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A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain
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Case Study
A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain Jaime A. Palma-Mendoza a,∗ , Kevin Neailey b,1 a Department of Industrial Engineering and Operations, Instituto Tecnologico Autonomo de Mexico, 01080, Mexico, Rio Hondo No.1 Col. Progreso Tizapan, Mexico City, Mexico b WMG, The University of Warwick, Coventry, CV4 7AL, United Kingdom
a r t i c l e
i n f o
Article history: Available online xxx Keywords: Supply Chain Integration Business process re-design Service supply chains
a b s t r a c t One of the challenges faced by organizations in the construction of Supply Chain Integration (SCI) is the re-design of business processes. Accordingly a detailed methodology was constructed based on the integration of a number of different methodological strands from the literature. The proposed BPR methodology was validated by applying it to an Airline Maintenance Repair and Overhaul (MRO) supply chain. This application lead to a re-design of the aircraft component repair services offered by an independent Airline MRO provider. Results from this application shows that the proposed methodology can clearly guide the re-design of business processes to support SCI. © 2015 Elsevier Ltd. All rights reserved.
1. Introduction In recent years companies across different sectors have been facing a new competitive environment, characterized by an increase in the number of competitors, shorter product cycles, and changing customer demand. In order to cope with these challenges and to achieve competitive advantage, companies are engaged in alliances and partnerships with other organizations and closer collaboration with suppliers and customers. Accordingly, companies have turned their attention towards improving the management of their supply chains to achieve competitive advantage (Simchi-Levi, Kaminsky, & Simchi-Levi, 2007; Prajogo & Olhager, 2012). At the core of gaining competitive advantage through Supply Chain Management (SCM) is Supply Chain Integration (SCI); when integration is achieved, the supply chain operates as a single entity driven directly by customer demand (Farhoomad, 2005). However evidence found in the supply chain literature shows a number of challenges faced by organizations regarding the construction of SCI (Awad & Nassar, 2010; Sweeney, 2011). One of the challenges is the necessity to change business processes to support SCI. However redesigning business processes is difficult; the increase of complexity in business processes in supply chains results in the need for new methodologies on how to
∗ Corresponding author. Tel.: +44 525556284000x3683. E-mail addresses: [email protected] (J.A. Palma-Mendoza), [email protected] (K. Neailey). 1 Tel.: +44 0 24 765 24762.
integrate process information in enterprise networks (Roder & Tibken, 2006). 2. Research methodology Based on the identification of a research problem consisting of the need to re-design business processes, a research question was elaborated; how to re-design business processes to support supply chain integration (Palma-Mendoza, Neailey, & Roy, 2014). To answer this question, a literature search and review was conducted to find a methodology to conduct business process redesign (BPR) to support SCI (Palma-Mendoza et al., 2014). The review found that none of the methodologies provides a comprehensive solution. However, a number of methodologies tend to be more useful in relation to some phases than others. Thus the idea of combining different methodologies for a better result is attractive. When linking different methodologies it is necessary to decompose them into detachable elements (Mingers & Brocklesby, 1997). Thus the methodologies identified were decomposed at their stage level, then through an inductive approach of pattern recognition similar to the one used by Kettinger, Teng, and Guha (1997), commonalities and differences between the reviewed methodologies were analysed. This analysis resulted in the identification of generic stages for the construction of a BPR methodology structure. The methodologies reviewed were decomposed a second time in terms of the techniques and methods employed in order to select the most suitable for each stage. Additional methods and techniques were adopted from the wider SCM and e-business literature. The resulting methodology is as shown in Fig. 1.
http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002 0268-4012/© 2015 Elsevier Ltd. All rights reserved.
Please cite this article in press as: Palma-Mendoza, J. A., & Neailey, K. A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain. International Journal of Information Management (2015), http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002
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Fig. 1. Business process re-design methodology to support supply chain integration.Source: Palma-Mendoza et al. (2014).
Please cite this article in press as: Palma-Mendoza, J. A., & Neailey, K. A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain. International Journal of Information Management (2015), http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002
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Fig. 2. Elements of research.
Source: Checkland and Holwell (1998).
Once the BPR methodology was constructed (Palma-Mendoza et al., 2014), the following hypothesis was elaborated:
3. BPR methodology application in an airline MRO supply chain
H1. The BPR methodology can clearly guide business process redesign to support supply chain integration.
3.1. Introduction
To test this hypothesis and the BPR methodology it will be necessary to take action and interact with a running operation. Thus the Action Research (AR) approach was selected to conduct the research effort in applying and validating the proposed BPR methodology. Coughlan and Coghlan (2002) define AR as an approach that studies the resolution of important social or organisational issues involving those individuals who experience the issues directly. AR involves the participation of members from the system under study and it takes action on a situation at the same time that it builds up a body of knowledge. According to Coughlan and Coghlan (2002) AR is about change and is applicable to the understanding, planning and implementation of change in organizations. The proposed BPR methodology aims to solve a practical problem (re-design of business processes) present in organizations across different sectors by providing a set of steps to guide and implement change in business processes (Palma-Mendoza et al., 2014). Thus, the action research approach is embedded within the proposed BPR methodology, whose purpose is to take action in a real world situation to improve it. Action research is a holistic research strategy, rather than a single method for collecting and analysing data. Thus, it allows the incorporation of several different research tools, techniques, and methods. The authors made use of a range of tools including keeping research notes, participant observation recordings, unstructured interviews, and gathering documents that are routinely produced by the company on which the proposed BPR methodology was applied. According to Checkland and Holwell (1998), any research should include a framework of ideas, which are used in a methodology to investigate an area of interest (Fig. 2). In Action Research (AR) it is possible to test and/or change the adequacy of the framework of ideas; for this it is essential that there is an explicit declaration of the framework of ideas before the researcher enters into the area of interest (Checkland & Holwell, 1998). In this research the framework of ideas is represented by the proposed BPR methodology (Palma-Mendoza et al., 2014). With this framework of ideas, the researcher entered a real world problem situation to take action (Fig. 3). This real world situation is represented by a problematic situation present in the repair services offered by an airline MRO provider.
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In recent years, the United Kingdom (UK) Airline MRO sector has been experiencing considerable growth. The main drivers affecting the positive growth are the appearance of low cost carriers and new aircraft technology, which brings an increase in the number of aircraft systems to be maintained/repaired. This growth has been affected by the current world economic situation causing a drop in demand, making it difficult to achieve high margins (Adams, 2009; Jackman, 2009). Thus, in order to remain competitive MRO providers are aiming to improve their supply chain processes (Adams, 2009). Potential benefits from e-business applications for SCI in the Airline MRO business are considered to be in the area of inter-organizational transactions, the ability to track components status, increased visibility, speed of communication, and reduction in inventory levels (MacDonnell & Clegg, 2007). Within this context contact was established with an Airline MRO provider in order to discuss a BPR project within their component repair services operations in the UK. This BPR project was conducted using the proposed BPR methodology as shown in Fig. 1 (Palma-Mendoza et al., 2014).
3.2. Stage 1: top management commitment and vision A project plan was created and an agreement was reached on the conduct of a BPR effort centred on aircraft component repair services to generate, evaluate, and propose alternatives for supply chain integration.
3.3. Stage 2: business understanding The objective of this stage is to develop an overall understanding of the business in which the BPR project will be conducted. This understanding can be divided into two parts: understanding the business context, followed by understanding the business logic. Understanding the business context involves gaining knowledge about the sector in which the company competes, the market characteristics and company history. Next it is necessary to understand the business logic, meaning how the company operates to satisfy its customers with emphasis on identifying the current roles of supply chain management and e-business technologies, if present.
Please cite this article in press as: Palma-Mendoza, J. A., & Neailey, K. A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain. International Journal of Information Management (2015), http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002
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Fig. 3. Action research cycle to test and validate the BPR methodology.
