MEYER TOOL INC.

Supply Chain Risk Management

CTPT 311
 Meyer Tool Inc.
Introduction
MTI is an innovative
high-tech supplier
Risks are everywhere in terms of unpleasant things that might happen. For

managers, risks are threat that something might happen to disrupt normal

activities or stop things as planned. Even when companies have the best

forecasts and do every possible analysis, there is always uncertainty about

future events.

Through this case, the supply chain of Meyer Tool Inc. (MTI) will be analyzed

where some risks were identified based on the way the run the business with

its unique customer: Pratt & Whitney Canada Corp. (P&WC).

There are some internal and external risks at MTI that might disrupt the flow of

materials on their journey from initial suppliers through to final customer,

therefore, some suggestions will be proposed to enhance the whole cycle

minimizing the probability of occurrence.

The alternative of ignoring risks leaves organizations vulnerable to risky

events with consequences apparent from some major business failures.

Meyer Tool Inc. and Pratt & Whitney Overview

Meyer Tool, Inc. (MTI) is an innovative high-tech supplier to the gas turbine engine

industry, headquartered in Cincinnati, Ohio, with supporting sites in Kentucky, Texas,

Florida, South Carolina, New York, Canada, and Poland. MTI specializes in the following

core process capabilities for airfoils and other super alloy components:

Electrical Discharge Machining (EDM)

Water Jet Machining

Laser Beam Machining (LBM)

Abrasive Grinding

Conventional Machining

Coating

Metals Joining

Flow Measurement

Materials Evaluation Lab

NDT (FPI, X-Ray, CT X-Ray, Mag. Particle, Ultrasonic)

Meyer Tool Canada is a factory located in Boucherville, Quebec which is focused just on

Electrical Discharge Machining (EDM). EDM, also referred to as spark machining, is the

process of producing a desired shape into a metal product using a rapid series of sparks

ranging from 14,000 - 21,000F or 8,000 - 12,000C. They are capable to punch 1.7 million

cooling holes per day for the gas turbine engine industry.
Their patented Encore shaping process allows for the manufacturing of complex 3D shaped

diffusers with the hole in a single process sequence which helps them to:

Eliminate mismatched shape tool/hole conditions common to the competition's two-

step process.

Provide better control over internal mass airflow and the shape of the diffuser

characteristic.

Pratt & Whitney Canada, based in Longueuil, Quebec, is a global aerospace leader,

shaping the future of business, helicopter and regional aviation with new generation

engines. The company also offers advanced engines for

industrial applications.

Pratt & Whitney is well-known in the development of green

technologies and a true innovator with an unmatched record of

100 new engines introduced into production in the past 25

years. The new generation engines surpass International Civil

Aviation Organization (ICAO) standards for low emissions and low noise.
Supplier Selection

P&W has an approved vendor list (AVL) where suppliers and sub-suppliers must be

selected from this. MTI cannot select any sub-supplier without P&Ws confirmation. Only

two sub-suppliers PCC Minerva Co. and Thermatex Co., are involved in the process of

producing these high-pressure parts and coating for P&W.

Risk Identified > By having a controlled list of suppliers provided by P&W, MTI processes

should be very well communicated not only to P&W but also to their sub-suppliers to

satisfy their customer needs. This is a bit risky when the

company doesnt have many choices in case of a supply

disruption by any of these sub-suppliers.

Furthermore, MTI doesnt have a risk response plan for these parts in detail. They have

some alternatives like contacting the plant in Cincinnati, but it is still time consuming as

they are not located in Canada. It would be a good idea to communicate possible risks to

P&W to mitigate this aspect and work towards possible issues in the future. If one of the

sub-supplier interrupts any part, the whole cycle will be affected and MIT is the one facing

the result in front of P&W, therefore, a strict control over the sub-vendors is highly

recommended.
Ordering & Procurement Processes

As mentioned, Pratt & Whitney is the unique client of Meyer Tool Inc., therefore, the

outputs are dependent on the orders which are received weekly from P&W.

Ordering process has several steps which are described below:

Order forecast is planned and approved by MTI and P&W.

MTI accesses P&W data system (enterprise resource planning) and receives the

orders every Monday.

After receiving them, MTI enters the orders into their internal information technology

system, called MPCS (Manufacturing Production Control System).

MPCS generates the purchase order to their supplier (PCC Minerva, Thermothec)

Through MPCS, MTI is able to monitor the status of the order.

There are two methods of obtaining raw materials:

1. Pratt & Whitney provides blades:

MTI receives aerospace blades from P&W.

MTI delivers the parts to Thermotech Co. in the USA for coating.
 After finishing the coating process, the blades are returned to MTI Canada for the

EDM process.

Then, MTI, delivers the final goods to P&W .

2. Meyer Tool, Inc. provides blades:

MTIs headquarter in Cincinnati, OH purchases the blades from PCC Minerva and

they are delivered to MTI Canada.

MIT Canada does not take any action for purchasing the materials.

