Project Zeus

1
Project Zeus
2
The History

• Accenture 2003
• Project Challenge
• A TUI Group initiated review of group airlines
  maintenance organisations
• Objective To identify opportunities with cost
  savings potential
• Findings 4 options to pursue
• Outsource all E M group requirements to a
  strategic partner
• Local re-engineering and the implementation of a
  single Engineering IT system
• (GEMS group engineering maintenance system)
• Single MRO
• Competency centres
• Scenarios evaluated and presented to the TUI
  board decision -
• Further investigate outsourcing all of EM and
  local re-engineering, including GEMS
• Abandon single MRO and competency centres

3
Project Zeus

• Purpose
• Conducted a review of EM Supply Chain to
  optimise its performance and to position it for
  the future
• Provided an input to the two remaining options
  under Project Challenge,
• i.e. outsourcing all of E M and local
  re-engineering
• Scope
• Thomsonflys Engineering and Maintenance Supply
  Chain (E M SC)
• Reviewed structure, skills, processes, systems
  and stock levels
• Phase I (August 2004 October 2004)
• Identified key tactical business, process and
  data improvements
• Proposed strategic improvements, ensuring
  alignment with
• Opportunities offered within the TUI Group
• Project Challenge
• Project LOLA
• C Check Escalation
• A Check Optimisation

4
Project Zeus - Phase I (Q3 2004)

• Delivered as agreed in project terms of reference
• Documented Findings
• Tactical Actions Outlined
• Improving inventory Accuracy
• Optimising inventory levels
• Strategic Improvements Outlined
• Organisation Structure Roles
• Skills Experience
• KPIs Accountability
• Process Redesign Implementation
• Deliverable incremental to the project terms of
  reference
• Cost/Benefit Analysis Model and Template for all
  Supply Chain initiativesFeeding into the local
  re-engineering option of Project Challenge

5
EM Supply Chain The story so far

• Focus of the last 3 years
• Consistently reducing the cost base whilst
  maintaining an adequate level of service for an
  expanding business model.
• Delivering in excess of 8.5m pa business
  benefits through -
• Reduced Headcount by 40 over a period of 18
  months, to end 2003, reducing the cost base by
  over 350k pa
• Rationalised inventory holding achieving in
  excess of 6m benefits
• Increased revenue contribution by winning
  profitable business, in excess of 1m pa
• Delivered bottom line benefits in excess of 1m
  pa through improved contract coverage and
  improved sourcing strategy
• Strategically outsourced non-core services
  delivering in excess of 250k pa

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EM Supply Chain The way forward

• A supply chain function that operates
  pro-actively, effectively and efficiently in
  delivering bottom line business benefits and an
  excellent service to BAL, TUI and its customers.
• This will include -
• The design and implementation of an
  organisational model that
• Is composed primarily of knowledge workers
• Ensures clarity of roles and responsibility
• Enables full accountability
• Enables the outsourcing of all low skills-based
  areas
• Embedding a culture that encourages teamwork,
  initiative and a can-do attitude
• Processes that are simple, auditable, measurable
  and streamlined

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Key findings addressed

• Inventory data is consistently inaccurate
• Inventory levels are in excess of business need
• Insufficient contracts and framework agreements
  in place
• No consolidated/comprehensive view of procurement
  and invoice settlement activity
• No active supplier management
• Unable to assess profitability of services sold
  to customers - poor data quality and quantity
• People skills less than needed, performance
  less than acceptable

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Inventory data that was consistently inaccurate

• Scale of the inaccuracy is hidden by the
• Reporting format
• Process halting when the report is delivered?
• Perpetual stock checks are used solely to correct
  financial records
• NO root cause analysis
• NO corrective actions
• Cause of inaccuracies extend beyond the span of
  control of the Supply Chain team
• NO clear mechanism to ensure compliance to
  record-keeping from the Engineering community

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Inventory levels that were in excess of business
need

• Accountability and ownership unclear
• Inaccuracies are corrected manually rather than
  systemically
• Processes and actions for materials forecasting
  planning and the setting of replenishment levels
  are ad-hoc rather than methodical
• No clear and agreed process/procedure to address
  old removed parts, resulting in an
  accumulation of redundant/obsolete inventory
• No clear and agreed process/procedure to dispose
  of redundant/obsolete stock