Using company annual reports, industry reports, information from the company website, and unstructured interviews with company executives, a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis (Bolstorff & Rosenbaum, 2012) was performed. This revealed that in recent years the Airline MRO provider had focused on consolidating as a global leading independent provider of technical solutions for airline industry worldwide, whilst maintaining a reputation for technical quality and safety. The Airline MRO provider also conducted an expansion of operations through partnerships, acquisitions and joint ventures and a unique component repair services model. Nevertheless, the economic situation, added to the already intensive competition, has had a negative effect on worldwide MRO services demand. Additionally, a situation of high costs and tight margins suggested the need for efforts to lower costs and increase operational efficiencies. In this context, the need to generate, evaluate, and propose alternatives for supply chain performance improvement is justified. A business logic map centred on the value proposition represented by component repair services was created using the business model ontology proposed by Osterwalder and Pigneur (2004) as shown in Fig. 4. This business logic map shows how the company operates to satisfy its customers with emphasis on identifying the current roles of supply chain management activities and supporting technologies. It shows that component repair services can be obtained by customers either as a single component service or as part of an Integrated Component Solution (ICS), designed to help customers to lower maintenance costs and reduce risk. Target customers are
Source: based on Checkland and Holwell (1998).
worldwide airlines equipped with Airbus and Boeing aircraft. Different channels act to promote the portfolio of component repair services and obtain new airline customers. Continuous customer support is provided by a dedicated customer team. The component solutions offered by the main supply chain activities involved are: • Procurement of new components from Original Equipment Manufacturers (OEM) • Procurement of serviceable components1 from other component suppliers. • Reverse logistics flow of unserviceable2 components • Repair and maintenance of unserviceable components • Delivery of serviceable components to airline customers.
A number of these activities are currently supported by an Enterprise Resource Planning (ERP) system to share and store component related information; however its main use is to support internal transactions whereas, for intra-organizational transactions, data exchange with external supply chain partners is done through fax and email.
1 Serviceable components are those, which are ready to be used by an airline customer. 2 Unserviceable components are those, which have been withdrawn from an aircraft and have been sent to the Airline MRO provider for repair/maintenance.
Please cite this article in press as: Palma-Mendoza, J. A., & Neailey, K. A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain. International Journal of Information Management (2015), http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002
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Fig. 4. Business logic map of the Airline MRO provider.
3.4. Stage 3: identification of relevant processes and selection of a target for re-design A supply chain consists of different processes and, when conducting supply chain re-design, is necessary to identify the relevant supply chain processes present and select a target for re-design. Relevant supply chain processes were identified first by using the business model (Fig. 4). Next a supply chain process map (Fig. 5) was created using the SCOR model process types and process categories as explained by Palma-Mendoza (2014a). The SCOR model was developed by the Supply Chain Council (SCC) in 1996, to understand, describe, and evaluate supply chains (SCC, 2012). The SCOR model provides a common supply chain framework, standard terminology, common metrics, and best practices. One of the applications of the SCOR model is to aid the understanding of a particular supply chain by means of mapping it in business process terms using SCOR model terminology. Thus, mapping with the SCOR model will show the relevant SC processes present in a particular supply chain under study. According to Fig. 5, three main supply chain partners dealing with repair and maintenance of aircraft components were identified:
• Airline customers: represented mainly by European Airlines, from low cost carriers to large carriers. • Airline MRO provider: the service provider located in the UK • External component repair vendors: a number of components are sent to be repaired by external repair vendors, in total around 23 external repair vendors are used.
Next, in conjunction with Airline MRO provider executives, the relevant supply chain processes were identified using SCOR model level I process types. These processes are: • Return of unserviceable components: airline customers, send components in need of repair – unserviceable components – to the Airline MRO provider. • Delivery of serviceable components: the airline MRO provider sends on request, components in working condition – serviceable components – to airline customers. • Repair and maintenance of unserviceable components: repair of components is conducted in facilities owned by the airline MRO provider and in facilities owned by external component repair vendors. Next the process categories from SCOR model level II process were identified; these better describe the supply chain processes present, and include: • DR2: delivery of MRO product is the process that better fits the return of unserviceable components • D1: delivery of stocked product is the process that better describes the delivery of serviceable components, because components are stocked in the Airline MRO provider facilities and are send on request to an airline customer. • M1: repair of stocked product is the process that better describes the repair operations conducted within the facilities of the airline MRO provider and by the external component repair vendors. Unserviceable components are repaired/maintained and then stocked in the Airline MRO storage locations.
Please cite this article in press as: Palma-Mendoza, J. A., & Neailey, K. A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain. International Journal of Information Management (2015), http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002
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Fig. 5. SCOR model map. Table 1 Metrics for objective definition. Performance attribute
Metric
Asset management
Return of investment on components Component inventory turnover
Supply chain cost Reliability
Transaction costs Delivery performance
In summary the resulting SCOR process map (Fig. 5) shows that when a customer demands a component, this requirement is satisfied, when possible, through components stocked in the company storage locations. The airline customer returns components to be repaired or maintained; this is performed within the repair facilities of the company and also with the aid of external repair vendors. For the selection of a target for redesign, the AHP technique (Saaty & Vargas, 2012) was used with two level criteria consisting of SCOR model performance attributes and level 1 metrics (Fig. 6) as explained by Palma-Mendoza (2014a). AHP assumes that decision problems can be structured by translating goals into measurable criteria, which in turn, can be related to alternative decisions. As a result, AHP provides a priority number at each level of the hierarchy; then priorities of the alternatives are weighted against those of the criteria so that the eventual importance of the alternatives related to the goal are quantified (Saaty & Vargas, 2012). From a workshop session organized with company executives, a number of tables for pair-wise comparison were completed. This information was then entered into the free licensed software Super Decisions 1.6.0 to be processed giving the results shown in Fig. 7 with a consistency ratio of 8%. From the AHP analysis it was concluded that the target for redesign is the repair and maintenance of unserviceable components conducted within facilities of the Airline MRO provider and in facilities of external repair vendors. 3.5. Stage 4: definition of objectives for improvement From AHP analysis it was possible to identify by priority rank of the most important performance attributes and metrics associated with the target for redesign as shown in Fig. 5 (items shaded). Performance was measured and compared with industry benchmarks as recommended by Bolstorff and Rosenbaum (2012) to identify gaps, leading to definition of objectives for improvement. These objectives were specified with the following performance metrics adapted from SCOR model (SCC, 2012) as shown in Table 1, (details are not shown due to the confidentiality agreement signed with the company). 3.6. Stage 5: analysis of process Once a process has been selected and objectives for improvement defined, it is necessary to understand the targeted process.
