Abstract - This paper was conducted at an aircraft spare

management company located in Singapore, which support several overseas offices, including the four offices located in US. Non-compliance findings were reported by the US authorities on several occasions in the past one year with several warning being served to the organisation. To eradicate this problem, this paper attempts to identify the potential causes in the inaccuracy of the shipment preparation process using Lean Six Sigma concepts and tools. The project successfully reviewed the shipment preparation process using the DMAIC framework and identifies areas of improvement within the process, which were prioritised for review and action. The eventual outcome exceeded the initial target of improving the shipment process so as to reduce/eliminate the opportunity for error. The MRP review further improved the re-distribution of spares, reducing the shipment frequency and balance out the workload distribution among the warehouses.

Keywords – Spares management, ITAR, Supply chain

management, DMAIC

I. INTRODUCTION This paper is motivated by the work done at an organization that manages aircraft spares that were being purchased from the United States in support of an international aircraft leasing programme.. Besides maintaining a high serviceability rate for the aircraft flying in Singapore by ensuring spares availability, there is the need to support the many overseas leasing operation as the company has leasing contracts established with regional offices setup in US, Europe and Australia, operating different type of aircraft (both fixed wing and rotary wing) with military grade parts in some of the aircraft for client security reason. This resulted in the need for spares to be position in both local and overseas regional offices for quick support. See Figure 1 on the geographical spread of the company overseas offices location. The Singapore office operates a few warehouses to cater to the different aircraft types and uses Singapore as the central hub for its international business. Purchase of any new US origin parts need to be import into Singapore before it can be re-export back to the US office, due to the regulations put in place by the US Government to ensure that all initial export is only shipped out to the country where the organisation is registered.

The organisation makes use of Enterprise System from SAP to manage its inventory, warehousing and distribution requirement. It engages a 3PL to manage the warehousing function in the Singapore warehouses and engage a freight forwarding company in the shipment requirement of it spares. The 3PL is required to use the organisation SAP programme and the shipment request module is link to the freight forwarder proprietary asset tracking system. When a demand is being placed in from an overseas office to the main warehouse in Singapore using the Enterprise System (ES), a picking list will be generated in the Singapore Warehouse. Items will be picked from the Singapore warehouse by the 3PL and packed for shipment. Here-lies the problem as the Freight Forwarder will not open up the consolidated boxes to ensure that all item declared in the shipment manifest are indeed packed and that the quantity tally with the shipment manifest provided by the 3PL. Several non-compliances were noted over the years, due to human error in the shipment preparation stage. Senior management has directed the need to prevent further non-compliances and with the tightening custom checks at the US borders; there is the immediate impetus for the organisation to review and tighten this process, so as to ensure no further re-occurrence of non-compliance be noted.

Fig. 1. Overseas office.

II. LITERATURE REVIEW

Similar challenges were faced by various Air Forces (which hold more military parts as compare to a commercial company) around the world and most notably the USAF, which operate a global operation on a budget

Improvement to the Freight Management of ITAR Controlled Items using Lean Six Sigma

K. M. Wong1, T. Halim2, Y. W. Tan1 1School of Business, SIM University, Singapore

2Department of Business Process & Systems Engineering, Temasek Polytechnic, Singapore (tyhalim@tp.edu.sg)

978-1-4799-0986-5/13/$31.00 ©2013 IEEE

in excess of US$120 Billion with over 700,000 employees. With the tightening budget constraint, the USAF has turn to Lean and Six Sigma to improve their processes, in a bid to lower operating cost without affecting their operational readiness [1]. The USAF is looking at productivity gain of about $5 Billion, 11,000 man-hours saving and energy saving of up to 30%. It has shown how the military has adopted real world application to improve its processes and has even re-discovered many of these ideas that actually originated from the military during World War II. With asset visibly key to the management of their world-wide material support to their deployed units, USAF has engaged Savi to design an end-to-end system to track it assets using active and passive RFID tags [2]. In the pilot trial, man hours used to locate assets were significantly reduced by 80% with over 99% of the assets located. This has shown that RFID technology can be deployed in a military environment with significant saving achieved, depending on application type. While the intent for the project is to identify unaccounted items that were earlier issued to the deployed unit, the capability showcased by the RFID deployment shows that assets identification without line of sight can be achieved and this is applicable to this project desired outcome.

