By Mike Lillich

When the U.S. Coast Guard needed solutions for its aircraft repair and supply dilemmas, Krannert's faculty and students stepped in to help out - and found a gold mine of opportunity.

The United States Coast Guard's Aircraft Repair and Supply Center (AR&SC), located in Elizabeth City, North Carolina, manages a mind-boggling 60,000 individual aircraft parts with an annual inventory value of $850 million (at the warehouse and 25 separate facilities), and performs $140 million in repairs for more than 200 aircraft. The facility also warehouses parts required to repair and maintain these aircrafts. To complicate matters, there were previously two separate computer systems for parts and maintenance, and these did not talk to each other.

When the staff of 40 officers, working in specialized capacities in an environment layered in years of policies and practices, were challenged to run the facility more efficiently, they called Krannert.

Opportunity pans out

When Lt. Commander Mike Shirk, MSIA '01, contacted Prof. Vinayak Deshpande, operations (with whom he had taken classes at Krannert), Shirk explained that this would be no mere academic exercise. The Coast Guard's AR&SC is responsible for maintenance of various essential aircraft including the HU25, H60, H65 and C130. In addition to the sheer magnitude of its massive operation and the lack of computer system communications, a large number of the maintenance facility's officers were scheduled to retire in the next five years, taking their expertise with them.

Krannert's assignment, once it cleared the paperwork hurdles at the Coast Guard and at Purdue, was a five-year master agreement to transform the maintenance system from one based upon human transactions into a data-driven computer model - letting the decisions come from the data, augmented by human experience.

"We had never reached out to a university before," Shirk says. "We challenged our former professors, and the project [now in its first year] has far exceeded our expectations."

Leading the Krannert side of the team is Prof. Ananth Iyer, operations management, who came to Krannert from the University of Chicago in 1996. His colleague, Deshpande, came to Krannert in 1999 after completing his Wharton School dissertation, which involved an extensive supply-chain coordination project with the U.S. Navy and the Defense Logistics Agency - a useful background for working on the Coast Guard project.

On the Coast Guard side of the team are two recent MSIA graduates along with Shirk: Commander Jay Jewess, MSIA '00, and Lt. Commander Gary Polaski, MSIA '02.

Interns who have worked on the project include Ryan Chan and Don Johnson, both MBA '02, Cassandra Fetzer, MBA '03, and Mihir Karanjkar, a master's student in industrial engineering at Purdue.

An essential agreement in the Krannert-Coast Guard alliance is trust. The Coast Guard has been sending its officers to the Krannert's Master of Science in Industrial Administration (MSIA) program for 25 years, so there is a solid history, familiarity, and mutual credibility between the organizations and their members. And of course, it is not exactly a military secret that Krannert's operations management area is perennially ranked in the top three nationally.

The agreement appealed to both parties. "Operations data are harder to come by than data for fields such as finance, with its publicly available stock listings, or marketing, with its scanning data," Iyer says. As a field, operations has struggled to acquire precise, detailed information on individual transactions within companies.

The Coast Guard, however, was a gold mine of data.

"The military is very good at tracking data," Deshpande says. "From the operations research point of view, the chance to get at 10 years of complete maintenance data for all of the Coast Guard's aircraft was a vein of gold 10 miles wide and 10 miles deep." It's no wonder Iyer and Deshpande dubbed the Coast Guard supply-chain project "MIDAS" (Managing Inventory and Data Across the Supply Chain).

Besides the mountains of hard-to-get operations data and the opportunity to turn the information into effective management tools, Krannert also received internships for current students and recent graduates. The project has even led to a full-time position with a Coast Guard contractor for one recent Krannert MBA graduate.

With the partnership, the Coast Guard gets service at a reasonable price. "The expense to have Krannert do the project is moderate, especially when compared with consultants," Iyer says. "At the University, we have the theoretical capabilities, the computing power, and the means to keep sensitive data from competitors. We're looking at collaborations of this kind as a model for the future of Krannert relationships with businesses and organizations."

Getting MIDAS off the ground

Iyer said Krannert's golden opportunity with MIDAS was to provide Coast Guard management with a system to make the best decisions possible.

"The problem is that top management deals with averages, while the rest of the organization tends to be more concerned with solving the problems of variants and anomalies," he says.

"When we look at a system, we start with raw data," Iyer says. "Any data that is processed, interpreted, or aggregated has assumptions built in. Management may suggest a reason why such and such a thing is happening, and these suggested reasons are seen as truth. It's the same thing that happens with urban myths, only it is within an organization. So it's important to test people's statements against the data."