The understanding of a supply chain process should be quite exhaustive to comprehend the diverse elements, interactions and flows. Trkman, Indihar, Stemberger, Jaklic, and Groznik (2007) recommend business process mapping to understand, visualize, and document a process as it is. Business process maps are useful in analysing flows, clarifying the relationships and sequence of operations. Through investigative methods as defined by Towill (1996), a business process map was constructed to understand the sequence and main activities present in the component repair process (Trkman et al., 2007). The business map (Fig. 8) is sectioned vertically according to areas of responsibility and horizontally into unserviceable and serviceable component related activities. The process starts at the upper left corner with the airline customer replacing a component and returning it to the MRO provider. It finishes when components are repaired, stocked, and replenished to the airline customer. According to Fig. 8, the airline customer sends unserviceable components to the Airline MRO provider – those that need to be repaired – and receives components ready to use, also called serviceable components. The airline MRO provider repairs unserviceable components and dispatches a number of components to an external repair vendor to be repaired, when there is a lack of repair capacity. Overall, there are 23 external repair vendors. The repaired components are returned to the Airline MRO provider as serviceable components, placed in stock, and are available to be sent to Airline Customers when necessary. The BPR methodology recommends use of a hybrid SD/DES computer simulation to analyze the system AS IS (Palma-Mendoza et al., 2014). Simulation models can describe how all parts of the supply chain will operate over time in respect to a set of parameters and policies defined by managers/analysts. Understanding the dynamics of the supply chain in a safe computer environment is the main value of computer simulation models. Two main distinct approaches to computer simulation for supply chain analysis exist: Discrete Event Simulation (DES) and System Dynamics (SD) (Akkermans & Dellaert, 2005). Simulation models in both DES and SD are built to understand how systems behave over time. However, given the fact that pure DES and SD simulation have a number of drawbacks preventing a thorough and exhaustive supply chain analysis, hybrid SD/DES simulation approaches have been suggested (Lee, Cho, Kim, & Kim, 2002; Palma-Mendoza, 2014b, Pereira, 2009; Rabelo, Helal, Jones, & Hyeunk-Sik, 2005; Reiner, 2005; Venkateswaran & Son, 2005). A hybrid SD/DES simulation approach analyses both discrete and continuous aspects of a supply chain simultaneously (Pereira, 2009). Although before adopting a hybrid SD/DES computer simulation approach, it is necessary to determine if a stand-alone SD or DES approach is enough. At this point in the BPR project, it was decided to model component and information flows. Information transactions follow
Please cite this article in press as: Palma-Mendoza, J. A., & Neailey, K. A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain. International Journal of Information Management (2015), http://dx.doi.org/10.1016/j.ijinfomgt.2015.03.002
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Fig. 6. AHP structure to select the target for re-design.
a well-defined sequence and detailed historic time series were available for most of the transactions which are characterized by stochastic behaviour; thus making Discrete Event Simulation (DES) the most adequate modelling approach. However data about
component inventories/backlogs was limited, particularly in respect to component flows from Airline customers and to and from external repair vendors; thus, it was decided to model component flows at an aggregate level to facilitate the modelling. Moreover
Fig. 7. AHP results.
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Fig. 8. Business process map.
component flows occur continuously every day; thus, making System Dynamics (SD) the most adequate modelling approach to represent component flows. Due to all these considerations, it was decided to use a hybrid SD/DES simulation model to understand the system as it is. A causal loop diagram was constructed (Sterman, 2000) as shown in Fig. 9, to understand the variables affecting the differ´ ent componentsbacklogs/inventories and as a basis for modelling component flows. Next, it was necessary to identify the points of interaction between the SD and DES model for the construction of the hybrid SD/DES model (Chahal, Eldabi, & Young, 2013). The points of interaction are: unserviceable component information arrival (Input from SD to DES), reception of unserviceable components in Airline MRO ERP system (Input from DES to SD), repair orders (Input from DES to SD), reception of serviceable components in Airline MRO ERP system (Input from DES to SD). Following the identification of points of interaction, information was gathered to quantify the main variables of the computer model (Table 2).
The hybrid simulation model was constructed using Goldsim software. Goldsim has capabilities to model discrete events combined with continuously varying systems. 3.6.1. Model verification and validation According to Balci (1994) model validation implies substantiating that the model behaves with satisfactory accuracy within its domain of applicability. It is recommended to that the model be run under the same input conditions that drive the system to compare the model behaviour with real system behaviour. Thus, constant communication took place with the Airline MRO company to verify the assumptions and logic of the simulation model. The current conditions observed in the real system were entered into the computer simulation model. To run the model 100 replications were specified, which means that the system was simulated for a period of 365 days, 100 times. Then it was compared to the real system current information backlogs and component inventory levels with those obtained by the simulation model. This comparison leads to a number of corrections into the computer simulation model. This process
Table 2 Computer model main variables. Variables
Average
Distribution type
Unserviceable component information rate of arrival Number of unserviceable components receipted in ERP system Number of repair notifications sent Number of repair orders issued Number of unserviceable components dispatched Number of components repaired and dispatched by external repair vendors Number of components repaired by internal repair workshop Number of serviceable components receipted into the ERP System Customer demand (number of components)
32.00 component information/day 54.80 components/day
Triangular
Standard Deviation
Maximum–Minimum
Log normal
28
53.70 notifications/day 57.30 orders/day 26.42 components/day 27 components/day
Log normal Log normal Normal Normal
27.8 20.6 15 3
26 components/day
Normal
17
0–62
58.7 components/day
Log normal
29.9
6–150
22 components/day
Triangular
0–79 6–146 6–141 2–121 0–86 20–34
0–35
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Fig. 9. Casual loop diagram.
continued until there was minimal difference between the real system behaviour and that of the simulation model (Balci, 1994; Robinson, Brooks, Kotiadis, & Van Der Zee, 2010) was achieved. For this model the minimal difference achieved after numerous corrections is 12% on average. The Airline MRO company agreed that the computer simulation model was accurate enough in terms of replicating the real system behaviour. 3.6.2. Findings From an analysis of the target for re-design under normal conditions using the performance measures defined in stage 4, it was found that the poorest performances were for the backlog of components waiting for repair (Table 3) and the time Table 3 Backlog. Backlogs
From model (daily average)
Number of unserviceable components waiting to be receipted Number of repair orders waiting to be generated Number of components waiting to be dispatched for repair Work in Progress (WIP) with external repair vendors Work in Progress (WIP) with internal repair workshop Number of serviceable components to be receipted
necessary to receive repaired components from external repair vendors (Table 4).
3.7. Stage 6: design of process AS TO BE After achieving a good understanding of the process as it is, what follows is the generation and evaluation of alternatives for the construction of supply chain integration. A number of alternatives for supply chain integration were generated using the SCOR model (SCC, 2012) and e-business schematics (Weill & Vitale, 2001) as proposed by Palma-Mendoza et al. (2014). One of the alternatives generated was to link the Airline MRO provider ERP system with external repair vendors via their web portals; the proposed relationships are shown in Fig. 10.
Table 4 Delivery performance.
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Delivery performance
From computer simulation model (average time in days)
Time to generate repair orders Time to repair components by internal workshop Time to repair components by external vendors including dispatch and shipment
5.3 15.1 24.4
64.2 39.2 173.9 196 47
Table 5 Alternatives for improvement selection. Performance attribute
Metric
Best alternative
Asset management
Return on components Inventory turnover
Alternative 2: automation of notifications for repair Alternative 2: automation of notifications for repair
Supply chain cost Reliability
Unserviceable component inventory cost Delivery performance
Alternative 1: integration with external repair vendors Alternative 2: automation of notifications for repair
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Fig. 10. e-Business schematics representation of integration with external repair vendors.
Another alternative considered was to automate the generation of repair orders immediately after receipt of an unserviceable component by the logistics area (Fig. 11). These alternatives were evaluated using the computer simulation model, simply by incorporating and quantifying the new relationships. Table 5 summarizes the results from the computer model.
Fig. 11. Business schematics representation AS TO BE notification for repair.
Even with a reduction in component inventory cost, the improvement from alternative 1 was found to be localized. Whereas, alternative 2 produces benefits across other parts of the process; this suggests that a main bottleneck is caused by delays in processing the notifications for repair. When alternative 1 is
Fig. 12. New process design.
