Field Report: Lean Manufacturing and Six Sigma at Raytheon IAD

By Ralph Rio, ARC Advisory Group

The Council of Supply Chain Management Professionals organized a plant tour of the Raytheon Integrated Air Defense (IAD) center in Andover, Massachusetts. This site has 4,000 employees, including 1,500 union members, and is a prime contractor for the military - characteristics that one would not normally assume are those of a leader in Lean Manufacturing and who is a recent Northeast Gold Shingo prize winner. They started with Six Sigma in 1999 and added Lean in 2003.

Excellent timing gave their Lean Manufacturing program a strong start. Three key constituencies came together at the same time. One, their prime customer, the US Navy, was ramping-up their requirements and wanted Raytheon to adopt a Lean program to improve production. Two, Raytheon had a few new members of senior management that where Lean Manufacturing advocates. Three, enlightened Union leadership approached management offering their help to keep the jobs local. Kind of like a perfect storm, but in a good way.

The Raytheon Lean Manufacturing program has, at its core, a focus on cultural change while connecting with the people who do the work with respect and integrity. The mind set transitioned from "entitlement" (not my job), to "activity" (look busy), and then to "results" (achieve the objective). Measurements in the form of dashboards are displayed in common areas. Several include large LCD monitors that are automatically updated every 15 minutes.

Raytheon's approach to the program had four distinct phases, 1) set a vision, 2) establish commitment from the executive team, 3) plan a change management process, and 4) develop people's skills. In terms of Lean Manufacturing methodologies, they have a best practice template where they are applied in a sequence steps. The typical sequence is training, quality tools, PokaYoke, 6S, Visuals, VSM (Value Stream Mapping), Cells, SMED (set-up reduction), pull (Kanban), and TPM (Total Productive Maintenance). Team members for a cell meet for 15 minutes at the start of each shift to identify issues and share best practices.

The adoption of Lean also affected their information systems. With Lean, they identified a need to facilitate cross-functional teaming. Previously, many of the software applications were independent silos of information. Now, they have connected the appropriate applications for information integration.

The tour included three major manufacturing lines within Raytheon's facility. They were electronic printed circuit board assembly (surface mount devices), metal fabrication (CNC machining and welding), and mechanical assembly. Each had its own application for managing work-in-process (WIP). The circuit board assembly area had a nice electronic Kanban application using barcodes for data entry.

During the tour, a few results where mentioned. Overall, there has been a 44 percent reduction in inventory. They where able to increase production 50 percent within the same floor space; meeting the requirements of their key customer, the Navy. And, the Union is happy with the improvements, because outsourcing was prevented and their jobs stayed local.

Leading through change and lean times

May 12, 2006 by Col. Sheri Andino
11th Mission Support Group commander

We live in a world today in which change is constant and accelerating. Change certainly exists in the 11th Wing with the maturation of the Air Force District of Washington, the evolution of joint basing on the Anacostia peninsula and the fast-paced and wide-ranging force-shaping cuts affecting our personnel on a daily basis. We are challenged to lead and embrace this change while continuing to provide the world-class customer support we are known for. How do we accomplish this seemingly daunting task?

Change is never easy, but it presents opportunities. Each of us must become a better resource manager in today's increasingly tight fiscal and personnel environment. Secretary of the Air Force Michael W. Wynne and Air Force Chief of Staff General T. Michael Moseley said, "We must fundamentally change the culture of our Air Force so that all Airmen understand their individual role in improving their daily processes and eliminating things that don't add value to the mission." This is the core of an Air Force-unique process-improvement program called "Smart Operations 21." The essence of this program of self-improvement is based on "Lean and Six Sigma" business process improvement tools.

The Lean concept includes two predominate process attributes:

* Do it right the first time.

* Stop doing non mission-critical tasks.

We make a process lean by changing it to eliminate steps that add no value to the end product or by combining steps to save time. For instance, moving tools and supplies closer to the work area reduces the number of footsteps required by workers to complete the job. Lean is all about getting the right things to the right place at the right time the first time while minimizing waste and being open to change. Lean is about less -- less waste, fewer organizational layers, and also about more -- more teamwork and worker empowerment, more flexibility and capability, more productivity and more customer satisfaction.