III. METHODOLOGY & RESULTS A. Define

This paper seeks to review and improve the shipment preparation process between the various parties involved using Lean Six Sigma tools and techniques, with potential IT application/solution to help facilitate check and balance among the parties, before the shipment of ITAR controlled items to US. Automatic Identification and Data Capture (AIDC) technology application may help validate and ensure all items packed can be identified by the freight forwarder without the need to open up the shipment packages. This will provide the safety net as a second layer check, to ensure compliance to the ITAR regulations. A. Measure

To understand the complicity of the shipment preparation process, it is essential to first map out the various licence required for the shipment of ITAR item into US and how it will affect the preparation process as shown in Table I. As ITAR govern the shipment of all military grade items into US, specific licence is required to identify 3 key areas, namely, (1) if item is of US origin/Non-US origin items, (2) if item requires special security handling and (3) if item is classified as a Significant Military Equipment by the US. First, to identify the country of origin, the warehouse staff must first go into the Material Master Data (MMD) field in ES system to confirm this

information. They will then need to go to Item Special Security Handling Field to identify the need for special security handling. The staff will then log into the US FedLog system to confirm this information (mainly to ensure the special handing category is still relevant as there has been cases where US has upgraded this information after the initiate material codification has been done in ES when item was first received in Singapore). Finally to identify if item is a Significant Military Equipment (SME) , staff will need to check the Item Export/Import Control (IECC) field for this information. After identifying the various items and sorted into various basket, Warehouse staff will proceed with the shipment process and create the various manifest as items cannot be pack together so as not to complicate the licence verification check in US.

TABLE I LICENCE APPLICATION CONSIDERATION

Type of Licence

Item Characteristics Country of

Origin

(check MMD field in ES)

Required Special Security

Handling (check special item handling field in ES and

FedLog)

Classified as Significant

Military Equipment

(check IECC field

in ES)

DSP 61 Non US Origin Yes NA

DSP 61 US only No No DSP 63 US only No Yes DSP 85 US only Yes NA Process mapping was carried out to first identify existing process map (AS-IS), which will provide a clear presentation on the sequence of events in the shipment process of the ITAR controlled item. A study into the shipment frequency reviewed no significant trend except there has been a downward trend in term of shipment into US. However, out of the 4 offices, Arizona I and Texas offices gather the highest number of shipment over the 3 years as shown in Figure 2.

Fig. 2. Number of Line Item shipped to the various offices in US over 3

years. This information is amplified when we look at the supporting Warehouses and realised that as Texas and Arizona I is support by one Warehouse (WH). Due to the high shipment load, this translates into a significantly higher chance of error arising from this warehouse C. This is illustrated in Figure 3.

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Fig. 4. No of Line Item shipped from the various supporting WHs over 3 years

It was noted that existing verification process by 3PL personnel is time consuming, which may lead to human error when handling large shipment under a tight timeline. The ability to better identify ITAR controlled items should significantly reduce the preparation lead time and error in shipment preparation phases. Table II shows the number of line items each WH supported per year for the past 3 years.

TABLE II WORKLOAD DISTRIBUTION BY WHS OVER 3 YEARS

Support BY 2010 2011 2012 Grand Total

Total Monthly Average

Total Monthly Average

Total Monthly Average

Total Yearly Average

Monthly Average

WH A 138 12 72 6 39 3 249 83 21

WH B 555 46 465 39 366 31 1386 462 116

WH C 1935 161 1563 130 1272 106 4770 1590 398

Grand Total 2628 219 2100 175 1677 140 6405 2135 534

C. Analyse The fishbone diagram was used to evaluate and analyse all possible contributing factors that may have resulted in the shipment error. A workshop was carried out with the various stake holders to identify and list out the potential causes as shown in Figure 5 above. As no one significant area was highlighted, there is a need to holistically address issues highlighted across the 4 areas. D. Improvement A brainstorming session was conducted to identify potential solution to the problems highlighted in the fishbone diagram earlier and the set of solutions were listed in Table III. Ideas were consolidated into logical grouping using the Affinity diagram at the end of the brainstorming session. As shown in Figure 6. Several ideas were eventually consolidated into a total solution to address a root cause. Thereafter, using the Impact/Effort matrix, the team seeks to identify and prioritise the approach to resolve the problem as illustrated in Figure 7.

Fig. 5. Fishbone Diagram on shipment preparation of ITAR controlled

items.

TABLE III BRAINSTORMING SOLUTION

Problem Solution

1. Error in the verification process 1a.

1b.

Simplify verification process by combining available information in ES.