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combined with alternative 2, it gains the benefit of improvement on inventory cost, as well as in most of the metrics monitored. 3.8. Stage 7: implementation of changes Based on the previous analysis, it was decided to proceed to the specification of the two alternatives in one single new process. First from reviewing Rosetta Net Partner Interface Processes (PIP) standards (Rosettanet, 2012), it was possible to understand the necessary electronic interactions between the Airline MRO provider and external repair vendors. Next ERP reference models were reviewed (Knolmayer, Mertens, Zeier, & Dickersbach, 2009; Dickersbach, 2006) to provide detail about transactions and platforms necessary to design the new process. It was found that through an Inventory Collaboration Hub (ICH), it will be possible to support integration between the airline MRO provider and its external repair vendors. ICH is a low-price collaboration platform available via the internet accessible through a web-based user interface, which accommodates different ERP systems (Knolmayer, Mertens, Zeier, & Dickersbach, 2009). Through ICH the Airline MRO provider can exchange component information with external repair vendors. To automate the creation of repair orders triggered by component receipts, it is necessary to modify ERP master data information for each component type per costumer, then to associate this information with the receipt transaction. If component receipt is successful a notification is sent for a repair order. By using the Architecture of Integrated Information Systems (ARIS), the new process is as shown in Fig. 12. With this the BPR project was concluded, leaving the detailed technical design to the Airline MRO provider and external repair vendors. 4. Conclusions Despite the potential benefits of supply chain integration, the literature suggests a number of challenges preventing its successful adoption, in particular the need to re-design business processes. A number of methodologies were found that address business process re-design, supply chain re-design and e-business process design. However, none of these methodologies addressed, in particular, how to redesign business processes to support construction of supply chain integration. Through a literature review conducted in different domains, a methodology has been developed and proposed to tackle this particular problem (Palma-Mendoza et al., 2014). Accordingly the BPR methodology was tested and validated in this paper through a practical application. This application was in support of creating a SCI between an MRO Company and its external repair vendors (23 main repair vendors). Although it will require further validation, experience from this application suggests that it can clearly guide a business process re-design to support supply chain integration. According to Checkland and Holwell (1998), Action Research (AR) cannot produce law like generalizations from an involvement in a single situation (such as the BPR methodology application in an Airline MRO provider). However, AR can yield defensible generalizations which can be transferred to other situations. Accordingly this application has proved the adequacy of the framework of ideas embedded in the proposed BPR methodology to support supply chain integration. According to Coughlan and Coghlan (2002) AR may have implications beyond taking action or the knowledge gained within a particular situation. The results of AR may be applicable to similar situations in other organizations. This means that even if AR takes place within the realm of a particular company situation and the application of the
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BPR methodology in the Airline MRO and its results are company specific, it has the potential to have implications for other industries and companies. The main implication here is that the proposed BPR methodology could be adapted to any company on any sector to undertake a BPR effort to support supply chain integration. This is possible because the techniques and methods employed in the BPR methodology can be generally applied to any company or sector: • The business model ontology (Osterwalder & Pigneur, 2004) can be used to describe any business logic map. • The SCOR model (SCC, 2012) can be used to map and describe any supply chain regardless of the type of company and/or sector. • The AHP structure, used to select a target for re-design, can be adapted to any relevant supply chain processes to be considered. • The SCOR model performance attributes and metrics cover all the possible metric combination to measure the performance of any supply chain. • The modelling and simulation approaches used have been applied to different supply chain cases as reported in the literature. • The SCOR model recommended best practices are applicable and adaptable to any supply chain configuration. • The Rosettanet PIP standards, provide generic descriptions of collaboration processes among supply chain partners. • Reference models such as those from SAP describe specifications for different transactions which can be adopted by any company. • The ARIS framework can be used to describe any business process in combinations with any information system. Acknowledgement The author Jaime A. Palma-Mendoza gratefully expresses its gratitude to Asociacion Mexicana de Cultura A.C for its support during the elaboration of this article. References Adams, C. Supply chain: Problems and solutions. Aviation maintenance June 2009. (2009). http://www.aviationtoday.com. Accessed 01.06.09. Akkermans, H., & Dellaert, N. (2005). The rediscovery of industrial dynamics: The contribution of system dynamics to supply chain management in a dynamic and fragmented world. System Dynamics Review, 21(3), 173–186. Awad, H.A. H. & Nassar, M.O. (2010). Supply chain integration: Definition and challenges. Proceedings of the international MultiConference of engineers and computer scientists. IMECS 2010, March 17–19, Hong Kong. Balci, O. (1994). Validation, verification, and testing techniques throughout the life cycle of a simulation study. Annals of Operations Research, 53(1), 121–173. Bolstorff, P., & Rosenbaum, R. (2012). Supply chain excellence ((third ed.)). New York: AMACOM. Chahal, K., Eldabi, T., & Young, T. (2013). A conceptual framework for hybrid system dynamics and discrete event simulation for healthcare. Journal of Enterprise Information Management, 26(1/2), 50–74. Checkland, P., & Holwell, S. (1998). Action research: Its nature and validity. In N. Kock (Ed.), Information systems action research. Laredo TX: Springer. Coughlan, P., & Coghlan, D. (2002). Action research for operations management. International Journal of Operations and Production Management, 22(2), 220–240. Dickersbach, J. T. (2006). Supply chain management with APO. Structures, modelling approaches and implementation of mySAP SCM 4.1 ((2nd ed.)). Heidelberg: Springer. Farhoomad, A. (2005). Managing e-business transformation, a global perspective. New York, NY: Palgrave Macmillan. Jackman, F. MRO market now, overhaul & maintenance. Aviation week, April 2009. (2009). http://www.aviationweek.com. Accessed 01.07.09. Kettinger, J. W., Teng, J. T. C., & Guha, S. (1997). Business process change: A study of methodologies techniques and tools. MIS Quarterly, 21(1), 55–80. Knolmayer, G. F., Mertens, P., Zeier, A., & Dickersbach, J. T. (2009). Supply chain management based on SAP systems. Architecture and planning processes. Heidelberg: Springer. Lee, Y. H., Cho, M. K., Kim, S. J., & Kim, Y. B. (2002). Supply chain simulation with discrete–continous combined modelling. Computers & Industrial Engineering, 43(1–2), 375–392. MacDonnell, M., & Clegg, B. (2007). Designing a support system for aerospace maintenance supply chains. Journal of Manufacturing Technology Management, 18(2), 139–152.