Six Sigma, or 6S, deals with quality control. It enables us to maximize our processes to deliver the highest-quality product or customer service. The Six Sigma process improvement tool includes:

* Sort through items and keep only what's needed.

* Straighten and keep things orderly.

* Shine and keep things clean; this makes it easy to see if something is wrong.

* Standardize or develop systems and procedures to maintain and monitor the first three "S's."

* Sustain or maintain your new standard.

* Safe workplace design.

The 11th Mission Support Group is integrating Lean and Six Sigma process improvement tools to continue to deliver the highest-quality customer support with fewer resources available.

The 11th Communications Squadron has worked aggressively to bring the new Project, Workflow, Requirements, and Resource Management System (or PWRR) onboard. The system provides a standardized, secure solution for communications and information-requirements processing. PWRR (pronounced "Power") is a Web-enabled, database-driven application that provides real-time processing, tracking, auditing, reporting and management of customer requirements. In the past, customers physically submitted a signed AF Form 3215 to the communications squadron in person, by fax or via mail to request support for their communications requirements. PWRR changed all that. Requirements are now submitted by the customer directly into the system for paperless processing and management. Customers now have the capability to check on the status of their requirements online, and the system enables much smoother workflow within the communications squadron (reducing processing time and meeting customers' needs faster).

The 11th Civil Engineer Squadron has led the way in examining their processes in light of increased Aerospace Expeditionary Force deployments and tighter fiscal constraints. For example, the purchase of any parts or materials called for the operations fight commander or deputy to personally sign "approval" on the material request form. This was cumbersome in emergencies or when individuals were not at their desks. In order to streamline the process, CE delegated the approval of parts and material purchases to the element chief level (one level above shop foreman).

They placed a $5K weekly budget on paper for the heavy repair and infrastructure element chiefs to fund all their emergency and urgent requirements. At the end of the week, if the element chiefs did not need to purchase emergency or urgent requirements, they can fund routine work requirements. As a result, parts were purchased quicker, since a level of paper handling was removed. This had a secondary benefit of getting the element chiefs involved in resources and requirements, not simply "available shop labor."

The 11th Security Forces Squadron is embracing change through process improvements to progress to the next level of force protection. Process application and improvement is "front and center" to accomplishment, accountability and execution of the mission. They began by flowing out the process. First, you grant yourself no more than 12 steps. Step one is the process purpose, step 12 is the desired process outcome.

Each step of the process may be independent or may be a process all its own, integrated into the process at hand. Each step should be the desired outcome of that step. A process need not take twelve steps but it can have no more than that. Determination of the process must be accomplished in 15 minutes or less. Application of this method is designed purposefully to prevent a practitioner from "getting into the weeds" during process identification. Once the "high points" of a process are identified, other process-improvement techniques can be applied.

Our 11th Mission Support Squadron Family Support Center offers seminars and classes to groups or individuals that are helpful in equipping us to lead change. Courses include: Time Management, Organizational Change Management, and "Who Moved My Cheese -- The Change Program." In concert with Lean and Six Sigma process-improvement tools, these courses enable us to discover how to deal with change positively and constructively so that we can experience more success and less stress in our careers and in our lives.

We cannot continue to do business as usual in today's environment of fewer resources and higher operations tempo and still provide the highest-quality product. We must take a look at our processes and eliminate any unnecessary steps. We must continually ask ourselves why we are doing things the way we are and work smarter, not harder. Every individual is important and empowered to lead change.

Leading change, through lean process improvements, provides opportunities to improve morale as we reduce the strain on our Airmen. Our core values -- integrity, service, excellence -- provide the foundation for standardizing and streamlining our processes and systems. We achieve the desired results of highest quality, lowest cost and shortest lead time for our customers; deployment predictability, job security, a safe work place, and involvement and satisfaction for our Airmen; and combat capability, flexibility, efficiency and sustainability for our Air Force. With a commitment to leading change at all levels, we will continue to fly, to fight and to win whenever and wherever we are called.