10
Insufficient contracts and framework agreements
being in place

• Low contract coverage for procured services
• No contract or framework agreement coverage for
  airline approved parts
• The process for requesting contracts award is
  ad-hoc and initiated on an as requested basis
  no contracting strategy or formalised, methodical
  process
• Resources and skills are not in place to
  pro-actively manage negotiation, tender activity
  and contracts, resulting in business exposure
  from unqualified staff entering into
  negotiation and supplier selection
• Key contract information not readily available
  for repair activity

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Absence of consolidated/comprehensive view of
procurement and invoice settlement activity

• Procurement carried out using
• IES (Integrated Engineering System) for Airline
  Approved Parts
• Oracle iProcurement for commercial parts and
  general purchasing
• Services non-PO invoices processed via Oracle
• No single view of purchasing commitments related
  to Engineer Maintenance activities
• Disjointed processes and systems, resulting in
  data inaccuracies and significant issues in
  reconciliation
• IES has been designed primarily from an
  engineering perspective and does not lend
  itself to enabling pro-active analysis, planning
  and management of procurement activity

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No active supplier management

• Supplier performance
• No monitoring or reporting
• No evaluation meetings
• No formalised feedback mechanisms
• No formalised mechanisms for sharing plans and
  projections
• No strategic sourcing strategies
• No commodity strategies
• No visible market data analysis

13
Inability to assess profitability of services
sold to customers - poor data quality and quantity

• Unreliable recording of man-hours
• Misunderstanding/misinterpretation of available
  man-hour data
• All required data not available
• Disjointed processes and systems between
  engineering, contracts and sales
• Capacity planning information not readily
  available
• Resulting in
• Difficulties in charging correct amounts to
  customer
• Difficulties in assessing potential profitability
• Difficulties in assessing actual profitability

14
People skills less than needed, performance
less than acceptable

• Organisation structure and boundaries are not
  conducive to team work
• Process are broken and disjointed across the
  organisation
• Skills level is not sufficient for an effective
  supply chain management group
• Resources mix inappropriate
• On-going headcount reductions and business
  uncertainty for Thomsonfly as a whole has
  dampened motivation and developed a culture where
  job security is sometimes managed by protecting
  job content knowledge
• Morale and motivation too low for the
  productivity and performance required going
  forward
• Environment not conducive to exhibiting
  initiative or gaining recognition for any
  significant contribution
• Silo mentality - very little periphery vision

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Implemented a Tactical ActionImproving Inventory
Accuracy

• Luton Main Stores (highest occurrence of
  inaccuracies)
• Root Cause Analysis to be initiated immediately
• Corrective actions, including any process
  changes, to be applied to all relevant stock
  locations
• 3rd-Party Agencies
• Root Cause Analysis to be initiated immediately
• Corrective actions, including any process
  changes, to be implemented
• Perpetual Stock Check (PSC) Process
• Immediate redesign of reports to accurately
  reflect scale of discrepancies
• Redesign process
• To capture, where possible, cause and effect
  information
• To complete only when corrective and preventative
  action has been implemented for each cause

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Organisation Structure Roles
Supply Chain Manager
Contracts Management Group Leader
Services Management Group Leader
Commodity Management Group Leader
Contracts Specialists
Revenue Specialists
Services Specialists
KPIs
KPIs
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Commodity Specialists

• Role Responsibility
• Materials Planning
• Commodity strategies
• Stock level
• Stock accuracy
• Procurement
• Supplier Performance Management
• Supply-base analysis
• Contracting requirements
• Contract management
• Teamwork with
• Contracts Specialists
• Outsource Specialists
• Revenue Specialists
• Liaison with engineering community for materials
  needs for all maintenance and repair activity
• Management of loans
• Repair and warranty management
• Management reporting

• Skills Experience
• Aviation Engineering Maintenance supply-base
  knowledge
• Procurement and/or Materials planning experience
• Degree/Diploma plus 5 years
• Commercially astute
• Strong inter-personal
• Strong communication (written verbal)
• Highly analytical
• Team player