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Mingers, J., & Brocklesby, J. (1997). Multimethodology: Towards a framework for mixing methodologies. International Journal of Management Science, 25(5), 489–509. Osterwalder, A., & Pigneur, Y. (2004). An ontology for e-business models. In W. Currie (Ed.), Value creation from e-business models (pp. 65–97). Oxford: Elsevier. Palma-Mendoza, J. A., Neailey, K., & Roy, R. (2014). Business process re-design methodology to support supply chain integration. International Journal of Information Management, 34(2), 167–176. Palma-Mendoza, J. A. (2014a). Analytical hierarchy process and SCOR model to support supply chain re-design. International Journal of Information Management, 34(5), 634–638. Palma-Mendoza, J. A. (2014b). Hybrid SD/DES simulation for supply chain analysis. In J. Wang (Ed.), Encyclopedia of business analytics and optimization (pp. 1139–1144). Hershey, PA: IGI Global. Pereira, J. V. (2009). SD-DES model: A new approach for implementing an e-supply chain. Journal of Modelling in Management, 4(2), 134–148. Prajogo, D., & Olhager, J. (2012). Supply chain integration and performance: The effects of long-term relationships, information technology and sharing, and logistics integration. International Journal of Production Economics, 135(1), 514–522. Rabelo, L., Helal, M., Jones, J., & Hyeunk-Sik, M. (2005). Enterprise simulation: A hybrid system approach. International Journal of Computer Integrated Manufacturing, 18(6), 498–508. Reiner, G. (2005). Customer-oriented improvement and evaluation of supply chain processes supported by simulation models. International Journal of Production Economics, 96(3), 381–395. Robinson, S., Brooks, R., Kotiadis, K., & Van Der Zee, D.-J. (2010). Conceptual modeling for discrete event simulation. Boca Raton, FL: CRC Press, Inc. Roder, A., & Tibken, B. (2006). A methodology for modelling inter-company supply chains and for evaluating a method of integrated product and process documentation. European Journal of Operational Research, 169, 1010–1029. Rosettanet. Overview: Clusters, segments, and PIPS. (2012). http://www.rosettanet. org. Accessed 01.07.12. Saaty, T. L., & Vargas, L. G. (2012). Models, methods, concepts & applications of the analytic hierarchy process ((2nd ed.)). New York: Springer. SCC, (2012). Supply chain operations reference model version 11, Supply Chain Council Inc., Pittsburgh, PA.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2007). Designing and managing the supply chain: concepts, strategies and case studies ((third ed.)). New York: McGraw Hill. Sterman, J. D. (2000). Business dynamics, systems thinking and modeling for a complex world. New York: McGraw-Hill. Sweeney E. (2011). Supply chain integration: Challenges and solutions. In Supply chain Innovation for competing in highly dynamic markets: challenges and solutions. In: Evangelista P., McKinnon A., Sweeney E., & Esposito E. (Eds.), Hershey, PA. Business Science Reference. Towill, D. R. (1996). Industrial dynamics modelling of supply chains. Logistics Information Management, 9(4), 43–56. Trkman, P., Indihar, M., Stemberger, I., Jaklic, J., & Groznik, A. (2007). Process approach to supply chain integration. Supply chain management: An International Journal, 12(2), 116–128. Venkateswaran, J., & Son, Y. J. (2005). Hybrid system dynamic—discrete event simulation-based architecture for hierarchical production planning. International Journal of Production Research, 43(20), 4397–4429. Weill, P., & Vitale, M. R. (2001). Place to space, migrating to e-business models. Boston, MA: Harvard Business School Publishing Corporation. Jaime Palma joined Warwick Manufacturing Group (WMG) at the University of Warwick 6 years ago as a research engineer on the Engineering Doctorate programme. His doctoral research consisted in the creation, development and application of a Business Process Redesign Methodology to support e-business implementation for Supply Chain Integration. Jaime was awarded the Doctor of Engineering degree in 2011 and since July 2012 is an Associate professor at Instituto Tecnologico Autonomo de Mexico (ITAM). Kevin Neailey has been in Warwick Manufacturing Group (WMG) at the University of Warwick for almost 20 years. His main responsibilities are for over 140 research students, half of whom are on the prestigious Engineering Doctorate programme. Kevin has been Director of Warwick’s Eng.D since 1994 and has led its development within the UK and in South Africa and Hong Kong. It is now believed to be the largest programme of its type in the UK and has been used as a model for other centres in the UK, the Far East and Australia. Since 2004 he has also been Director of the Warwick Collaborative Training Account, currently worth over £5m. In this role, he helped to develop a similar programme to the Eng.D but within Chemistry—the ChemDoc.
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Case Study
A business process re-design methodology to support supply chain integration: Application in an Airline MRO supply chain Jaime A. Palma-Mendoza a,∗ , Kevin Neailey b,1 a Department of Industrial Engineering and Operations, Instituto Tecnologico Autonomo de Mexico, 01080, Mexico, Rio Hondo No.1 Col. Progreso Tizapan, Mexico City, Mexico b WMG, The University of Warwick, Coventry, CV4 7AL, United Kingdom
a r t i c l e
i n f o
Article history: Available online xxx Keywords: Supply Chain Integration Business process re-design Service supply chains
a b s t r a c t One of the challenges faced by organizations in the construction of Supply Chain Integration (SCI) is the re-design of business processes. Accordingly a detailed methodology was constructed based on the integration of a number of different methodological strands from the literature. The proposed BPR methodology was validated by applying it to an Airline Maintenance Repair and Overhaul (MRO) supply chain. This application lead to a re-design of the aircraft component repair services offered by an independent Airline MRO provider. Results from this application shows that the proposed methodology can clearly guide the re-design of business processes to support SCI. © 2015 Elsevier Ltd. All rights reserved.
1. Introduction In recent years companies across different sectors have been facing a new competitive environment, characterized by an increase in the number of competitors, shorter product cycles, and changing customer demand. In order to cope with these challenges and to achieve competitive advantage, companies are engaged in alliances and partnerships with other organizations and closer collaboration with suppliers and customers. Accordingly, companies have turned their attention towards improving the management of their supply chains to achieve competitive advantage (Simchi-Levi, Kaminsky, & Simchi-Levi, 2007; Prajogo & Olhager, 2012). At the core of gaining competitive advantage through Supply Chain Management (SCM) is Supply Chain Integration (SCI); when integration is achieved, the supply chain operates as a single entity driven directly by customer demand (Farhoomad, 2005). However evidence found in the supply chain literature shows a number of challenges faced by organizations regarding the construction of SCI (Awad & Nassar, 2010; Sweeney, 2011). One of the challenges is the necessity to change business processes to support SCI. However redesigning business processes is difficult; the increase of complexity in business processes in supply chains results in the need for new methodologies on how to
∗ Corresponding author. Tel.: +44 525556284000x3683. E-mail addresses: [email protected] (J.A. Palma-Mendoza), [email protected] (K. Neailey). 1 Tel.: +44 0 24 765 24762.
integrate process information in enterprise networks (Roder & Tibken, 2006). 2. Research methodology Based on the identification of a research problem consisting of the need to re-design business processes, a research question was elaborated; how to re-design business processes to support supply chain integration (Palma-Mendoza, Neailey, & Roy, 2014). To answer this question, a literature search and review was conducted to find a methodology to conduct business process redesign (BPR) to support SCI (Palma-Mendoza et al., 2014). The review found that none of the methodologies provides a comprehensive solution. However, a number of methodologies tend to be more useful in relation to some phases than others. Thus the idea of combining different methodologies for a better result is attractive. When linking different methodologies it is necessary to decompose them into detachable elements (Mingers & Brocklesby, 1997). Thus the methodologies identified were decomposed at their stage level, then through an inductive approach of pattern recognition similar to the one used by Kettinger, Teng, and Guha (1997), commonalities and differences between the reviewed methodologies were analysed. This analysis resulted in the identification of generic stages for the construction of a BPR methodology structure. The methodologies reviewed were decomposed a second time in terms of the techniques and methods employed in order to select the most suitable for each stage. Additional methods and techniques were adopted from the wider SCM and e-business literature. The resulting methodology is as shown in Fig. 1.
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Fig. 1. Business process re-design methodology to support supply chain integration.Source: Palma-Mendoza et al. (2014).
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Fig. 2. Elements of research.
Source: Checkland and Holwell (1998).
Once the BPR methodology was constructed (Palma-Mendoza et al., 2014), the following hypothesis was elaborated:
3. BPR methodology application in an airline MRO supply chain
H1. The BPR methodology can clearly guide business process redesign to support supply chain integration.
3.1. Introduction
To test this hypothesis and the BPR methodology it will be necessary to take action and interact with a running operation. Thus the Action Research (AR) approach was selected to conduct the research effort in applying and validating the proposed BPR methodology. Coughlan and Coghlan (2002) define AR as an approach that studies the resolution of important social or organisational issues involving those individuals who experience the issues directly. AR involves the participation of members from the system under study and it takes action on a situation at the same time that it builds up a body of knowledge. According to Coughlan and Coghlan (2002) AR is about change and is applicable to the understanding, planning and implementation of change in organizations. The proposed BPR methodology aims to solve a practical problem (re-design of business processes) present in organizations across different sectors by providing a set of steps to guide and implement change in business processes (Palma-Mendoza et al., 2014). Thus, the action research approach is embedded within the proposed BPR methodology, whose purpose is to take action in a real world situation to improve it. Action research is a holistic research strategy, rather than a single method for collecting and analysing data. Thus, it allows the incorporation of several different research tools, techniques, and methods. The authors made use of a range of tools including keeping research notes, participant observation recordings, unstructured interviews, and gathering documents that are routinely produced by the company on which the proposed BPR methodology was applied. According to Checkland and Holwell (1998), any research should include a framework of ideas, which are used in a methodology to investigate an area of interest (Fig. 2). In Action Research (AR) it is possible to test and/or change the adequacy of the framework of ideas; for this it is essential that there is an explicit declaration of the framework of ideas before the researcher enters into the area of interest (Checkland & Holwell, 1998). In this research the framework of ideas is represented by the proposed BPR methodology (Palma-Mendoza et al., 2014). With this framework of ideas, the researcher entered a real world problem situation to take action (Fig. 3). This real world situation is represented by a problematic situation present in the repair services offered by an airline MRO provider.
