Lean Sigma and Lockheed Martin

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Lean Sigma and Lockheed Martin:With the advent of globalization and rapid technological advances, businesses are forced to focus on quality management practices in order to maintain competitive advantage. Innovation has become the key word for businesses all over the world. It has been found that simple operationally strategic techniques can go a long way in improving the overall quality and efficiency of a business.

When the quality management strategy focuses on both efficiency and growth of a business, it can provide a strong foundation for innovation throughout the organization. This kind of approach does not stop with doing things better but also considers doing better things. While Six Sigma focuses on improving the quality and efficiency of the product or services of the business through reducing defects whereas lean manufacturing principles are mostly about minimizing waste in all aspects of operation. Six Sigma Lean is a combination of both these approaches.

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Many successful companies have implemented strategies based on the famed management philosophy Lean Six Sigma also known as Six Sigma Lean. One such important company is Lockheed Martin which is the world’s #1 defense contractor.Headquartered in Bethesda, Md., Lockheed Martin employs about 135,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustenance of advanced technology systems, products and services (Lockheed Martin, 2007).

The Corporation reported 2005 sales of $37.2 billion and its New York Stock Exchange symbol is LMT. Lockheed Martin’s business segments include (Lockheed Martin, 2007):·         Aeronautics, which includes the F-16 and F-22 fighters, and the upcoming F-35 Joint Strike Fighter (now officially named the Lightning II);·         Electronic Systems, encompassing everything from missiles and submarine warfare systems to homeland security systems, radar, and postal automation systems;·         Space Systems, which includes satellites, strategic missiles, and airborne defense systems; Integrated Systems & Solutions, which makes command, control, and communication systems and reconnaissance/surveillance systems; and·         Information & Technology Services.The company has generated revenue of 39620.

00 M in 2006 at a revenue growth of 6.5% (Yahoo, 2007). With 135,000 employees, the company has showed an annual employee growth of 3.80% in 2006.

Lockheed Martin belongs to the Industrial Goods Sector and the Aerospace/Defense Products and Services Industry. The Company chairman is Robert J. Stevens. Its top competitors are The Boeing Company (ba), Northrop Grumman Corporation (noc) and Raytheon Company (rtn) (Yahoo, 2007).

In 1999, Lockheed Martin in a desire to develop best practices for increasing production, quality and performance, developed an approach called LM21, the ‘21’ standing for the twenty-first century (Resnick, 2005). Soon, the company was on its way to achieving excellence with respect to various actors associated with it such as the customers, shareholders, and employees. This was achieved by selecting and implementing management philosophies called Lean and Six Sigma.Lean Sigma:In order to make products faster, better and cheaper, there are two approaches to be followed: Lean Manufacturing and Six Sigma – together known as Lean Sigma.

Lean Manufacturing is all about reducing waste and increasing efficiency of the manufacturing process (MAMTC, 2007). This is possible by concentrating on processes. Lean manufacturing insists on reduction in cost in every program and in every department. Logically, there are three possible ways to achieve reduction in cost: cutting budget; cutting service and cutting waste.

Cutting budget is a lazy man’s approach and can lead to poor performance. Cutting services can result in competitive disadvantages for the company. Cutting waste leads to operating excellence and is the key to achieving efficiency. Managers should be able to find out wasted activity and sources of variation and then work towards eliminating them.

Simple steps in processes can help save time, reduce waste or even increase production. Application of the principles of lean manufacturing involve planning for high levels of quality process control, standardizing the most waste-free methods in production, and managing manufacturing as a complete production system to deliver the highest levels of customer value.Lean Manufacturing is well suited for situations where a company is seeking immediate changes.  Six Sigma, on the other hand is an approach that aims at improving quality by reducing defects (Resnick, 2005).

In order to maintain uniform quality during production, a five-step, systematic method known as DMAIC may be used. Six Sigma makes use of statistical analysis, data, and experiment and is ideal for solving complicated issues (WMEP, 2003). For example, when many customers complained of latching problems in the Ford Mustang’s hood, the Ford Motor Company decided to use Six Sigma tools such as simulations, process mapping, and line trials. The use of such tools helped in redesigning and correcting the problem of the hood latch.

Ford expected these changes to reduce hood defects by 97 percent and save $283,000 a year (WMEP, 2003). Thus we find that while lean manufacturing focuses on removing waste, speeding up the manufacturing process and cutting lead-time, Six Sigma focuses upon enhanced product quality and reducing costs. When the two approaches are combined, Lean & Six Sigma can provide many powerful advantages. The advantage of having Lean Sigma approach is that while both macroscopic and microscopic views of the problem are made possible.

