Aerospace Case Study

Airline equipment manufacturer

THE ORGANISATION

• Subsidiary of a major plc, specializing in the manufacture and supply of equipment for use in most of the world's commercial airlines
• Subsidiary employs 130 staff, (1100 in the Group)
• Direct sales within UK, but world wide to the end user

THE ISSUES / PROBLEMS

• Unaware of own financial position or performance
• Poor customer performance, 3 month overdue on delivery
• Excess stock of raw material
• Little control over buying policy
• 65% un-utilized capacity
• Little knowledge of the market in terms of customers and competitors
• No product costs or pricing policy
• Business estimated to have a pre-tax loss of £2m on sales of £5m

PROJECT ACTIVITIES

• Created separate stand alone accounting system
• Installed independent manufacturing IT systems to allow full visibility of production processes
• Linked manufacturing software to stand alone accounting system
• Utilized new manufacturing IT package to identify exact un-utilized capacity, in order to eliminate overdue delivery performance
• Balanced capacity to meet demand by the reduction in the payroll from 130 to 98
• Reduced inventory by 50%, by the utilization of the MRP processes on the new manufacturing package and with the introduction of JIT methods
• Conducted a full marketing study in order to fully understand major competitive forces
• Defined clear roles and responsibilities and created budget holders with financial accountability
• Installed full budgets, forecasting, monthly management accounts with variance analysis

PROJECT RESULTS

• Overdue order book eliminated and delivery lead time 3-4 weeks, has become standard
• Working capital reduced by 50% by the reduction of inventory and prompt collection of receivables
• Full understanding of the market place, thus allowing focus on high margin output
• Created greater customer confidence, thus gaining access to larger orders in more cost effective batch sizes
• A project return of 32:1 over a 2 year period