Quality Management using Key Performance … Management using Key Performance Indicators at MTU Aero Engines Egon Behle, CEO, MTU Aero Engines IAQG General Assembly, 16 October 2009
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Quality Management using Key Performance Indicators at MTU Aero Engines Egon Behle, CEO, MTU Aero Engines IAQG General Assembly, 16 October 2009
• Capability to develop and manufacture complete propulsion systems
• R&D is frequently financed by the customer
• MTU has significant stakes in the major European military programs
• Largest independent provider of commercial engine MRO (Maintenance, Repair and Overhaul) services
• Stakes in engines with high growth rates (V2500, CFM56, CF34)
• Strong presence in Asia
*) FY2008
MRO business
GP7000 EJ200
2,724.3 m€ ∑ Revenues*
331 m€ EBIT *
7537 Headcount *
Presenter
Presentation Notes
So what exactly is MTU Aero Engines? Germany's leading manufacturer of engine sub-systems and modules with operations around the globe - a German company with a long tradition that has a global workforce of some 7,500 people, as many of 6,600 of whom work at the high-cost locations Munich, Hannover and Berlin; -its legal predecessor is BMW Flugmotorenbau GmbH, founded in 1934. Our eventful corporate history, which traces back to 1934, has seen many ups and downs and has turned us into what we are today: - a modern, global, listed company which is celebrating its 75th anniversary this year. Business model: 3 pillars In the commercial OEM business (41.4%) and in the military business (18.2%), we design, develop, manufacture and support commercial and military engines for fixed-wing and rotary-wing aircraft and industrial gas turbines. In the area of commercial maintenance (40.4%), we are the world's largest independent MRO provider for commercial engines. 2008 proved an exceptionally successful year for MTU - I would even say: a record year. In 2008, we posted revenues of more than 2.7 billion euros, up 6% from 2007. Our EBIT amounted to 406 million euros, which is 3.3% higher than in 2007. At 180 million euros, our net income exceeded the figure for 2007 by 17%. With these results, we have exceeded our forecast.
16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 3
The major market players in the engine business Overview of the engine industry
Engine componentsuppliers
Enginesub-system(module)providers
OEMs
• Players specialize in specific engine modules and technologies
• Acceptance and certification requirementsand approval by authorities
Incr
easi
ng P
artn
ersh
ip
The players in the engine market
Presenter
Presentation Notes
Special characteristics of the engine industry: Few players Partners = competitors (all compete against all others and all cooperate with all others) Many players are specialists and no "all-rounders" Long market cycles Long time to reach the break-even point MTU Aero Engines is an established player in the engine industry worldwide: a must-have partner for the largest manufacturers in the world and - as already mentioned – the world's largest independent provider of maintenance services for commercial engines the industrial lead company for almost all propulsion systems flown by the Federal Armed Forces. �Partnership with the Federal Armed Forces ("Industry/Military Cooperative Model of Engine Maintenance“) The challenges are high market entry barriers as a result of technology leadership Traditionally high expenditures going into R&D and investments secure MTU's growth In 2008, MTU managed to gain a foothold in the U.S. military market, the largest of the world, by taking a stake in a helicopter engine.
16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 4
Source: MTU/ASM September 2009, Airclaims‘ CASERemark: Western-manufactured jet powered commercial transport aircraft are considered (Airliners, Freighters & RJs; turboprops, business jets, military and general aviation excluded)
The market cycles (status September 2009)
Presenter
Presentation Notes
Ladies and Gentlemen, MTU, too, will not entirely escape the impact of the crisis, but it will not be hit as hard as other industries. Fortunately, we are far from seeing a slowdown as pronounced as, say, in the automobile industry; and yet air traffic, too, has declined appreciably. For MTU, the question now is not only: "How bad is the crisis going to be?", but also: "How long is it going to last?„ While we were only marginally hit in 2008, we will be sure to feel the impact of the crisis this year and in the year to come. The aviation industry in general tends to become affected rather late in the economic cycle, and this is why this industry will feel the brunt of the recession in 2010. In the long run, though, we expect our industry to return to continuous growth, as you can see from the chart.
