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Aerospace MRO: Two Critical Metrics to Gain Massive Leverage

aerospace mro Dec 19, 2019

For every MRO organization, there are standard sets of metrics we spend time and energy trying to perfect. Depending on your organization type and structure, these metrics can number from six to 20, or even more!

The challenge doesn’t come from managing any one metric in isolation but chasing a dozen or more simultaneously and actually believing that we can be successful. It’s easy to get overwhelmed and lose focus, which can cause your business to spiral out of control and be unable to adjust to the pace required for all MRO’s to effectively operate.

To become a successful MRO leader, it’s important not to get caught up in the “death by a thousand metrics” trap, even though your leaders may already be deep in the thorns on this. Let your business performance speak for itself and use that great performance to educate others.

I recommend you spend a good portion of your total time and brain power, (about 20%), managing the performance and outcomes of two specific metrics: Open Order Backlog and Orders Past Due. Here’s why these metrics are so critical to the overall recovery and long-term success of your MRO business.

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Open Order Backlog (a.k.a. WIP, Order Book, Backlog)

This metric typically measures the number of unique customer orders in the queue for completion, regardless of status or location.

Think of Open Order Backlog as a “complementary metric” meaning its overall health affects several other measures by default, both for good and bad. When you decrease (improve) Open Order Backlog, it creates a byproduct of tangible benefits felt throughout the greater MRO business, such as:

  1. Inventory goes down, A/R and Cash Accounts go up (improves)
  2. Turnaround Time (TAT) days go down (improves), organic and new customer growth are benefactors of lower TAT days
  3. On-Time Delivery (OTD) rate goes up (improves), customer satisfaction and Voice of Customer (VOC) scorecards get better
  4. Lower backlog creates room for the organization to breathe, resulting in additional capacity
  5. Employee confidence and behavior improve as a result of experiencing their direct impact on winning

As shown, intentional focus on the Open Order Book Metric has a very specific set of positive outcomes, at least 10 measurable improvements by my count, from which your MRO business will benefit.

Use these positive outcomes to your advantage and leverage them across your entire team for maximum results. With everyone pulling the rope in unison, you’ll see a shift in momentum that expands with everyone’s level of focus and effort.

Don’t spread yourself or your team too thin by struggling to herd cats (chasing too many metrics). Keep it simple and maintain focus on this metric to maximize results across multiple business elements.

Orders Past Due  (a.k.a Orders Late, Delinquent Backlog)

This metric typically measures a subset of orders within the Open Order Book that are late to the agreed upon customer delivery date, regardless of status or location.

Every day look at the number of orders past due and make an intentional plan to eliminate (complete and ship) each one. Establish this daily ritual, but do not let it overwhelm you or your team.

It’s not at all uncommon for MRO’s to have 50% or more of their current order book in the past due column. Acknowledge this reality and establish specific process steps to crush each late order into oblivion systematically!

Don’t be a superhero; teach the process and appropriately share the accountability across your team. This technique will accelerate the reduction of Past Due Orders and build great muscle memory into those assigned to each task. Remember, small improvements + good process + broad accountability = BIG RESULTS!

 

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