Simplify business process to reduce the number of consideration/ permutation for licence application.

2. Order Picker pick wrong item 2a.

2b.

Education and training

Incentive system to encourage picker to do it once, do it right.

3. WH staff pack wrong item into shipment

3a.

3b.

Education and training

Introduce AIDC technology for checks to be conducted by supervisor before release to FF.

4. 2 systems used in verification purpose

4a.

4b.

Reduce distance between 2 terminals to minimise fatigue and error.

Develop reader for Fedlog system to allow Barcode reading so as to minimise error, long time for data input

5. Only Barcode system available 5a. Introduce AIDC technology beside Barcode

6. Freight Forwarder unable to physically verify shipment package

6a. Introduce AIDC technology for checks to be conducted by FF.

7. No check and balance between 3PLand FF

7a. Introduce AIDC technology for checks to be conducted by FF.

8. Rush Factor for large shipment 8a.

8b.

Spread out the shipment load by studying into the consumption rate at Detachment.

Study into the stocking policy to minimise the need for urgent shipment by early pre-positioning of spares to overseas detachment

9. Workload not balance among WHs 9a.

9b.

Review stocking policy and re-distribute spares to minimise shipment.

Identify consumables that are available in US for direct purchase instead of drawing from Singapore warehouse.

The review approach will be prioritized based on the following sequence below (in decreasing order of priority):

• Solution E (Work Place Improvement) • Solution B (Business Process Improvement) • Solution A (ES System Improvement) • Solution F (Material Requirement Planning

Review) • Solution D (AIDC application review) • Solution C (Staff training review) will be an on-

going process

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Fig. 6. Affinity Diagram grouping derive from the Brainstorming

Session.

Fig. 7. Impact/Effort Diagram from the 6 Solutions derive from the

Affinity Diagram In brief, “Work Place Improvement” involves to immediately addressing the issue of having to move between ES terminal and the FedLog terminal, the Fedlog terminal will be converted into a laptop to allow easy access to the Fedlog information, wherever the operator is operating from. In term of workload review, it was conducted with the 3PL and review conducted indicates manpower has been allocated across the 4 WHs to ensure optimal productivity based on workload. WH C is already allocated with more men as compare to the other WH but it is not mainly only to address shipment workload to US, as stock movement is typically high for WH C Under “Business Process Improvement”, we realized that there are today 4 permutations on the type of license to be applied for shipment into US. After careful discussion with the relevant authorities, there is actually no significant difference in how the handling for Non-US origin item that requires Special Security Handling vs US Origin item that requires Special Security Handling. US will accord the same handling process if DSP 85 is apply for the shipment of Non-US origin item. With that, it was decided that all items that require Special Security handling will apply DSP 85, thus removing the need to check the country of origin field in ES once the item has been identified as one that requires Special Security handling. By reviewing the Business process, we have cut down one step in the verification status which will essentially mean about a saving of 2 minutes achieved per line item shipped. This translates to an approximate

saving of 71 man-hours (based on annual average shipment of 2135 line items at 2 mins/Line Item). While the saving is not significant, it inadvertently cut down potential opportunity for error in the shipment preparation phase. In “ES System Improvement”, In the Import Export Control Classification (IECC) field in ES today, there are a total of 4 fields namely: (1) Special Security Handling, (2) SME without Special Security Handling (3) Non-SME without special security handling and (4) No Entry. A review was conducted to understand how the codification has been conducted in the past and the findings review the followings:

TABLE IV IECC CODIFICATION STATUS

Current Description Current Status

Special Security Handling Contains both US and Non US origin item that requires Special Security Handling. US origin item with Special Handing may also be SME.

SME without Special Security Handling

Contains US origin item SME without special securi ty handling requirement.

Non-SME without special security handling

Contains US and Non US origin item without special security handling requirement

No Entry Contains Non US origin item wi thout special security handling requirement

As the field was not a mandatory field to be filled up during initial codification phase, it was updated based on best knowledge the cataloguer has at the point of time. This has results in ambiguity and misunderstanding at the ground. The review with the respective stakeholder concluded with the decision to clean up the IECC field to allow easy understanding by the warehouse staff. This field will also be made mandatory, so as to ensure all items are properly codified for standardisation. The propose fields are as shown in Table V. Special Security Handling field was removed as it is a redundant value and duplicated with Item Security Field. In its place, the value will be renamed to “Non-US origin” to denote items which are Non-US Origin. Some items will have to amend their IECC field update due to the name change but it was assessed that the data cleansing will be completed by end Jun 13. The relevant agencies have signed up to this change and is already progressing well in the data cleansing exercise. With the change, we can now check on the country of origin as well as the SME status under one common field in ES. This essentially translates to about a saving of 2 minutes achieved per line item shipped. This gives to an approximate saving of 71 man-hours (based on annual average shipment of 2135 line items at 2 mins/Line Item). The process as a whole gain 4 minutes per line items and beside cost saving, we eradicated past errors in the data cleansing exercise, as well as reduce the fatigue level of the staff to ensure timely and accurate licence application in the shipment process.