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Strategic pillars
Strategic target fields
To shape our future, the MTU strategy is targeting profitable growth in all business segments
Quality, Reliability, Speed, Productivity and Intercultural Expertise
~ 6 Bn.€ Sales 2018 EBIT > 12%
Strategic target
Presenter
Presentation Notes
How does MTU Aero Engines deal with the crisis? And what challenges does it pose for us? In summer last year, we revamped MTU's strategy, focusing it on profitable growth. The clear target that I set at our internal Leadership Conference is to double sales by 2018. Our strategic pillars will help us achieve this target. I would like to say a few words on three of these pillars here: First, we boast excellent technologies, which help us to always be at the forefront of technology, which, second, we can then infuse successfully into new, fast-growing engine programs. And third, we have cost optimization projects in place to increase our competitiveness. Overall, however, it should be noted that we can achieve these "Strategic Targets" only if we succeed in keeping our "Strategic Basement" at the high level for which we have made a name for ourselves. Having said that, I would now like to turn to the aspect of quality and go into some details of the quality issue.
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Quality, a management task
Mindset of organization
MTU Board follows up KPIs
Focus on selected KPIs
Monitor development of trends
Quality audits and initiatives
Quality needs to be produced by every individual at any time.
Presenter
Presentation Notes
First of all: to raise the awareness of quality is a management task. As part of the company culture we continuously focus on quality. Therefore the board follows up the relevant quality KPIs of all MTU locations on a regular basis. Of course this also includes the monitoring of trends, that means the development of KPIs over time. Later on in my presentation I will explain the KPIs more into detail. In addition to that the board also monitors the results of internal and external audits. We know: Quality needs to be produced by every individual at any time.
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CIP as an ongoing process throughout the complete organization
Improve price/ performance ratio
Dedicated projects to improve KPIs examples:
• strong improvement of TAT and OTD in MTU’s MRO locations
• to become benchmark
• to win new contracts on the basis of best quality
Quality, a selling argument
Presenter
Presentation Notes
Of course the costs play a crucial role when it comes to winning new orders for MTU. In an effort to further boost MTU's performance in all of its processes, we launched a corporate-wide Continuous Improvement Program (CIP) three years ago. As a result of our CIP activities, we have achieved significant improvements, as for example with regard to TAT and OTD at our MRO locations. Ably assisted by external consultants, we are currently exploring options to further reduce turnaround times and cut costs also in our part manufacturing area. At the same time, we are fully aware that our customers value us also for the quality of our products. MTU is very proud of the awards we have received from our customers in recognition of our quality work. To further improve the quality situation, we have recently started a quality offensive in our parts manufacturing. For we know all too well that: Quality is a selling argument!
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MTU's Integrated Management System (IMS)
• Safety is a prime concern in aviation.
• The smallest of mistakes may have catastrophic consequences. Therefore MTU insists on the finest quality of its products and services.
Quality and safety are the first priority in whatever we do.
MTU's Integrated Management System (IMS)
Quality Environmental protection
Occupational health & safety
A world-class, efficient Integrated Management System (quality, occupational health & safety, environmental protection) that ensures that principles, objectives and standards are put in place at all of the company's locations.
Presenter
Presentation Notes
First of all, MTU lives up to a basic principle: Safety is our first priority! All MTU employees are aware that even the slightest of mistakes may have catastrophic effects. This is why MTU insists on the highest of quality standards for its products and services. And this is why MTU – just like many other companies – has chosen to put an Integrated Management System in place which addresses three elements: quality, occupational health & safety, and environmental protection. When we did so, the goal we had in mind was to implement the principles, objectives and standards in quality, environmental protection and occupational health & safety at all company locations, and to do so in an effective, legally compliant, efficient and transparent manner. Our aim is to further develop the IMS to turn it into a benchmark with regard to the safety, competitiveness and economic efficiency of our products and services.
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Production quality Process quality Development quality
The key quality data / indicators have been continuously improved
1995 2005
Customercomplaints
(components)
Scrap costs
Rework costs
First pass yield (components/engines)
DPM
RPM
Supplier performance
Statistical process control
(SPC)
Compliance withdevelopment milestones
Passed reviews(design / production readiness)
First pass yield (Design)
Number of component mods
Process maturity levels
EFQM result
Spec compliance
Presenter
Presentation Notes
At MTU, the key quality data set has been continuously further developed since the mid-1990s. In the mid-1990s, the focus was initially placed on measuring production quality. Typical key figures which we use to this date as production quality indicators are, for example, the number of customer complaints received, the scrap costs, or the defects per million (dpm) opportunities in parts manufacturing. Over the following years, we placed an additional focus also on process quality. In this respect, we have developed a comprehensive review system that assures the quality of the design work for our engine programs at the development stage and also supports preparations for subsequent production rampup. Since the late 1990s, statistical process control has been introduced on most of our production shop floors. We know that production quality depends in no small measure on the extent to which aspects of the producibility of a part are taken into account already in its development. Therefore we have added key quality data over the past few years to monitor development quality. To give you an example: In all our development programs, we today routinely measure to what degree the design complies with the applicable specification.