Lean thinking lets the solver see the holistic picture whereas Six Sigma zooms in on problem areas. Lean thinking is system focused, easier to implement, and gives quicker results, while Six Sigma is issue focused and can handle more complex problems. The combination of Lean & Six Sigma gives the best of both worlds (WMEP, 2003).Lockheed Martin applied Six Sigma in the case of building the C-130J Hercules, a large transport jet.

Lockheed used to spend average of 200 worker-hours trying to get a part that covers the landing gear to fit. For years, employees had brainstorming sessions, which resulted in seemingly logical solutions. None worked. The statistical discipline of Six Sigma discovered a part that deviated by one-thousandth of an inch.

Now corrected, the company saves $14,000 a jet (Jones, 1998). Lean Sigma at Lockheed:The main drivers for Lean Sigma implementation at Lockheed Martin include many factors such as the business competitiveness, customer expectations with a lot of US military interest in cutting costs of weapon production, and the desire for a standard, continuous improvement quality management and operating system and toolbox throughout diverse business units. Initially, Lockheed-Martin’s implemented the LM21 Best Practice. Six critical areas were identified: program management, operations, engineering, employee development, indirect cost, and procurement (Hugus, 1999).

These areas were selected because of their high potential for cost savings. Lockheed-Martin benchmarked 17 of its companies and some 70 practices within the six areas (Dixon, 1999). It was found that every company was best at something. Lockheed-Martin created 70 ‘transfer teams’ each made up of representatives from eight different units, two of whom came from the best practices in that particular area.

Each transfer team works as a unit over a period of several months to transfer the business and implementation plans for the team members. (Dixon, 1999) and then the teams were mixed up so that best practices training in other areas could be shared.In early 2000, LM21 Best Practices was changed to LM21 Operating Excellence. LM21 quickly became the platform for launching the Lean and Six Sigma philosophy throughout Lockheed Martin enterprise.

This was achieved mainly through coordinated efforts in training and standard application of the tools. Within a brief span of four years, LM21 helped in setting workplace standards and introduced a typical lean mindset as well.  Almost four years later, LM21 has become a workplace standard and a mindset. The Lean/Six Sigma principles of process improvement soon percolated to all levels of all functions within Lockheed Martin such as finance, business development, procurement, operations, human Resources, cash management, contracting, etcInitially, LM21, the pursuit of Operating Excellence, was introduced through training programs for the firm’s top management.

More than 8,000 executives of Lockheed Martin, ranging in level from the chief executive officer to corporate executive and program managers participated in a 4-1/2 day Lean Leadership training program (Joyce and Schechter, 2004). The program also incorporated a practical session during which the trainees were expected to implement the principles they had learnt in their functional area. These actions, along with trained experts in Lean/Six Sigma have lead to several improvements that have affected the employees at Lockheed Martin. Best of all, even customers were allowed to participate in the training and get involved in the pursuit of excellence in performance.

Lockheed Martin has developed a strategy based on both infrastructure and management to introduce lean principles. Moreover, by showing a keenness to improve continuously, by setting management goals for improvement, by providing the needed infrastructure for implementing constructive waste mitigating ideas, Lockheed Martin sought to achieve lean manufacturing (Joyce and Schechter, 2004).In the early stages of implementation of principles of lean manufacturing the focus was on training and having meetings so as to encourage both employees and the top management to experience the Lean and Six Sigma tools. This involved an introduction to process mapping, statistical analysis, time analysis and defect analysis.

The strategy was to make the employees and top management believe in the principles. Belief should precede change. Once these training sessions became satisfactorily productive, the LM21 toolset expanded to include the Value Stream Map (VMS). The VMS is a wonderful tool that can provide a strategic look at its value streams and help in identification of waste in the production system at a macro level.

Using the VMS, leaders are able to identify and prioritize the improvement events needed to mitigate or eliminate waste. Such events are also known as Kaizen events. A Kaizen event is an activity where a team is chartered for a period of 3–5 days, to identify waste for a given process and implement immediate, sustainable solutions for waste elimination/reduction (Joyce and Schechter, 2004). Usually, the outcome of a kaizen event is a plan to strategically identify and eliminate the waste that most interferes with the ability to deliver value to the customer (Joyce and Schechter, 2004).