TABLE V IECC CODIFICATION PROPOSE CHANGES

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Current Description

Revised Description

Current Status

Special Security Handling

Non US Origin To be renamed to enable clear distinction between US Origin and Non US Origin items.

SME without Special Security Handling

US Origin SME To be renamed to indicate that SME is only to be provided for US Origin items.

Non-SME without special security handling

US Origin Non SME

To be renamed to indicate that Non-SME is only to be provided for US Origin items

No Entry No Entry To remain

Under “Material Requirement Planning (MPR) Improvement” review, we look into past consumption rate and derive a formula in the stocking policy to minimise shipment occurrences. As highlighted in the earlier data review, MRP planner may wish to focus on the helicopter platform which operates from Arizona I and Texas, since the platform had contribute to the bulk of overseas shipment to US. Warehouse C took the bulk of the shipment to US (74%), with a monthly shipment line item quantity almost 3 times to Warehouse B. MRP planner should work closely with the warehousing team in Arizona I and Texas to identify space availability and conduct a one-time re-distribute exercise of spares between Singapore warehouse and those in the US, so as to minimise the shipment frequency. Past trends of the said line items shipped to US were reviewed and it indicates that at least 65% percentage of shipment were recurring and improvement made to this recurring shipment will significantly drop the total number of shipment per year to 2880 (or reduction of 1890 shipment, approximately 40%). E. Control As part of the control phase, it is essential that the finding and improvement noted in this project be documented and a periodic review (2 yearly) be instituted, to review if the initiatives are working as projected, and if there is any further improvement to be made to address new or changing landscape in the operating environment. Two KPIs were proposed to help keep track of the improvement, as well as the application of AIDC technology, which seek to provide an added tool to the operator on the ground to have a tighter check and balance, without the added workload. KPIs can be introduce to help the organisation watch the shipment loading as well as provide a reference point/guide for it to perform to its optimal level, by constantly reviewing and balancing the shipment loading, without impacting the serviceability of the aircrafts in both the US and local fleet. Using the past 3 years data, the following were proposed.

Fig. 8. No of Line Item with recurrence shipment records

TABLE VI PROPOSED KPI TO REDUCE SHIPMENT LOAD

Support BY Past 3 years Trends Proposed KPI Target

Percentage Improvement Total

Yearly Average

Monthly Average

Yearly Target

Monthly Target

WH A 249 83 7 < 60 < 5 28%

WH B 1386 462 38 < 360 < 30 21%

WH C 4770 1590 133 < 840 < 70 52%

Grand Total 6405 2135 178 < 1260 < 105 41%

The other KPI identified will be the management guidance on the need to have Zero Error in licence application, and this can be set as a target out front to all involved parties, so that each and every worker are aware of the importance of their role and the implications behind any lapses. This will help shape their mind-set to achieve this target.

IV. CONCLUSION

It was acknowledged during the brainstorming session that an alternative AIDC application may be applied to eliminate errors in the shipment packing process, so as to allow a checker to conduct a last “QC check” before the release of the shipment to Freight Forwarder. A simple physical trial is proposed to be conducted to establish the potential challenges RFID implementation in the organisation environment may pose. The findings will help the project team to scope the trial study so as to ensure the right RFID components be chosen for the eventual implementation. This paper has reviewed and addressed the research questions. By using a slice of the DMAIC framework, potential factors leading to inaccuracy in the licence application were noted and with the implementation of the various initiatives developed in the improvement phase, the company is able to simplify its process and thereby eliminate potential errors in the shipment process.

REFERENCES [1] R. Ritter, Productivity Lessons from the US Air Force,

Mckinsey on Government, Issue 4: Page 16 – 17D, 2009. [2] Savi's logistics informatics improves Air Force logisticians'

productivity and accuracy, http://www.savi.com/client-successes/us-air-force-2/ [Accessed on 1 Mar 2013]

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