needed for MEMIS for future FOCUS
Constant stock Reports
Improve ‘attention’ on
depletes prevents current SD parts
any activity of
requested parts Simplify methods of
identifying needed part
Improve ordering logic

to improve assured
supply

Six Sigma -- Improve Phase GE Aircraft Engines
Improved Process Title: INVENTORY MOVEMENT FMSZ

CURRENT METHOD
Stores Parts arrive to Issue &

Stores or accept back
Direct deliver “unused” qty
Procurement
Market Research Place order to buy. (Small %
have an MRP plan) Weak monitoring
Under stock occurs
and
MEMIS measuring
NEW METHOD
NEW METHOD for “EXPENDABLE MATERIALS” Planning and Procurement
Parts arrive at Stores
MOS issue PC report for Issue & accept back
Stores or Direct delivery
AOG’s by Buyer Code “unused” qty
(MEMIS updated)
Check Stock &

Procurement Market research Place order to buy.
Open orders
MMIS Under stock SD Report issued by Using new BUY-QTY ‘math

occurs Proc Area & Buyer model’ determine order qty
TIS
Produce Major Open Item (MOI) weekly SD Report
Feedback

Six Sigma -- Improve Phase GE Aircraft Engines
Improved Process
Before and After Improvements

Buyer Code 21
Change: Value/Qty of ‘SLOW/ZERO’ removed to ‘MEDIUM/FAST’
VALUE Qty Part#s

51
50
50 1200 1075
1000
49
48 800 699
47 46 600
46 400
45
200
44
43 0
Before After Before After
8.1% improvement by SR 31% improvement by Qty
GOAL: Improve both by 5%

GE Aircraft Engines
CONTROL PHASE

Six Sigma -- Control Phase GE Aircraft Engines
What Xs to Control
Project Title: FMSZ Movement Expendable Material
Variation Control
Variation Source •Implementation and use of

‘Quantity’ and ‘SR Value’ of STR New Math-model for
Stock Depletes (SD) of Buyer reorder and under stock
Code 21, where Customers settings.
have requested the parts •Monitor and actions based
(has been demand) on monthly Reports
through FOCUS
•MOI Report
•SD Report
•AOG Desk Report

GE Aircraft Engines
Project Summary Six Sigma Lessons Learned

• Worthwhile project, with • Importance of Project
short and long term benefits selection, due to what data is
to Saudia, both in Saudi actually available.
Riyals and FMSZ stock • Criticality of clear project
movement terms definition and scope.
• Some of the data was hard • Excellent toolkit for working
to find for some of the a project through to
‘causes (X’s)’ successful completion.
• Challenging project overall • Many prior assumptions
were proven through
MiniTab to be incorrect.

GE Aircraft Engines
Project Closure
Project Dates
Started: Oct 2000 Completed Sep 2001
Improvements Implemented Oct 2001
Description of Savings
Reduction in Stock Depletes, by improved math model for “reorder &
under stock levels” settings & “solving Major Open Items (MOIs)”.
Savings Calculation For Buyer Code 21
Time of Aircraft Delay due to SD part…………….. Equals = SR xxxxxxx
SR xxxxxx times (# of AOG) = SR xx for 9 months, annual = SR xxx
Cost expenditure for additional S+Z Movement = SR zzz
SR xxx - SR zzz = SR aaa (for Buyer Code 21)

Total Savings
SR aaa
Project Signatures
Project Leader Allen Mackay Finance: Management VP MM

GE Aircraft Engines
Attachments Project Title: INVENTORY MOVEMENT FMSZ

We have actioned the Major Open Items (MOIs) with excellent
results achieved in the first week (61% reduction).
Number of MOI's - for Parts

8000
7000
6000
5000
Quantity
4000
3000
2000
1000
0
8Sep01-Started 15Sep01-Current
Series1 7501 2891 4610
Reduction (61%)
Awaiting next monthly report to show FMSZ impact.

