"How to Avoid Risk and Save Money with the Right Project Approach” Presented by: Sponsored by: Adam Wood, MTU America Inc. Rupert Hoecherl, io-consultants L.P. © 2014 MHI® Copyright claimed as to audiovisual works of seminar sessions and sound recordings of seminar sessions. All rights reserved. Introduction – Abstract In this seminar presented by MTU America Inc. and io-consultants, you will learn how you can positively impact the three project objectives: • Scope • Budget • Schedule The presenters will show you how you can meet these objectives based on a highly successful implementation project. They will guide you through the project life cycle from the early planning stages all the way through to a successful go-live. Using practical and proven examples, the presenters will show you how the right level of up-front planning, a functional bidding process and professional execution can reduce your timeline, improve your bottom line and reduce your risk. Introduction – Key Takeaways 1. Risk mitigation 2. How to plan and execute large investment projects 3. Project management tools 4. Cost saving ideas for your project 5. Project on time and on budget Content • Introduction • New Parts Logistics Center North America (PLCNA) – Overview – Approach and Timeline – Logistics and Automation – IT – Project Management • KPIs and Summary INTRODUCTION & OVERVIEW Introduction – Speaker Information Adam Wood • Education: – B.S. Applied Engineering Science, cognate in MLM – Michigan State University – B.A. Physics – Albion College • • • • • • 16 + years in the Diesel Engine Business Extensive background in Production and Service Logistics and Operations Project lead for production IT (SAP) rollout in North America Responsible for multiple warehouse changes / relocations Regional project owner for new After Sales IT (SAP) roll out and Parts Distribution Center implementation in NA Current position – Director of Service Sales & Operations NA / LA, MTU America Inc. Introduction – Speaker Information Rupert Hoecherl • • • • • Master of Science, Industrial Engineering 6 years experience in large scale distribution center planning and supply chain management projects in aftersales and production related environments International experience, assignments in Europe, USA and the Middle East involving managing geographically distributed project teams working in multi-cultural environments Focus on Strategic Planning, Material Handling Design, Implementation, Ramp-up Support and Project Management Currently serving as Business Unit Manager for the io-consultants North American operations Introduction – Overview MTU America – Power, Passion, Partnership • • • Subsidiary of Rolls-Royce Power Systems AG Manufacturer of large diesel engines and power systems Manufacturer with global logistics operations supported by 3 main distribution hubs worldwide (US, Germany, Singapore) io-consultants – a Global Consulting Group • • Founded in 1958 Provides services in Logistics, Supply Chain Management, IT Automation and Flight Catering that are independent from hardware, software and solution providers PROJECT: MTU PARTS LOGISTICS CENTER NORTH AMERICA (PLC NA) Starting Point – MTU After Sales Logistics • Large diesel engine manufacturer with logistics operations focused in 3 main distribution regions • All regions operate as separate organizations, with different processes, systems (IT, Logistics) and locations • North American operations and systems outsourced • Renewal of contract for NA was evaluated • Expected increase in sales, product portfolio and customer service level requirements could not be supported in existing setup for North America • Process harmonization and integration of global after sales logistics set up expected Premise – Global Parts Logistics Global After Sales Solution 3 Regions 3 Warehouses 3 Systems Series production Series production Vendors Germany USA 1 globally harmonized planning and execution system Region 3 Latin America Australia Vendors Region 1 Australia Singapore Region 2 Goals and Target Definition • Standardized Processes – Global process template – Individual localization per region • • • One global IT system (EWM) Global stock visibility Standardized operations and systems – Pre-selection of systems for given application on global basis – Application to local requirements • Budget (conf.) Reduction in overall logistics cost Timeline 13 months Scope • New DC • New 3PL • New IT Overall Milestone Plan for Integration Q3-2010 IT Blue print Q4-2010 Prototype 1 Building 3PL Prototype 2 Cut-over Concept Cut-Over LOG Q1-2011 Design Stage Selection / Contracting Bidding & Contracting Q2-2011 Q3-2011 Roll-In USA Data migration GoLive Physical move Implementation & Testing Refurbishment / Fit-out Selection / Contracting Training & Ramp-up Less than 13 months from Kick-Off to Go-Live Operating Model – Setup Options Land Building Equipment IT Staffing Remarks MTU Investor 3rd Party Existing model B MTU Investor 3rd Party • Separate contracts for building, equipment & operations • Process ownership (IT) • Flexibility with 3PL • Cost efficiency C MTU Investor 3rd Party A Equipment Building Long term dependencies to 3rd parties After Sales Logistics: Facts & Figures • • • • • • Approx. 40,000 different SKUs from small O-rings to 12-ton crank cases Up to approx. 