• KPIs Accountability
• Minimise stock excess stock levels vs. usage
• Minimise stock shortages (AOG Loans data)
• Minimisation of Loans-In
• Revenue from Loans-Out Sales
• Savings Cost optimisation
• Supplier Scorecards (quality of supplier
  performance)
• Internal Customer Satisfaction
• Performance against contracts

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Commodity SpecialistsClosed-loop Performance
Improvement

• Role Responsibility
• Materials Planning
• Commodity strategies
• Stock level
• Stock accuracy
• Procurement
• Supplier Performance Management
• Supply-base analysis
• Contracting requirements
• Contract management
• Teamwork with
• Contracts Specialists
• Outsource Specialists
• Revenue Specialists
• Liaison with engineering community for materials
  needs for all maintenance and repair activity
• Management of loans
• Repair and warranty management
• Management reporting

Performance in Role
Capability Required

• KPIs Accountability
• Minimise stock excess stock levels vs. usage
• Minimise stock shortages (AOG Loans data)
• Minimisation of Loans-In
• Revenue from Loans-Out Sales
• Savings Cost optimisation
• Supplier Scorecards (quality of supplier
  performance)
• Internal Customer Satisfaction
• Performance against contracts

• Skills Experience
• Aviation Engineering Maintenance supply-base
  knowledge
• Procurement and/or Materials planning experience
• Degree/Diploma plus 5 years
• Commercially astute
• Strong inter-personal
• Strong communication (written verbal)
• Highly analytical
• Team player

Development Plan
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Commodity Management Group Leader

• Role Responsibility
• Leadership and co-ordination of Commodity
  Specialist team
• Liaison with all areas of BAL and TUI pertinent
  to commodity planning and delivery
• Management reporting
• Performance management

• Skills Experience
• Aviation Engineering Maintenance supply-base
  knowledge
• Degree plus 10 years
• Procurement and/or materials planning
• Sound leadership
• Strong inter-personal
• Strong communication (written verbal)
• Commercially astute
• Highly analytical
• Team player

• KPIs Accountability
• Employee Satisfaction
• 360 degree feedback
• Aggregated team KPIs

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Commodity Management Group LeaderClosed-loop
Performance Improvement

• Role Responsibility
• Leadership and co-ordination of Commodity
  Specialist team
• Liaison with all areas of BAL and TUI pertinent
  to commodity planning and delivery
• Management reporting
• Performance management

Performance in Role
Capability Required

• Skills Experience
• Aviation Engineering Maintenance supply-base
  knowledge
• Degree plus 10 years
• Procurement and/or materials planning
• Sound leadership
• Strong inter-personal
• Strong communication (written verbal)
• Commercially astute
• Highly analytical
• Team player

• KPIs Accountability
• Employee Satisfaction
• 360 degree feedback
• Aggregated team KPIs

Development Plan
Leadership Performance
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Outsourced Services

• Stores
• Goods receiving
• Returns Management
• Warehousing and Stores Movement
• Inventory Pooling
• Logistics
• UK Overseas Planning Handling
• Sales Agents
• Surplus Stock
• Repair Agents
• Engines APUs
• Components
• Maintenance (C-Checks, A-Checks, Line,
  Unscheduled)
• Overflow
• Strategic/Planned

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Strategic Process Redesign ImplementationInvent
ory Level Management
Key Inventory Definitions Redundant No longer
valid for Fleet Obsolete No longer valid for any
airline Excess Too much valid stock

• Included -
• A comprehensive disposal timetable
• For Redundant/Obsolete Stock
• Quarterly review and disposal process capturing
  input for the KPIs of relevant Commodity
  Specialists
• Event-based review and disposal process for stock
  replaced through normal course of business and/or
  exceptional events (e.g REFRESH programmes)
• For Excess Stock
• Quarterly review and disposal process for
  potentially excess stock capturing input for
  the KPIs of relevant Commodity Specialists
• Maintenance plan-based review and tuning of
  replenishment levels (by Commodity Specialists
  for each of their commodities)
• Key inputs for both processes (i.e. Quarterly
  reviews and plan-based reviews)
• Stock Usage vs. Stock Turns
• Forecasted Usage
• Current and projected market value and purchase
  price
• Business impact reporting of stock shortages
  (AOG/Loan Costs)
• capturing input for the KPIs of relevant
  Commodity Specialists