Risk Identified > By receiving the parts from P&W and sending them to USA, this is a

long process plus the transportation cost involved on this step. MTI should review the

standards and the reason behind sending the parts to USA as there could be a risk

involved on this node. If MTI gets involved on the design process, there could be an option

to discuss about having local suppliers rather than international which makes the process

longer and exposure to risks when different suppliers are involved.

Production Process

MIT Canada specializes in Electrical Discharge Machining (EDM). The procedure can drill from

12 holes to 60 holes on the same blade in single process sequence.

1- Weekly schedule: The weekly schedule is prepared by both companies, MTI and

P&W, then it is send to the MTI Cincinnati. Once approved, the order cannot be changed.

In the case of rush orders, MTI will schedule overtime in order to meet customers

demand.

2- Planner and Production system: The floor manager is the planner of the production

line. He organizes the schedule of the flow for the orders, machine use and the workers.

At the work center, the experienced workers are controlled by the quality department. MTI

has a 40 % increase in their production in comparison to last year.

3- Just in time production: the company has no warehouse and logistic department in

Qubec. When MTI receives a shipment, they will make an incoming inspection and

transfer the units to production lines. If delays in receiving occurs, the finished goods will

be also delayed. Whenever there is a last minute request from P&W, MTI is able to

change its production process and focuses on the new demand requested to satisfy the
final customer. The objective of their supply chain is to adjust every request and work

through a better controlled flow of inventory by delivering the parts on time.

4- Cooling Process: Meyer designed Five-Axis Vision Systems to measure the location of

each cooling hole independently, providing the machinist with critical positioning feedback.

The Networked Airflow Test Stand measures the internal mass flow rate through

each cooling circuit to ensure all areas of the product receive proper cooling.

Using back lighting, pressurized water and infra-red radiometer based gauging

systems, MTI is able to verify that each hole on the product is completely through

and free from foreign objects.

5- Certifications and Quality Control: Pratt & Whitney embraces the requirements

defined in the AS9100 Aerospace Standard for Quality Management Systems. AS9100

elements include safety, airworthiness, product conformity and reliability in the aerospace

industry. These Quality requirements are significant in the aerospace environment and are

recognized by international customers. The company holds different certifications:

ISO: 9001 for the quality of production

NADCAP: for the quality of Aviation Industry

Certified inspectors from Pratt & Whitney to inspect the blades and check if they are

meeting the requirement (DQL Certification- delicate quality Represent) 1

1
See more at: http://www.pratt-whitney.com/Quality#sthash.DThYL8SD.dpuf
Ingrained in the Meyer Tool culture is the mindset of continuous improvement. This

philosophy is based on the tools and concepts of Six Sigma and Lean Manufacturing. All

production jobs are monitored and controlled real-time using Statistical Process Control

(SPC) techniques through the proprietary Orion data management system. Machine

centers and dimensional and visual inspection systems are automated and CNC

controlled. With over 800 EDM machines, Meyer Tool Inc. is North America's

largest EDM shop and remains on the cutting edge of technology through continuing

investment in Research and Development.

Risk Identified > By having a make to order production they are cutting cost in inventory

which makes a supply chain agile and flexible. However, MTI should work on better plan

their supply chain flexibility such us volume flexibility, schedule flexibility, physical, logistics

flexibility and create multiple supply chain to match product and customer segment

requirements. In addition, a Sales and Operating Plan (S&OP) could also be an excellent

alternative. S&OP is about piloting a daily operations and monthly plans toward a long-

term business goals. It's about getting everyone headed in the same directionincluding

contract manufacturers, suppliers, distribution partners, and customers. By working on a

S&OP and shorter forcast, both P&W and MTI can improve their procedures and

operations between the people who design the plans and those who have to execute

them.
Distribution Process

Due to the tremendous power that P&W has over the buying decisions, MTI works closely

with them, therefore, the supply chain is fast and agile, rather than slow and inflexible. A

fast supply chain emphasizes a speed and time component, whereas and agile focuses on

an organizations ability to respond to changes in demand with respect to volume and

variety 2.

Meyer Tool space is limited to store the material. MTI processes the orders as they come

in and then prepares them for delivery. As mentioned earlier, it does not have a

warehouse to stock the parts. The safety inventory is very low for some parts, but in

general all materials are produced and shipped to P&W through Ryder Transportation. MIT

sends Ryder a pick up request, which they have a seven-day window to pick up the order.

If P&W receives a damage part, called Escape, they return it to Meyer in order to

investigate the root cause of the problem. Reverse logistic accounts for less than

2%. If reverse logistics is necessary, (returning Merchandise Authorization), MTI

receives the default part from P&W where two actions take place:

1- Open an investigation, where MTI checks the production logs and inspection

logs, to find where the error is and fix it.

2- Place all the defect units on MRB (Material Review Board) bin. MTI sends an

inspector to check these parts and decide if the units are for recycle or for scrap.

2
Notes taken from Contemporary Logistics, eleventh edition.
The Logistics Process

Since Meyer is not the only node in this supply chain, they have a firm deadline to meet,

not only P&Ws deadline but also not to cause delays for the following node in the supply

chain. If Meyer would cause a delay, this would cause a ripple effect across the supply

chain. In a worst-case scenario, this may cause a bullwhip effect where P&W may pull

more order through the supply chain and have a higher carrying cost due to lower

throughput. If MTI were to miss a delivery schedule, their score as a supplier from P&W

would be affect, jeopardizing future orders. This emphasizes the need for an efficient

supply chain while remaining agile and on time.