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In recent years, the United Kingdom (UK) Airline MRO sector has been experiencing considerable growth. The main drivers affecting the positive growth are the appearance of low cost carriers and new aircraft technology, which brings an increase in the number of aircraft systems to be maintained/repaired. This growth has been affected by the current world economic situation causing a drop in demand, making it difficult to achieve high margins (Adams, 2009; Jackman, 2009). Thus, in order to remain competitive MRO providers are aiming to improve their supply chain processes (Adams, 2009). Potential benefits from e-business applications for SCI in the Airline MRO business are considered to be in the area of inter-organizational transactions, the ability to track components status, increased visibility, speed of communication, and reduction in inventory levels (MacDonnell & Clegg, 2007). Within this context contact was established with an Airline MRO provider in order to discuss a BPR project within their component repair services operations in the UK. This BPR project was conducted using the proposed BPR methodology as shown in Fig. 1 (Palma-Mendoza et al., 2014).
3.2. Stage 1: top management commitment and vision A project plan was created and an agreement was reached on the conduct of a BPR effort centred on aircraft component repair services to generate, evaluate, and propose alternatives for supply chain integration.
3.3. Stage 2: business understanding The objective of this stage is to develop an overall understanding of the business in which the BPR project will be conducted. This understanding can be divided into two parts: understanding the business context, followed by understanding the business logic. Understanding the business context involves gaining knowledge about the sector in which the company competes, the market characteristics and company history. Next it is necessary to understand the business logic, meaning how the company operates to satisfy its customers with emphasis on identifying the current roles of supply chain management and e-business technologies, if present.
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Fig. 3. Action research cycle to test and validate the BPR methodology.
Using company annual reports, industry reports, information from the company website, and unstructured interviews with company executives, a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis (Bolstorff & Rosenbaum, 2012) was performed. This revealed that in recent years the Airline MRO provider had focused on consolidating as a global leading independent provider of technical solutions for airline industry worldwide, whilst maintaining a reputation for technical quality and safety. The Airline MRO provider also conducted an expansion of operations through partnerships, acquisitions and joint ventures and a unique component repair services model. Nevertheless, the economic situation, added to the already intensive competition, has had a negative effect on worldwide MRO services demand. Additionally, a situation of high costs and tight margins suggested the need for efforts to lower costs and increase operational efficiencies. In this context, the need to generate, evaluate, and propose alternatives for supply chain performance improvement is justified. A business logic map centred on the value proposition represented by component repair services was created using the business model ontology proposed by Osterwalder and Pigneur (2004) as shown in Fig. 4. This business logic map shows how the company operates to satisfy its customers with emphasis on identifying the current roles of supply chain management activities and supporting technologies. It shows that component repair services can be obtained by customers either as a single component service or as part of an Integrated Component Solution (ICS), designed to help customers to lower maintenance costs and reduce risk. Target customers are
Source: based on Checkland and Holwell (1998).
worldwide airlines equipped with Airbus and Boeing aircraft. Different channels act to promote the portfolio of component repair services and obtain new airline customers. Continuous customer support is provided by a dedicated customer team. The component solutions offered by the main supply chain activities involved are: • Procurement of new components from Original Equipment Manufacturers (OEM) • Procurement of serviceable components1 from other component suppliers. • Reverse logistics flow of unserviceable2 components • Repair and maintenance of unserviceable components • Delivery of serviceable components to airline customers.
A number of these activities are currently supported by an Enterprise Resource Planning (ERP) system to share and store component related information; however its main use is to support internal transactions whereas, for intra-organizational transactions, data exchange with external supply chain partners is done through fax and email.
1 Serviceable components are those, which are ready to be used by an airline customer. 2 Unserviceable components are those, which have been withdrawn from an aircraft and have been sent to the Airline MRO provider for repair/maintenance.
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Fig. 4. Business logic map of the Airline MRO provider.
3.4. Stage 3: identification of relevant processes and selection of a target for re-design A supply chain consists of different processes and, when conducting supply chain re-design, is necessary to identify the relevant supply chain processes present and select a target for re-design. Relevant supply chain processes were identified first by using the business model (Fig. 4). Next a supply chain process map (Fig. 5) was created using the SCOR model process types and process categories as explained by Palma-Mendoza (2014a). The SCOR model was developed by the Supply Chain Council (SCC) in 1996, to understand, describe, and evaluate supply chains (SCC, 2012). The SCOR model provides a common supply chain framework, standard terminology, common metrics, and best practices. One of the applications of the SCOR model is to aid the understanding of a particular supply chain by means of mapping it in business process terms using SCOR model terminology. Thus, mapping with the SCOR model will show the relevant SC processes present in a particular supply chain under study. According to Fig. 5, three main supply chain partners dealing with repair and maintenance of aircraft components were identified:
• Airline customers: represented mainly by European Airlines, from low cost carriers to large carriers. • Airline MRO provider: the service provider located in the UK • External component repair vendors: a number of components are sent to be repaired by external repair vendors, in total around 23 external repair vendors are used.
Next, in conjunction with Airline MRO provider executives, the relevant supply chain processes were identified using SCOR model level I process types. These processes are: • Return of unserviceable components: airline customers, send components in need of repair – unserviceable components – to the Airline MRO provider. • Delivery of serviceable components: the airline MRO provider sends on request, components in working condition – serviceable components – to airline customers. • Repair and maintenance of unserviceable components: repair of components is conducted in facilities owned by the airline MRO provider and in facilities owned by external component repair vendors. Next the process categories from SCOR model level II process were identified; these better describe the supply chain processes present, and include: • DR2: delivery of MRO product is the process that better fits the return of unserviceable components • D1: delivery of stocked product is the process that better describes the delivery of serviceable components, because components are stocked in the Airline MRO provider facilities and are send on request to an airline customer. • M1: repair of stocked product is the process that better describes the repair operations conducted within the facilities of the airline MRO provider and by the external component repair vendors. Unserviceable components are repaired/maintained and then stocked in the Airline MRO storage locations.
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Fig. 5. SCOR model map. Table 1 Metrics for objective definition. Performance attribute
Metric
Asset management
Return of investment on components Component inventory turnover
Supply chain cost Reliability
Transaction costs Delivery performance
In summary the resulting SCOR process map (Fig. 5) shows that when a customer demands a component, this requirement is satisfied, when possible, through components stocked in the company storage locations. The airline customer returns components to be repaired or maintained; this is performed within the repair facilities of the company and also with the aid of external repair vendors. For the selection of a target for redesign, the AHP technique (Saaty & Vargas, 2012) was used with two level criteria consisting of SCOR model performance attributes and level 1 metrics (Fig. 6) as explained by Palma-Mendoza (2014a). AHP assumes that decision problems can be structured by translating goals into measurable criteria, which in turn, can be related to alternative decisions. As a result, AHP provides a priority number at each level of the hierarchy; then priorities of the alternatives are weighted against those of the criteria so that the eventual importance of the alternatives related to the goal are quantified (Saaty & Vargas, 2012). From a workshop session organized with company executives, a number of tables for pair-wise comparison were completed. This information was then entered into the free licensed software Super Decisions 1.6.0 to be processed giving the results shown in Fig. 7 with a consistency ratio of 8%. From the AHP analysis it was concluded that the target for redesign is the repair and maintenance of unserviceable components conducted within facilities of the Airline MRO provider and in facilities of external repair vendors. 3.5. Stage 4: definition of objectives for improvement From AHP analysis it was possible to identify by priority rank of the most important performance attributes and metrics associated with the target for redesign as shown in Fig. 5 (items shaded). Performance was measured and compared with industry benchmarks as recommended by Bolstorff and Rosenbaum (2012) to identify gaps, leading to definition of objectives for improvement. These objectives were specified with the following performance metrics adapted from SCOR model (SCC, 2012) as shown in Table 1, (details are not shown due to the confidentiality agreement signed with the company). 3.6. Stage 5: analysis of process Once a process has been selected and objectives for improvement defined, it is necessary to understand the targeted process.