3,000 order lines fulfilled daily Prepacking to streamline outbound process Conservation operations to protect material More than 1,000 different kits produced in flexible Kit-toStock and Kit-to-Order process Picking strategy: Work-to-Man Recommended 3-Phase Approach Client Docs Data, Systems & Layout Concept Design Technical Requirements Detailed Design Budget & Business Case Budget Update Phase 1 Phase 2 Functional Bid Package Design Spec Engineering Site Supervision Implementation FAT, SAT Testing & Acceptance Bidding & Contracting Firm Competitive Quote Change Requests / Budget Tracking Phase 3 Comparison 3-Phase Approach Approach ‘Direct-buy’ • • • • • • • • Up front budget estimate Competitive pricing (RFQ) for major budget items Transparent market Functional system definition to allow different technical solutions Clear testing and acceptance scenario: – Functionality – Performance – Availability • • No defined basis for RFQ RFQ for minor budget items (concept) Non-competitive pricing for big ticket items No functional system definition Limited testing (check against proposal) Recommended approach has positive impact on budget and timeline Automated vs. Manual – Overview • • Goal is to determine the most suitable storage system for small and medium parts (up to 35 lbs) Comparison of multi-order picking in a two-tier shelving system vs. a Workto-Man picking strategy in an automated storage and retrieval system (AS/RS) loaded with trays (48in x 24in) Manual Shelf System (2-tier) AS/RS – Miniload Automated vs. Manual – Operating Cost Graph shows annual operating cost including depreciation on construction cost and system invest from 2013 – 2021: Savings > 16% Break even in annual operating cost (including depreciation) is reached after approx. 3 years. AS/RS Shelf-Rack Value Operating Cost (Qualitative comparison) (Normalized) 3.9 1.0 3.0 1.1 Operating Cost System Comparison – Summary 1.2 Shelf-Rack 1.0 ASRS 0.8 2.0 3.0 4.0 Value Conclusion: The proposed automated storage and retrieval system is the preferred picking strategy for small and medium parts Process Standardization • Standardize business processes at 3 sites in 3 different time zones with different cultures / practices • Develop global process template; allow for local adjustments required for special processes and legal requirements • Dramatic changes to current processes required early change management and communication strategy • Improved support and comparison (KPIs) on a global scale w/comparable operations • Basis for improved inventory management across end-to end supply chain Case Study – IT Process Standardization Detailed process modeling utilizing database technologies Local process for Quality Inspection Global process to handle part returns IT Standardization Pre-GPL PE2 Front-End Post-GPL Web Shop GTS PS3 DIBS MS5 CMCS Global AFS Template PS2 CANTON RETURNS EXTRANET GTS TCMS PAS PE2 Returns Core Management Back-End IMS PARTS LOC Electronic EDI Ordering MS5 PS2 PS3 Warehouse Kitting Forecasting / Planning  Disconnected systems and information  Non-Harmonized business processes  Non-Harmonized data  Non-Harmonized document types  Uncontrollable results  Common standardized systems  Harmonized business processes  Harmonized data  Harmonized document types  Optimized results Procurement Project Organization = Global Project Sponsors Coordination Global Parts Logistics GPL IT (Global solution with local roll-in) Support = Regional Steering Committee PLC NA Controlling Quality / Integration Global IT Deliverable Coordination Management Extension PLC Ueberlingen Global Solution Architect Transition Pl. & Phys. Move Processes & Materials 3PL Equipment Facility Project Management – Tools Web-based project management tool with: • Simple information exchange • Standardized communication and information channels • Resource allocation and control • Permanent process tracking and documentation of all activities • Access control on user level The project team used the Project Portal in conjunction with MS-Project (for schedules) Controlling / Supervision • Risk management / Early warning system (e.g. critical path) • • • • Weekly status update meetings Standardized status reports Monthly budget tracking & control Detailed schedule per sub-project (with dependencies) Integrated milestone schedule Clear definition of deliverables • • Balancing act between top down control and bottom-up sense of ownership and responsibility KPI AND SUMMARY Review of Goals and Target Definition  • Standardized processes   • • Budget (conf.) One global IT system (EWM) – Global stock visibility Standardized operations and systems  • – Global process template with – Individual localization per region – Pre-selection of systems for given application on global basis – Application to local requirements Timeline 12 months Scope • New DC • New 3PL • New IT Reduction in overall logistics cost Goal met: On time and under budget Summary and Lessons Learned • Spare parts profitability is significantly affected by logistics costs • Cultural differences pose challenge to worldwide projects • Introduction of automation requires time to embrace all benefits • Consistent worldwide processes facilitate cost effective operations and inventory management • Standardized operations facilitate benchmarking For More Information: Adam Wood MTU America, Inc. Rupert Hoecherl io-consultants L.P. [email protected] www.mtu-online.com [email protected] www.io-consultants.com Visit us at Booth 9941