In June 2002, Iyer and Deshpande visited the Elizabeth City facility and met with the Coast Guard personnel. Meanwhile, the interns spent the summer of 2002 gathering information on all phases of keeping the Coast Guard's planes safe and in the air. The Purdue team then put together its proposed inventory-maintenance system.

Last September, Shirk and other officers came to Purdue's West Lafayette campus for two days of brainstorming.

After the meeting, the professors and their students built a statistical model for the year 2001 to look at which aircraft parts failed most often and when, and to forecast failure rates. Their forecasting model, tested in 2002, proved to be 80 percent accurate, a very good initial level, Iyer says.

Working with the Coast Guard officers, the Purdue team then succeeded in getting the two computer systems communicating with each other.

"We were able to put the standard, more predictable maintenance items on autopilot, which means the officers can spend more time looking at the problem maintenance issues," Iyer says. "Having models driven by computerized data that you can analyze gives you new insights."

Those insights will improve for the Coast Guard over time as new information is fed into the computer system and is fine-tuned. Shirk says the Coast Guard had the best maintenance and inventory data of all the military services at the project beginning.

"At the end of the first phase of the project, we're not quite Federal Express, which sets the standard in data-driven maintenance systems, but with integrated parts, financial procurement, and supply-chain management, the Coast Guard is up there with the best in the private sector," he reports.

Shirk says the Coast Guard has an advantage over the other armed forces maintenance operations because its work is limited to a relatively small number of aircraft and because the control and supply center is centrally located. "But the logic itself could be applied to the more decentralized maintenance operations like that of the other military branches," Shirk says.

MIDAS Phase II

Polaski manages nine component repair shops that support the overhaul lines on four different aircraft and that also support the warehouse at the Elizabeth City repair and supply facility.

"When a component comes in for overhaul, the question is the probability of the need to replace all the parts inside," Polaski says. "A big portion of MIDAS Phase II is predicting which parts will need to be replaced."

Once in place, Polaski says, the new Web-based software tool Iyer and Deshpande are developing will forecast which parts will need to be replaced. This will cut lead times, which means Coast Guard aircraft will be back in the air more quickly.

Further back in the supply chain, better predictability means more accurate budgeting, shorter lead times, and better allocation of resources. And, Polaski says, "It will help us address organizational issues.

"For example, take the central and complex maintenance of the helicopter gearbox," Polaski says. "Currently, different managers manage different parts that go into overhauling the gearbox. Some of those parts have a two-year lead-time. None of those managers works for me; and so there's nothing I can do to get those parts sooner. The data we're making accessible may change the whole way we go about doing business."

Compared with the maintenance operations of other branches of the military, Polaski says, even at this stage of implementing MIDAS, the Coast Guard is "way ahead of the game."

Academic and educational ROI

Thanks to their long-standing relationship, Krannert operations professors and the Coast Guard have forged a five-year master contract that serves as how-to model for strategic partnerships. The arrangement aims to put the maintenance of all Coast Guard aircraft on as predictable a basis as possible, leading to faster maintenance and repair turnarounds, more budget control, and, ultimately, a better-managed operation. And that also translates to safety and security on our shores.

Iyer and Deshpande are putting together articles on the Coast Guard project for academic research publications. "The historical data we have and what we are doing to analyze and make it useful for management decision-making is very rare," Iyer says.

"Good theory benefits from being derived from solid empirical data," he says. "Indeed, one reason we are excited about the research potential of the Coast Guard project is the possibility of identifying unique ideas that are generalizable to other supply-chain contexts."

What's been happening for Iyer and Deshpande's students is not so academic. It's no secret that the last two years have been difficult ones employment-wise for freshly minted MBAs.

Alvaro Ledesma, MBA '03, works in the logistics department through a subcontractor at the Elizabeth City facility. "I'm confident and prepared for the job. It helps that Purdue is so well-regarded in the Coast Guard," Ledesma says.

"In fact, if an officer wants to elect training at another graduate business school, the powers that be use Krannert as the measuring stick."

He explained that his piece of MIDAS
is activity-based costs. "I am tracing all resources," he says. "The most costly input is people and how they perform their activities."

Ledesma is settling in for the long haul. He and his wife are expecting their first child and are negotiating to buy a house in Chesapeake, Virginia.

"This is a good time," Ledesma says.

Others in West Lafayette and Elizabeth City agree.

For the MIDAS team, one might say it's golden.