With the use of VSMs, Lockheed Martin was able to create interconnections between its organizational goals and functional plans (McCarthy, 2003).  Every branch of Lockheed Martin had its own Leadership Excellence Councils. These councils include senior leaders of each business. There are regular council meetings to ensure the implementation of LM21and also discuss broadly the issue of resource allocation.

The councils then appoint Green Belts and Black Belts among the leaders to take leadership positions within the council and ensure that lean manufacturing principles are in place. In fact, it has been found that lean manufacturing involves a lot of work, ability to identify waste, honesty to label it as waste and will power to get rid of waste.Usually, at Lockheed Martin, customer value is generated through a customer program and program office. In the case of application of Lean Sigma, Lockheed Martin has created a Program Excellence Plan aimed at evaluating and improvising the existing customer program (Joyce and Schechter, 2004).

The Plan also weighs the program’s value stream and measures its performance. This performance is compared to the demands of excellence, identifies flaws and makes recommendations. Existing programs are often the target of the Program Excellence Plan. However, the Plan at Lockheed Martin also targets front end of the product lifecycle, and also analyses the proposal and design phases.

These two phases are tackled by a tool created by LM21 called the Product Development Kaizen (PDK). The PDK consists of three interrelated tools: Pre-Proposal Kaizen, Pre-Design Kaizen, and Pre-Production Kaizen (Joyce and Schechter, 2004) These three tools help in catering to user needs in terms of time, cost and performance of the product or service. As their names suggests, the three tools find application in various stages of production. Engineering principles of design applied to product designing are implemented through the new programs.

The tools have had a dramatic impact on the success of Lockheed Martin. They have provided the company with a competitive advantage through pricing strategies and also improved the profits.Lockheed Martin sets specific annual savings targets that are a percentage of the sales. This ensures that LM21 is continuously employed.

Lockheed Martin businesses are programmed in such a way that they continuously seek improvement in avoiding waste. Thus the pursuit of excellence has become almost a management philosophy and a way of life at Lockheed Martin (Joyce and Schechter, 2004).The pursuit of excellence does not stop within the buildings of Lockheed Martin and the company also works towards including its hundreds of suppliers in its LM21 pursuit of excellence plan.  The company organizes special events, training programs and plan to improvise the supply chain to improve the performance of suppliers.

The company studies its various suppliers in a strategic manner and takes note of valuable performers among them. Then, Lockheed Martin enters into a partnership with them to explore new ways of reducing waste so that cycle time and costs can be reduced.The LM21 approach revolves around the measurement of reality and this means people who are involved with production and services at Lockheed Martin should be the ones to measure reality. People at Lockheed Martin are those who run the whole show – from top level executives to front-line workers.

 The people have been provided the motto of “Just Do It” in order to motivate them in following LM21 and the pursuit of excellence (Lockheed Martin, 2005).Further, the concept of Kaizen Management is one that makes the entire human resources at Lockheed Martin more efficient. Here, the leaders provide the direction, allow the team members to implement their change in processes in a formal event. All employees have been entrusted with the task of observing the five principles of LM21.

According to the Kaizen Management model, the leaders are totally connected with their front-line workers and hence any change is easily implemented. Thus, at Lockheed Martin, there is both the top down and bottoms up approach facilitated by the Kaizen Management model. It is because of this approach that one finds that within Lockheed Martin, all 125000 employees, managers and leaders are all moving in the same direction towards the pursuit of excellence.It is not enough if one defines what is meant by Operating excellence, there needs to be results based on customer expectations.

LM21 has helped Lockheed Martin create savings to the customers and to the company itself, billions of dollars and it has also helped in enhancing customer relationships. The increasingly positive image of Lockheed Martin company in the eyes of the customer is evident through the customer ratings and satisfaction with current programs and services, increased levels of customer retention and moreover, expansion of businesses. The company has expanded through major acquisitions such as the Joint Strike Fighter (JSF) or F-35 Fighter (Stevens, 2005). In such an important venture, customer timing and acquisition costs play an important role.

Application of LM21 has also ensured that there is slack in improvisation of manufacturing methodsAccording to marketing guru Philip Kotler, the modern digitized economy is characterized by the principle “The customer is the King” (Kotler, 2003). True to this principle, the LM21 holds that value should be measured from the customer’s perspective. The company slogan “At Lockheed Martin, we never forget who we work for” is a reflection of the significance the company holds for its customers.  The needs of the customers keep changing day by day.