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Strategic Process Redesign ImplementationStrate
gic Sourcing Contract Management

• Included -
• The development and ongoing management of
• Sourcing Strategies
• Contract Strategies
• Full life-cycle management and administration of
• Tenders
• Contracts
• Framework Agreements
• Monitoring and reporting of
• The coverage of commodities and services with
  contracts and framework agreements
• Procurement activity against contracts and
  framework agreements
• Performance and continued fit of contracts and
  framework agreements
• Off-contract activity

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Supplier Management

• Included -
• Supplier Scorecards that enable analysis and
  decision-making related to supplier performance
  in key areas, e.g. -
• Price
• Quality
• Delivery/Lead-time
• Responsiveness
• Data collection processes that enable the
  construction of the Supplier Scorecards based on
  consistent and, wherever possible, objective data
• Supplier performance review process, including -
• Internal review
• Supplier feedback
• Supplier ranking
• Supply base optimisation

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Market Development and Customer Satisfaction

• Included -
• Business and market development strategies and
  plans
• Sales performance management
• Key decision-making data to win profitable
  business
• Customer satisfaction surveys and associated
  processes and timetable
• Market/Customer review process, including -
• Internal review
• Feedback from Customers
• Customer ranking
• Customer base optimisation for maximum
  profitability

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People Management

• Included -
• Date collection, monitoring and reporting
  processes for all KPIs
• Employee satisfaction surveys and associated
  processes and timetable
• 360 degree feedback process
• On-going skills review and gap analysis
• Group and individual development plans and
  timetables
• Skip-level meetings (i.e. relatively informal
  meeting between a manager and staff two levels
  away in the organisations structure, skipping a
  level)
• High-visibility employee recognition programmes

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Transition Route Map with Optional Outsourcing
of Stores
8-10 weeks
6-8 weeks
8-10 weeks

• Finalise embed organisation
• Review performance of all staff in new roles
• Recruitment shortlist identified if any role
  needs to b revisited
• Assessment centres completed and new staff
  assigned
• Skills gap analysis and associated development
  plans in place for any new appointments
• Probationary performance targets in place for new
  appointment
• Routine performance target established for
  remaining staff
• Redundancy processes completed, if appropriate

• Set-up mobilisation
• HR support and participation initiated

• Group Leader assignments
• Target roles for existing Group Leaders
  identified
• Recruitment shortlist identified
• Group leader Assessment centres completed and
  group leaders assigned
• Skills gap analysis and associated development
  plans in place
• Probationary performance targets in place

• Specialists assignments
• Target specialists roles for existing staff
  identified
• Recruitment shortlist identified
• Specialists Assessment centres completed and
  staff assigned
• Skills gap analysis and associated development
  plans in place
• Probationary performance targets in place
• Redundancy processes completed

• New organisation
• Staff feedback cycles completed

6 month probationary period for each role

• Role profiles and associated target skills
  matrix in place
• Recruitment campaign initiated
• Assessment centres designed and scheduled

Design of new business process and procedures
completed
Ongoing Performance monitoring and review
Probationary Performance monitoring and review
Rationalisation of STORES
Optional Outsourcing of STORES
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Project Challenges

• Support increased number of outsourced
  maintenance Checks
• Management of complex component support
  arrangements across mixed fleet i.e. Thomsonfly,
  Nordic, Third Party, etc
• Maintaining business continuity whilst
  transitioning the Supply Chain through its
  organisational restructure
• Facing the challenge of up-skilling and changes
  to the Fabric of the business
• For employees this means either
• Repair (develop, train, grow)
• Remove (re-deploy elsewhere or leave)
• Replace (external recruitment)
• For peers this means exposure
• Embedding a culture that encourages teamwork,
  initiative and a can-do attitude with processes
  that are simple, auditable, measurable and
  streamlined