PCs to Planes

By Amy MacMillan, News@MITSloan – March 17, 2008

He went from working with minuscule computer components to massive airplane wing apparatus.

But Chan Yuin (C.Y.) Lee, LFM ’08, effortlessly made the shift from engineering manager to supply chain analyst in a different environment during his six-and-a-half month internship at Spirit AeroSystems, Inc. in Prestwick, Scotland. LFM students are required to complete an internship at an LFM partner company from June to December in the program’s second year. The internship experience provides the foundation for the thesis they must write to complete their dual degree in engineering and management from MIT.

Prior to arriving at the Institute, C.Y., 35, a native of Malaysia, worked for Intel for 11 years, most recently as an Engineering Manager in Belen, Costa Rica. He also held positions as a Technology Transfer Manager and Test Program Engineer in Arizona and Malaysia. Intel is also an LFM partner company, so C.Y. had known about the program for many years before he decided to apply – at the urging of one of his supervisors, Viju Menon, LFM ’94. C.Y. was ready for new challenges. “I wanted to expand my mindsets and mental models, to get a larger sense of what’s possible, and how other companies are doing things,” he says.

Plane parts
C.Y. was interested in Spirit AeroSystems, Inc., a new LFM partner company which makes airplane wing components for both Airbus and the Boeing Company. The idea of working in a supply chain environment, in Europe, in a different industry, appealed to him. “I think it’s as far away from the semiconductor industry as you can get,” he says.

Spirit, which is headquartered in Wichita, Kansas, used to be part of Boeing, until it was spun off to private equity in 2005. With additional locations in Scotland, England, and Oklahoma, it is the world’s largest supplier of commercial airplane components and assemblies. The Prestwick location was previously owned by British Aerospace and Engineering (BAE). Spirit bought it to diversify its customer base by adding Airbus as a customer. Spirit outsources 80 percent of its work to suppliers in countries such as Indonesia, Malaysia, Poland, South Africa, the United Kingdom, and the United States. The Prestwick plant, which employs 700 workers, assembles wing components known as leading edges and trailing edges, the front and rear pieces of the wing. “My focus in going there was to understand how to improve the operations of the supply chain,” says C.Y.

With so much of the work being outsourced, Spirit must ensure that its supply chain runs seamlessly and cost-effectively. Suppliers are expected to deliver the parts on time, and they must meet the right specifications for quality, C.Y. says. However, the supply chain process – which in theory is designed to save money – was experiencing multiple problems in terms of quality and delivery. Many of the suppliers’ parts were defective, and had to be “scrapped,” while some suppliers were demanding price increases. The inventory rate of high-value items such as big chunks of titanium collecting dust in the warehouse skyrocketed, and the whole supply chain system was costing Spirit millions of dollars in cost overruns, C.Y. says.

C.Y.’s internship assignment was to analyze how Spirit could optimize its supply chain. Centralized teams of materials, procurement, logistics, and scheduling all worked independently, focused on their own goals and processes. “No one was looking at the supply chain as an interconnected chain. Everyone was looking at it functionally, in pieces of the links,” C.Y. explains. Spirit was well aware of the problem, but had no idea how to fix it. Since C.Y. is from a completely different industry he was able to provide a valuable outsider’s view to the problems.

Supply chain disconnect
C.Y.’s first challenge was to learn the business by spending time on the floor with employees, in the offices with the management, and abroad, visiting some of the suppliers. “You’ve got to talk to people in different functions. You can’t just sit at your desk. You’ve got to go out to the shop floor,” he says. “Then you start to see where the disconnects are. Integration wasn’t happening. When I went in, I was looking from an integrated supply chain perspective, and that helped me to see those gaps.”

In order to optimize the supply chain, C.Y. observed that management would need to implement a structure that enabled a cross-functional team to exist. The cross-functional team would bring together various functions that would work together to solve common problems. “It’s a shift of mindset,” he says. “With the cross-functional team, and aligned business objectives, activities would be more focused on what the overall business needs. C.Y. says Spirit is working on fulfilling the goal of forming such cross-functional teams. One of the LFM ’09 class members will most likely continue C.Y.’s work in Scotland, says Don Rosenfield, Director of the LFM program.

Rosenfield says C.Y. accomplished a lot at the company. “C.Y. did a great job helping Spirit in a number of areas. He helped them understand the causes of what is known as the ‘beer game’ or bullwhip effect, where inventory fluctuates much more than would be expected from the usual demand fluctuation. He helped them develop a methodology for setting inventory levels, and he also helped them understand how to structure their supplier relationships.”

C.Y. says he was able to apply many of the skills he learned at Intel. “Intel has a much higher volume [of products] and is a faster-paced industry. It does have much higher expectations of supplier-incoming quality than what I observed in the aerospace industry,” he says. C.Y. emphasizes that ultimately, high quality is maintained in the aerospace industry – just at a much higher price. “I showed them [Spirit] that they were accepting a much higher defect rate than what we would expect from our suppliers at Intel.”

LFM’s technical analysis training also proved invaluable to the internship assignment. “From a management perspective, I could understand the business model and the organizational issues that they were trying to maintain. From an LFM perspective, we are trained to think about how to bring these together and make it even more powerful. How do you bridge technical knowledge with business needs?”

C.Y. says he learned, “The soft stuff is really the hard stuff.” He explains: Technical issues can be solved with knowledge, but the harder part is actually convincing employees and management that they need to change their mindsets in order to improve the business. “That is actually much, much more time-intensive and harder to do than to sit down with an Excel spreadsheet and write a formula. It’s a matter of taking them through the whole change management process to really internalize why this matters to them and how it impacts the bottom line.”

He also gained an understanding of the commonality of business problems across all industries. “At the core, a lot of business problems are actually the same. If you peel the skin off of an aerospace company or a semiconductor company, at the bottom, they all face the same issues. It’s about dealing with people, processes, and having a system.”

C.Y. loved living in Scotland (“It’s a very proud country with a very rich history”) and visited 12 other European countries on weekend trips. He also honed his golf skills at links courses such as Turnberry, a championship course. “The courses are really good there, but challenging, because there’s a lot of wind.”

Now writing his thesis, C.Y. is also preparing for his return to Intel. He’s not yet sure yet in which capacity he will work, but it most likely will be in an operations role so he can apply his LFM knowledge. After several years of living abroad, he and his wife, Siew Min, a financial analyst, plan to return to Malaysia.