At Lockheed Martin, the Operating Excellence which is a business imperative ensures that the operating system is flexible enough to meet the changing needs of the customers (Lockheed Martin, 2005). The pursuit of excellence policy implemented through LM21 guarantees excellence to the customers, shareholders and employees. There are total quality products and services for the customers, value for shareholder investments, and a challenging work environment for the employees.  Above all LM21 keeps the Lockheed Martin fully engaged and connected in their noble pursuit of Operations Excellence.

In a policy brief dated March 2004, Lockheed Martin Chairman and CEO Vance Coffman explains:  “LM 21 acts as a catalyst for facilitating improvements in every aspect of the design and manufacturing process”. He also points out that during the last count there has been a savings of over five billion dollars due to LM21. The savings not only enable low production costs, and low costs for customers, but also tend to “accrue over time, resulting in streamlined operations, reduced overhead, better quality, less re-work, improved productivity and enhanced overall performance” (Marx, 2005).Implementation of Lean Sigma was earlier focused on manufacturing airplanes and missiles at Lockheed Martin.

But now, these principles are implemented even in divisions of research and development and in administrative and support activities. The status of Lean Sigma implementation is different for different business units and facilities. Lockheed Martin today, through its success in LM21, is participating in MIT’s Lean Aerospace Initiative. Now in its fifth year of Lean and Six Sigma deployment, Lockheed Martin has accrued more than $4 billion in certified savings, introduced the methodologies to more than 5,000 leaders via weeklong classes, and produced more than 6,000 “experts” – those with Green Belts and Black Belts.

Today, these experts have held thousands of Lean and Six Sigma events and introduced hundreds of programs, making “LM21” an engrained business process across the corporation (Dulye ; Co, 2007).An example of how Lockheed Martin used LM21 Operation Excellence system at Manassas facility is interesting from the environment point of view. Lockheed Martin acquired a portion of the Manassas facility from Loral in May 1996. This facility dealt with manufacture of sonar systems for defense applications.

As this was only a portion of the original facility, the acquisition reduced the production capacity of the facility by over 80% and there were limitations on staff, space, and spending. By applying the LM21 Operating Excellence system at the Manassas facility in February 1995, the various Chemical, Environmental, Safety, and Health (CESH) operations were restructured. Five departments at the facility-Operations, Engineering, Chemical Management, Environmental, Health and Safety, and Industrial Hygiene-were made into one department (EPA, 2007). Lean Sigma tools were used to improve internal environmental management business processes.

Knowledge was transferred through training events by environmental experts and it was ensured that there are two employees at the facility with both Six Sigma training and environmental management backgrounds. The company sought to reduce chemical inventories to the maximum extent possible. The company aimed to optimize the performance of the entire system, focus on actual needs, and ensure a smooth flow of materials through the facility. The new system replaced the chemical warehouse with a point-of-use storage (POUS) cabinets and right-sized containers of chemical supplies (EPA, 2007).

Lockheed Martin also converted its chemical suppliers to partners with incentives for prompt, efficient and quality service.  The facility’s Chemical Challenge Program aimed at streamlining the product and process design stages exploring opportunities to minimize chemical usage and risk. The LM21 also controlled the waste by eliminating on-site treatment and shifting to regular hazardous waste pick-up by a waste management vendor. The practice of inventory was made into just in time inventory.

This slashed the quantities of wastes at the facility (EPA, 2007). They are now a 90 days RCRA -Subtitle C – Large Quantity Generator. In fact, they have several 90 days satellite storage areas. As a result: chemical inventories were dramatically reduced; chemical inventory turns dramatically increased; chemical utilization rates increased dramatically; chemical warehouse was eliminated, reducing chemical storage space; and  despite increased unit cost for hazardous waste disposal/treatment, significant system savings have resulted from elimination of RCRA Part B permit and associated regulatory requirements (EPA, 2007).

The Lean Sigma principles also caused several environmental benefits: reduction in chemical inventories reduced the probability and possibilities of spills and accidents; hazardous waste problem was totally eliminated; chemical authorization process increase safety levels; and energy was saved through significant reduction in warehouse space required for chemical storage (EPA, 2007).Thus we find that at Lockheed Martin, the application of Lean Sigma Principles created a dramatic product. While lean manufacturing principles in the form of LM21 Operating Excellence program sought to eliminate waste at all levels and in all departments and divisions at Lockheed Martin, Lean Sigma also assured total quality management where customer needs were met in the most efficient manner. Lockheed Martin thus remains a wonderfully successful example of Lean Sigma Principles.

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