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1 © supply chainge management ltd. 2008 Case Example: Supply Industry Benchmarking Aerospace Sub-contract Machining.

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Presentation on theme: "1 © supply chainge management ltd. 2008 Case Example: Supply Industry Benchmarking Aerospace Sub-contract Machining."— Presentation transcript:

1 1 © supply chainge management ltd Case Example: Supply Industry Benchmarking Aerospace Sub-contract Machining

2 2 © supply chainge management ltd BenchmarksBefore Benchmark Sales/Employee~£ 32,000 £ 45,000 Operators/Total Employees 64% 80% Labour Reduction following benchmarking: 10% 4 weeks elapsed time ~ 5% reduction in total cost Supply Industry Benchmarking Case Example Part 1: Aerospace sub-contract machining: pareto cost (45% of sales) = labour

3 3 © supply chainge management ltd Aerospace Sub-contract Machining. Case Example Part 2. Pareto cost = labour (on average 45% of turnover)

4 4 © supply chainge management ltd Benchmarking Metrics Secondary Metrics investigate drivers behind Primary Metrics. For example: Primary Metric = Sales* x 100% Employee Secondary Metric = Operators x 100% Total Number of Employees Presuming organisation design/leanness drives down labour costs… * In most industries Added Value/Employee would be a better primary metric than Sales/Employee because the sales per employee is substantially affected by the degree of vertical integration / outsourcing between businesses being compared; whereas added value per employee isn’t. However in the case of aerospace sub-contract machining suppliers, since the materials are free issued by the customer it makes little difference.

5 5 © supply chainge management ltd Number of Suppliers in Range Sales/Employee is a fair Primary Efficiency Metric for aerospace industry sub-contract machining… Small Turned Large Turned Small Prismatic Sales/Employee (£,000s) for Low Volume Segments of the UK Sub-Contract Machining Industry Source: Industry Analysis – Survey of 200 Suppliers Large Prismatic

6 6 © supply chainge management ltd Case Example: two suppliers of large prismatic aerospace machinings… CompanyACompanyB

7 7 © supply chainge management ltd With very different Primary Metrics… Small Turned Large Turned Small Prismatic Sales/Employee (£,000s) for Low Volume Segments of the UK Sub-Contract Machining Industry Source: Industry Analysis – Survey of 200 Suppliers - Consultancy Assignment – Aerospace IndustryB Large Prismatic Large PrismaticA

8 8 © supply chainge management ltd `…very different Secondary Metrics… Source: Industry Analysis – Survey of 200 Suppliers - Consultancy Assignment – Aerospace Industry: Team Questionnaires and Infocheck Reports. = Operators x 100% Total Number of Employees Co. A Co. B

9 9 © supply chainge management ltd Comparing Org. Designs/Leanness… Source: Team Analysis MD11 MD11 Ops Dir.11 Ops Dir.11 Sales Dir.11 Sales Dir.11 Contracts Mgr.01 Contracts Mgr.01 QA Mgr01 QA Mgr01 Chief Inspector01 Chief Inspector01 Dep. Chief Inspector01 Dep. Chief Inspector01 Inspection38 Inspection38 NDT01 NDT01 Despatch & GI01 Despatch & GI01 Accountant11 Accountant11 Office35 Office35 Procurement01 Procurement01 Ind. Eng.11 Ind. Eng.11 Snr. Programmer11 Snr. Programmer11 Programmers25 Programmers25 Planners02 Planners02 Planning Clerk01 Planning Clerk01 Production Controllers11 Production Controllers11 Chasers03 Chasers03 Other10 Other10 Bonus Clerks02 Bonus Clerks02 Senior Foremen06 Senior Foremen06 Chargehands03 Chargehands03 Production Workers Production Workers Labourers02 Labourers02 Maintenance04 Maintenance04 Apprentices 06 Apprentices 06 Cleaning Staff02 Cleaning Staff02 Canteen02 Canteen02 Special Tooling 07 Special Tooling 07 Small Machines07 Small Machines07 TOTAL TOTAL Co. B Co. A Co. B Co. A

10 10 © supply chainge management ltd IndustryAverage Company A Organisation Design/Leanness Labour 45% Company B 30% 60% i.e. Largest Cost (Labour)/Sales

11 11 © supply chainge management ltd The impact on their businesses ? Source: Industry Analysis – Survey of 200 Suppliers - Consultancy Assignment – Aerospace Industry: Team Questionnaires and Infocheck Reports. * before Tax # Previous year’s figures Sales £7.3m Sales £7.3m Employees 97 Employees 97 Sales/Employee: £ 75k Sales/Employee: £ 75k Labour Costs/Employee: £ 20k Labour Costs/Employee: £ 20k Largest Cost (Labour)/Sales 30% Largest Cost (Labour)/Sales 30% Operators/Total Employees: 80% Operators/Total Employees: 80% Profit Margin 14% Profit Margin 14% ROCE 66% ROCE 66% £4.6m £ 27k £ 14k 60% 60% 50% 50%-9% -


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