The understanding of a supply chain process should be quite exhaustive to comprehend the diverse elements, interactions and flows. Trkman, Indihar, Stemberger, Jaklic, and Groznik (2007) recommend business process mapping to understand, visualize, and document a process as it is. Business process maps are useful in analysing flows, clarifying the relationships and sequence of operations. Through investigative methods as defined by Towill (1996), a business process map was constructed to understand the sequence and main activities present in the component repair process (Trkman et al., 2007). The business map (Fig. 8) is sectioned vertically according to areas of responsibility and horizontally into unserviceable and serviceable component related activities. The process starts at the upper left corner with the airline customer replacing a component and returning it to the MRO provider. It finishes when components are repaired, stocked, and replenished to the airline customer. According to Fig. 8, the airline customer sends unserviceable components to the Airline MRO provider – those that need to be repaired – and receives components ready to use, also called serviceable components. The airline MRO provider repairs unserviceable components and dispatches a number of components to an external repair vendor to be repaired, when there is a lack of repair capacity. Overall, there are 23 external repair vendors. The repaired components are returned to the Airline MRO provider as serviceable components, placed in stock, and are available to be sent to Airline Customers when necessary. The BPR methodology recommends use of a hybrid SD/DES computer simulation to analyze the system AS IS (Palma-Mendoza et al., 2014). Simulation models can describe how all parts of the supply chain will operate over time in respect to a set of parameters and policies defined by managers/analysts. Understanding the dynamics of the supply chain in a safe computer environment is the main value of computer simulation models. Two main distinct approaches to computer simulation for supply chain analysis exist: Discrete Event Simulation (DES) and System Dynamics (SD) (Akkermans & Dellaert, 2005). Simulation models in both DES and SD are built to understand how systems behave over time. However, given the fact that pure DES and SD simulation have a number of drawbacks preventing a thorough and exhaustive supply chain analysis, hybrid SD/DES simulation approaches have been suggested (Lee, Cho, Kim, & Kim, 2002; Palma-Mendoza, 2014b, Pereira, 2009; Rabelo, Helal, Jones, & Hyeunk-Sik, 2005; Reiner, 2005; Venkateswaran & Son, 2005). A hybrid SD/DES simulation approach analyses both discrete and continuous aspects of a supply chain simultaneously (Pereira, 2009). Although before adopting a hybrid SD/DES computer simulation approach, it is necessary to determine if a stand-alone SD or DES approach is enough. At this point in the BPR project, it was decided to model component and information flows. Information transactions follow
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Fig. 6. AHP structure to select the target for re-design.
a well-defined sequence and detailed historic time series were available for most of the transactions which are characterized by stochastic behaviour; thus making Discrete Event Simulation (DES) the most adequate modelling approach. However data about
component inventories/backlogs was limited, particularly in respect to component flows from Airline customers and to and from external repair vendors; thus, it was decided to model component flows at an aggregate level to facilitate the modelling. Moreover
Fig. 7. AHP results.
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Fig. 8. Business process map.
component flows occur continuously every day; thus, making System Dynamics (SD) the most adequate modelling approach to represent component flows. Due to all these considerations, it was decided to use a hybrid SD/DES simulation model to understand the system as it is. A causal loop diagram was constructed (Sterman, 2000) as shown in Fig. 9, to understand the variables affecting the differ´ ent componentsbacklogs/inventories and as a basis for modelling component flows. Next, it was necessary to identify the points of interaction between the SD and DES model for the construction of the hybrid SD/DES model (Chahal, Eldabi, & Young, 2013). The points of interaction are: unserviceable component information arrival (Input from SD to DES), reception of unserviceable components in Airline MRO ERP system (Input from DES to SD), repair orders (Input from DES to SD), reception of serviceable components in Airline MRO ERP system (Input from DES to SD). Following the identification of points of interaction, information was gathered to quantify the main variables of the computer model (Table 2).
The hybrid simulation model was constructed using Goldsim software. Goldsim has capabilities to model discrete events combined with continuously varying systems. 3.6.1. Model verification and validation According to Balci (1994) model validation implies substantiating that the model behaves with satisfactory accuracy within its domain of applicability. It is recommended to that the model be run under the same input conditions that drive the system to compare the model behaviour with real system behaviour. Thus, constant communication took place with the Airline MRO company to verify the assumptions and logic of the simulation model. The current conditions observed in the real system were entered into the computer simulation model. To run the model 100 replications were specified, which means that the system was simulated for a period of 365 days, 100 times. Then it was compared to the real system current information backlogs and component inventory levels with those obtained by the simulation model. This comparison leads to a number of corrections into the computer simulation model. This process
Table 2 Computer model main variables. Variables
Average
Distribution type
Unserviceable component information rate of arrival Number of unserviceable components receipted in ERP system Number of repair notifications sent Number of repair orders issued Number of unserviceable components dispatched Number of components repaired and dispatched by external repair vendors Number of components repaired by internal repair workshop Number of serviceable components receipted into the ERP System Customer demand (number of components)
32.00 component information/day 54.80 components/day
Triangular
Standard Deviation
Maximum–Minimum
Log normal
28
53.70 notifications/day 57.30 orders/day 26.42 components/day 27 components/day
Log normal Log normal Normal Normal
27.8 20.6 15 3
26 components/day
Normal
17
0–62
58.7 components/day
Log normal
29.9
6–150
22 components/day
Triangular
0–79 6–146 6–141 2–121 0–86 20–34
0–35
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Fig. 9. Casual loop diagram.
continued until there was minimal difference between the real system behaviour and that of the simulation model (Balci, 1994; Robinson, Brooks, Kotiadis, & Van Der Zee, 2010) was achieved. For this model the minimal difference achieved after numerous corrections is 12% on average. The Airline MRO company agreed that the computer simulation model was accurate enough in terms of replicating the real system behaviour. 3.6.2. Findings From an analysis of the target for re-design under normal conditions using the performance measures defined in stage 4, it was found that the poorest performances were for the backlog of components waiting for repair (Table 3) and the time Table 3 Backlog. Backlogs
From model (daily average)
Number of unserviceable components waiting to be receipted Number of repair orders waiting to be generated Number of components waiting to be dispatched for repair Work in Progress (WIP) with external repair vendors Work in Progress (WIP) with internal repair workshop Number of serviceable components to be receipted
necessary to receive repaired components from external repair vendors (Table 4).
3.7. Stage 6: design of process AS TO BE After achieving a good understanding of the process as it is, what follows is the generation and evaluation of alternatives for the construction of supply chain integration. A number of alternatives for supply chain integration were generated using the SCOR model (SCC, 2012) and e-business schematics (Weill & Vitale, 2001) as proposed by Palma-Mendoza et al. (2014). One of the alternatives generated was to link the Airline MRO provider ERP system with external repair vendors via their web portals; the proposed relationships are shown in Fig. 10.