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MTU's system allows the key performance indicator information to be viewed from different perspectives
A complete and consistent database for the generation of key indicators for different perspectives
Organization ProcessProduct / program
GP 7000GP 7000
• Management perspective• Center perspective• Team perspective
• Engine• Module• Detail part
• Business processes• Main processes• Part processes
Presenter
Presentation Notes
All of the afore mentioned quality indicators are used consistently across MTU's hierarchical levels and are stored in a single database. Depending on the desired information, different perspectives can be generated. This way, for example, the quality costs can be analyzed for the various production teams, but also from the perspective of the various engine programs. Given the fact that use is always made of the same basic data, the evaluations are consistent and coherent. Reporting on the different perspectives takes place at regular intervals. As already mentioned, appropriate actions are taken whenever deviations from the target values are noted, actions which are then followed up.
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Highest priority on customer needs
Strong focus on on-time and on-quality delivery
Implementation of best-practice processes in production and quality management
Intense oversight and training of our suppliers
Continuous improvements through people, processes and tools
Highly qualified and trained personnel
Participation in national and international initiatives and working groups to develop internationally accepted standards
Cost optimization and quality do not have to contradict each otherAviation safety is the first priority in whatever we do!
Presenter
Presentation Notes
At this point, please let me emphasize one more aspect: In our view, the objectives of cost reductions and quality do not contradict one another! I am firmly convinced that an optimization of the processes and workflows, the assignment of clear responsibilities and a reduction of interfaces results in increased transparency and reduces possible sources of errors and mistakes. Here, I think, the implementation of binding standards also plays a decisive role. This is why MTU participates, wherever possible, in initiatives and working groups dedicated to developing such accepted standards. It is with this spirit in mind that I wish IAQG continued success in its cooperative efforts, which benefit the international aerospace industry.
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"Good is not good enough where better is expected."(Thomas Fuller – English historian)
Thank you very much for your attention!
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weiteres Material
16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 14
The relevant key performance indicators are consistently
reported2
We use key performance indicators (KPIs) to continuously improve our operational performance
The company's objectives are broken down into the
operational units' objectives
In the event of deviations, corrective actions and failure analyses are initiated without
delay
1
Company
Center
Team
Employee
3
Our Continuous Improvement Program (CIP) supports
sustained process optimization4
5The organization's
productive efficiency is improved, the
objectives are adjusted
Presenter
Presentation Notes
We use key performance indicators to measure the effectiveness and efficiency of our IMS. The basis from where we start is the IMS objectives the company sets for itself, which are then broken down into objectives for the individual operational units at the beginning of the year. Throughout the year, the relevant key performance indicators for all company locations are then continuously analyzed to measure progress towards the goals, and the KPI data is reported to the board of management. Should any deviations from the KPI targets be noted, corrective actions are initiated without delay. In parallel, a failure analysis is conducted to pinpoint the cause of the problem. To improve our processes in a sustainable and comprehensive way, we at MTU have put a Continuous Improvement Program – or CIP for short – in place. As part of our CIP efforts, in-house consultants optimize the processes, using selected, suitable methods. In this manner, the productive efficiency of the organization is continuously being improved, and the objectives are then adjusted accordingly as part of the next cycle. An important prerequisite for this control loop is that suitable key performance indicators that accurately reflect the objectives be defined.
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External consultants help with the optimization of selected KPIs
Result: TAT reduction by 26% achieved(average out of 54 components) -26%
Example: Project for the reduction of turnaround time (TAT) in parts manufacturing
Presenter
Presentation Notes
To optimize selected key performance indicators, we also employ the services of external consultants on a case-by-case basis. The reason why we do so is that we want to benefit from expertise available outside MTU, or available in industries other than ours, to further improve our internal processes and workflows. One example from the recent past is shown here: at the end of last year, we launched a consultancy project, which aimed at appreciably cutting the turnaround time in parts manufacturing. Comprehensive value stream analyses were conducted and videos were taped at machine workstations and evaluated. The project identified turnaround time reduction potentials of more than 20% - a remarkable result indeed.