GE Aircraft Engines
Attachments Project Title: INVENTORY MOVEMENT FMSZ
AOG's YTD Total & Buyer 21

ADDITIONAL IMPACTS
4500
•There are 40 Acft Buyers 4000
•Changes in inventory levels 3500

3000
using the ‘new math model’
Quantity
2500
will become apparent with 2000
the monthly Focus Reports 1500
from MEMIS. 1000
Obj-01: ASSURED SUPPLY 500

0
•Improved parts availability AOG's YTD
AOG's Buyer 21
Sep01
could reduce AOG
Series1 3859 102
occurrences, as Buyer 21
has 3% of AOG’s in his area
•Cancelled/delayed flights could reduce in quantity
•Number of work-stoppages for parts could reduce
•Planning of shop work could become more certain

GE Aircraft Engines
BEST GUESS ?
HOW WELL DID YOU GUESS

WHY SO MUCH S&Z
AT THE BEGINNING OF THIS
6-SIGMA PROJECT?
Project Title: INVENTORY MOVEMENT FMSZ

GE Aircraft Engines
FINALLY
DO GET INVOLVED IN
SIX-SIGMA
The benefits will
surprise you!

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GE Aircraft Engines

Saudi Arabian Airlines/GEAE Partners in Productivity 1

1. 550 multi national staff (mainly Saudi)

Saudi Arabian Airlines/GEAE Partners in Productivity 2

WHY SV MM ADOPTED : 6-SIGMA

1993 .. Adopted TQM - Methods

Saudi Arabian Airlines/GEAE Partners in Productivity 3

SIX SIGMA – Status Today

6-Sigma Green-Belt (Use it)

Saudi Arabian Airlines/GEAE Partners in Productivity 4

Saudi Arabian Airlines/GEAE Partners in Productivity 5

Saudi Arabian Airlines/GEAE Partners in Productivity 6

P (>SR 100k) 0 0 0 0 0 0 2 450,000 2 450,000

Why is such a high percentage of consumable materials

Saudi Arabian Airlines/GEAE Partners in Productivity 7

Saudi Arabian Airlines/GEAE Partners in Productivity 8

Project Summary Project Title: INVENTORY MOVEMENT FMSZ

Mission Statement Leadership

Goal/Objective Key Performance Metric Affected:

Availability of data from MEMIS system

Saudi Arabian Airlines/GEAE Partners in Productivity 9

Project Summary Project Title: INVENTORY MOVEMENT FMSZ

Risks & Abatements Funding Source

Saudi Arabian Airlines/GEAE Partners in Productivity 10

THREATS & OPPORTUNITIES

Saudi Arabian Airlines/GEAE Partners in Productivity 11

2000 Zero Slow Medium Fast

Percentage of TOTAL 60%

Saudi Arabian Airlines/GEAE Partners in Productivity 12

Time All times where materials None

KEY CONSTITUENTS MAP

18% Mtrls Sales

Saudi Arabian Airlines/GEAE Partners in Productivity 14

Project Title: INVENTORY MOVEMENT FMSZ

Saudi Arabian Airlines/GEAE Partners in Productivity 15

PROCESS CAPABILITY : ALL STUFF

Potential (Within) Capability

Saudi Arabian Airlines/GEAE Partners in Productivity 16

ALL THE STUFF

LONG & SHORT TERM PROCESS CAPABILITIES

Descriptive Statistics: (%)SR

Variable N Mean Median TrMean StDev SE Mean

Variable Minimum Maximum Q1 Q3

Long Term Capability = Zlt

Short Term Capability = Zst

Saudi Arabian Airlines/GEAE Partners in Productivity 17

GOOD STUFF : 10 Best Consecutive Points

Potential (Within) Capability

Saudi Arabian Airlines/GEAE Partners in Productivity 18

Variable N Mean Median TrMean StDev SE Mean

Variable Minimum Maximum Q1 Q3

Long Term Capability = Zlt

· Zshift = Zst - Zlt = 6.15 - (-1.20) = 7.35

Saudi Arabian Airlines/GEAE Partners in Productivity 19

CONTROL vers TECHNOLOGY PLOT

Saudi Arabian Airlines/GEAE Partners in Productivity 20

ONE-WAY ANOVA (%)SR versus GROUP

BOX PLOTS by (%SR) by GROUP

Saudi Arabian Airlines/GEAE Partners in Productivity 22

MEASURE & ANALYSE Summary

Saudi Arabian Airlines/GEAE Partners in Productivity 23

Saudi Arabian Airlines/GEAE Partners in Productivity 24

Process Fixes & Controls