Table 4 Delivery performance.
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Delivery performance
From computer simulation model (average time in days)
Time to generate repair orders Time to repair components by internal workshop Time to repair components by external vendors including dispatch and shipment
5.3 15.1 24.4
64.2 39.2 173.9 196 47
Table 5 Alternatives for improvement selection. Performance attribute
Metric
Best alternative
Asset management
Return on components Inventory turnover
Alternative 2: automation of notifications for repair Alternative 2: automation of notifications for repair
Supply chain cost Reliability
Unserviceable component inventory cost Delivery performance
Alternative 1: integration with external repair vendors Alternative 2: automation of notifications for repair
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Fig. 10. e-Business schematics representation of integration with external repair vendors.
Another alternative considered was to automate the generation of repair orders immediately after receipt of an unserviceable component by the logistics area (Fig. 11). These alternatives were evaluated using the computer simulation model, simply by incorporating and quantifying the new relationships. Table 5 summarizes the results from the computer model.
Fig. 11. Business schematics representation AS TO BE notification for repair.
Even with a reduction in component inventory cost, the improvement from alternative 1 was found to be localized. Whereas, alternative 2 produces benefits across other parts of the process; this suggests that a main bottleneck is caused by delays in processing the notifications for repair. When alternative 1 is
Fig. 12. New process design.
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combined with alternative 2, it gains the benefit of improvement on inventory cost, as well as in most of the metrics monitored. 3.8. Stage 7: implementation of changes Based on the previous analysis, it was decided to proceed to the specification of the two alternatives in one single new process. First from reviewing Rosetta Net Partner Interface Processes (PIP) standards (Rosettanet, 2012), it was possible to understand the necessary electronic interactions between the Airline MRO provider and external repair vendors. Next ERP reference models were reviewed (Knolmayer, Mertens, Zeier, & Dickersbach, 2009; Dickersbach, 2006) to provide detail about transactions and platforms necessary to design the new process. It was found that through an Inventory Collaboration Hub (ICH), it will be possible to support integration between the airline MRO provider and its external repair vendors. ICH is a low-price collaboration platform available via the internet accessible through a web-based user interface, which accommodates different ERP systems (Knolmayer, Mertens, Zeier, & Dickersbach, 2009). Through ICH the Airline MRO provider can exchange component information with external repair vendors. To automate the creation of repair orders triggered by component receipts, it is necessary to modify ERP master data information for each component type per costumer, then to associate this information with the receipt transaction. If component receipt is successful a notification is sent for a repair order. By using the Architecture of Integrated Information Systems (ARIS), the new process is as shown in Fig. 12. With this the BPR project was concluded, leaving the detailed technical design to the Airline MRO provider and external repair vendors. 4. Conclusions Despite the potential benefits of supply chain integration, the literature suggests a number of challenges preventing its successful adoption, in particular the need to re-design business processes. A number of methodologies were found that address business process re-design, supply chain re-design and e-business process design. However, none of these methodologies addressed, in particular, how to redesign business processes to support construction of supply chain integration. Through a literature review conducted in different domains, a methodology has been developed and proposed to tackle this particular problem (Palma-Mendoza et al., 2014). Accordingly the BPR methodology was tested and validated in this paper through a practical application. This application was in support of creating a SCI between an MRO Company and its external repair vendors (23 main repair vendors). Although it will require further validation, experience from this application suggests that it can clearly guide a business process re-design to support supply chain integration. According to Checkland and Holwell (1998), Action Research (AR) cannot produce law like generalizations from an involvement in a single situation (such as the BPR methodology application in an Airline MRO provider). However, AR can yield defensible generalizations which can be transferred to other situations. Accordingly this application has proved the adequacy of the framework of ideas embedded in the proposed BPR methodology to support supply chain integration. According to Coughlan and Coghlan (2002) AR may have implications beyond taking action or the knowledge gained within a particular situation. The results of AR may be applicable to similar situations in other organizations. This means that even if AR takes place within the realm of a particular company situation and the application of the
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BPR methodology in the Airline MRO and its results are company specific, it has the potential to have implications for other industries and companies. The main implication here is that the proposed BPR methodology could be adapted to any company on any sector to undertake a BPR effort to support supply chain integration. This is possible because the techniques and methods employed in the BPR methodology can be generally applied to any company or sector: • The business model ontology (Osterwalder & Pigneur, 2004) can be used to describe any business logic map. • The SCOR model (SCC, 2012) can be used to map and describe any supply chain regardless of the type of company and/or sector. • The AHP structure, used to select a target for re-design, can be adapted to any relevant supply chain processes to be considered. • The SCOR model performance attributes and metrics cover all the possible metric combination to measure the performance of any supply chain. • The modelling and simulation approaches used have been applied to different supply chain cases as reported in the literature. • The SCOR model recommended best practices are applicable and adaptable to any supply chain configuration. • The Rosettanet PIP standards, provide generic descriptions of collaboration processes among supply chain partners. • Reference models such as those from SAP describe specifications for different transactions which can be adopted by any company. • The ARIS framework can be used to describe any business process in combinations with any information system. Acknowledgement The author Jaime A. Palma-Mendoza gratefully expresses its gratitude to Asociacion Mexicana de Cultura A.C for its support during the elaboration of this article. References Adams, C. Supply chain: Problems and solutions. Aviation maintenance June 2009. (2009). http://www.aviationtoday.com. Accessed 01.06.09. Akkermans, H., & Dellaert, N. (2005). The rediscovery of industrial dynamics: The contribution of system dynamics to supply chain management in a dynamic and fragmented world. System Dynamics Review, 21(3), 173–186. Awad, H.A. H. & Nassar, M.O. (2010). Supply chain integration: Definition and challenges. Proceedings of the international MultiConference of engineers and computer scientists. IMECS 2010, March 17–19, Hong Kong. Balci, O. (1994). Validation, verification, and testing techniques throughout the life cycle of a simulation study. Annals of Operations Research, 53(1), 121–173. Bolstorff, P., & Rosenbaum, R. (2012). Supply chain excellence ((third ed.)). New York: AMACOM. Chahal, K., Eldabi, T., & Young, T. (2013). A conceptual framework for hybrid system dynamics and discrete event simulation for healthcare. Journal of Enterprise Information Management, 26(1/2), 50–74. Checkland, P., & Holwell, S. (1998). Action research: Its nature and validity. In N. Kock (Ed.), Information systems action research. Laredo TX: Springer. Coughlan, P., & Coghlan, D. (2002). Action research for operations management. International Journal of Operations and Production Management, 22(2), 220–240. Dickersbach, J. T. (2006). Supply chain management with APO. Structures, modelling approaches and implementation of mySAP SCM 4.1 ((2nd ed.)). Heidelberg: Springer. Farhoomad, A. (2005). Managing e-business transformation, a global perspective. New York, NY: Palgrave Macmillan. Jackman, F. MRO market now, overhaul & maintenance. Aviation week, April 2009. (2009). http://www.aviationweek.com. Accessed 01.07.09. Kettinger, J. W., Teng, J. T. C., & Guha, S. (1997). Business process change: A study of methodologies techniques and tools. MIS Quarterly, 21(1), 55–80. Knolmayer, G. F., Mertens, P., Zeier, A., & Dickersbach, J. T. (2009). Supply chain management based on SAP systems. Architecture and planning processes. Heidelberg: Springer. Lee, Y. H., Cho, M. K., Kim, S. J., & Kim, Y. B. (2002). Supply chain simulation with discrete–continous combined modelling. Computers & Industrial Engineering, 43(1–2), 375–392. MacDonnell, M., & Clegg, B. (2007). Designing a support system for aerospace maintenance supply chains. Journal of Manufacturing Technology Management, 18(2), 139–152.
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