P&W has contracted Ryder Logistics to act as a third party logistic provider. Ryder

Logistics subcontracts the deliveries to FedEx. Often depending on the urgency of the

shipment, cargo will be airfreighted to the next node in the supply chain to reduce transit

time. This shows the level of service, the flexibility and agility of the supply chain. For

inbound materials to MTI, FedEx continues to handle the delivery but very little notification

is provided to the Canadian facility. On multiple occasions, shipments which are procured

through Meyers head office in Cincinnati, have very little notice upon arrival in the

Boucherville facility. This facility remains very flexible and if shipments were to arrive

without notice; a sudden change in production is made so all orders can be filled within the

limited time frame. Not all products are procured from their head office; some shipments
are well planned by P&W and arrive on a delivery schedule. These parts are machined at

MTI and are picked up within a fixed time frame.

As primary logistics provider, Ryder Logistics must arrange to have shipments arrive from

Cincinnati to MTI on time and in good order. Once necessary modification is performed by

MTI, shipment is sent to Wichita Falls TX for specialized coating. Once Coating is

completed parts return to MTI to finish tooling the final product. From here Ryder arranges

delivery to P&W which is located within 10 kilometers from Meyer. Since MTIs sole

primary customer is P&W, their choice of location would be very simple. Manufacturing

would either be close to the raw materials or close to the final consumer to cut down on

transportation costs. Due to the proximity of the manufacturer and the final customer: the

transport costs and the lead times are reduced, flexibility and agility of the supply chain are

increase.

Risk Identified > As some parts are sent by the Cincinnati office to the Boucherville facility

without notice, this should be better communicated and shared. The lack of

communication and coordination should be improved by coordinating the risks arising from

the alignment of operations not only with the delivery of parts, but also with lead times,

quality, delivery reliability, cycle tyme, etc. When all members of a supply chain work on

their risk management in isolation, the results are rarely good and both parts will be

working and looking after its own interest.

Supply Chain Maturity Heat Map Assessment

These are usually two dimensional representations of impact plotted against likelihood.

They can also depict other relationships such as impact versus vulnerability. For even

richer information, the size of the data points can reflect a third variable such as speed of

onset or the degree of uncertainty in the estimates 3.

The supply chain in general at MTI has to be improved. By evaluating their maturity

through the Heat Map assesstment, it shows nine aspects where MTI has to focus on in

order to enhance the whole cycle. This company doesnt have a strong visualization of all

the network participating on the supply chain. They understand the business and their

customer needs, but it should be more controlled and more proactive in order to mitigate

risks in all nods involved on the process.

3
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Governance-Risk-
Compliance/dttl-grc-riskassessmentinpractice.pdf
Conclusion and Recommendations

The tailored logistics approach works very well for them, however, some roles are needed

to better monitor and control the materials through the supply chain process. As an

example, the customer service representative is the one taking the orders from P&W,

communicating with sub-vendors, delivering some parts, and doing part of the logistic

process and accounting. This could be handle by adding some defined activities and roles

in the logistical channel such as order management, customer service, materials handling,

packaging, and reverse logistics.

In addition, as a big step to work towards improving risks in their supply chain, MTI should

have to develop processes to identify, prioritize, and mitigate risk in three steps4 :

1. Risk Identification:

4
Notes taken from Managing Risk in the Global Supply Chain lecture
 - What can go wrong?

2. Risk assessment and priorization:

- What is the likelihood it will go wrong?

- What is the magnitude of the consequences and overall impact on the firm?

- How quickly will the problem be discovered?

3. Risk mitigation and management:

- What options are available to mitigate the risks?

- What are the costs and benefits of each option?

By doing these three steps, MTI will be more knowledgeable about the sypply chain cycle,

mapping the processes and creating action plans in case of risks events. Risks identified

and mitigated today become obsolete tomorrow, therefore, risk management must be an

ongoing process.

To conclude, Meyer Tool Inc. is an essential part in P&Ws supply chain in regards to

manufacturing of turbine blades. One major hurdle that MTI must overcome; has been the

lack of forecasting when it comes to the delivery schedule of raw materials. If better and/or

more visible forecast could be made from Meyers Cincinnati office, it would allow Meyer to

increase productivity, by reducing setup time. This would also allow MTI to focus more on

their primary business of manufacturing rather than worrying about delivery schedules.

There not just negatives to conclude with, many of MTI processes have been improved

over the years to make them a highly ranked supplier for Pratt and Whitney. Whenever

there is a last-minute request from P&W, MTI will change its production process and
focuses on the new demand requested to satisfy the final customer. This helps to secure

future orders and earn confidence as a key vendor. Since Pratt and Whitney is the primary

customer for Meyer, it is of the utmost importance that Pratt and Whitneys regulations are

followed without error. Therefore, Meyer stresses the importance of quality control,

documenting all defects and providing full visibility to Pratt and Whitey.