Remaking a champion

Bolaji Ojo
My-ESM

More than a few people concluded Mike Cannon either liked living dangerously or had a secret formula for success when he accepted the top job at embattled EMS provider Solectron Corp. in January 2003.

Certainly, the turbulent terrain of the EMS sector would be familiar territory for Cannon, who was then leaving the hardscrabble disk drive industry for Solectron. Some observers surmised at the time that Cannon, now 53, simply couldn't pass up the challenge of helping one of the premier contractors to electronics OEMs regain its footing after its savaging by the record downturn barely two years earlier.

Three years later, there are clear signs of positive change at Solectron, though a definitive verdict is probably years away. A new team of hands-on managers is in place; six of Solectron's top 10 executives joined in the last three years, and none has been there for more than seven years. Revenue is slowly rising.

And in a radical departure from the recent, wanton past, when the company would gobble up any OEM fare placed before it, Solectron has adopted a more discriminatory product and customer strategy. Today, Solectron aims to provide value-added manufacturing in sometimes low-volume but higher-margin areas such as automotive electronics, medical, networking and industrial equipment.

"At one time, we took any business that walked in the door," said Craig London, Solectron's executive vice president of marketing, strategy, services and corporate development. "If the rabbit was running, we shot at it. It didn't matter whether the rabbit had two legs, one leg or three ears. And a lot of the time it turned out to be a skunk."

That revenue-centered growth focus has been replaced by a discriminatory product selection plan built around providing extra design and supply chain services to customers.

"We are going after markets that honor and respect value," London said. "They demand an awful lot — system integration, quality and a very efficient supply chain."

Solectron executives said the company is also winning critical OEM endorsements with a revamped supply chain and manufacturing system that is proactive and responsive to customer requirements. At the core of that strategy is the Solectron Production System (SPS), a Lean and six-sigma combination patterned after the famed Toyota Production System pioneered by the Japanese automotive company.

For farsighted OEMs, Solectron has a team of experts ready to dissect the customer's operations, identify bottlenecks and suggest actions aimed at boosting design, manufacturing and other supply chain efficiencies. Solectron wants to ensure it can help customers anticipate problems, offer solutions and improve the efficiency of their operations, according to Marc Onetto, executive vice president of operations.

"We had to adapt," Onetto said. "Today, we have a suite of offerings that allow us to redesign the [customer's] supply chain — not just what we do [for them] but also the way we plan demand and manage flexibility for our customers."

Report card
Recent improvements notwithstanding, Solectron has its work cut out for it convincing the investment community that its recovery won't flame out with the next downturn.

In this regard, the company is struggling under the weight of its own recent history. Cannon and his team must dig out from so much slush — underused facilities, excess inventory, exposure to low-margin products — that it will probably take the company more than a few years to regain its balance, some analysts contend.

"We remain on the sidelines with Solectron," Kevin Kessel, an analyst at Bear Stearns & Co. Inc. (New York), wrote in a report issued March 24 after the company reported its fiscal-second-quarter results. "We believe Solectron is in the process of a slow return to growth."

There's a case to be made for embracing the new Solectron, according to one take on its history. Starting in the mid-1990s, the company expanded beyond its pc board-manufacturing base by acquiring OEM assets and taking on contracts for computing, telecom and wireless devices. By the end of its fiscal year ended Aug. 31, 2001, Solectron was the world's No. 1 EMS provider, with revenue of $18.7 billion.

That growth, however, came at a heavy price. Solectron's manufacturing presence across the globe more than doubled during those years, but many of the plants were unprofitable sites sold by lumbering OEMs that were themselves in the throes of redefining their relevancy in a market confronting the rise of low-cost rivals based in Asia. Solectron ended up with a serious case of indigestion that culminated in a huge inventory write-off in fiscal 2002 and a $3.3 billion restructuring and impairment charge. That same year, the company posted a $3.5 billion net loss.

The situation deteriorated further as the industry downturn clipped customers' wings. Solectron's revenue fell sharply, to less than $10 billion in fiscal 2003.

While the sales numbers have recovered somewhat, they have not reached the record fiscal 2001 level. Company executives said they expect continued improvements in the quarters ahead, anchored by a vastly expanded operation that looks beyond Solectron's manufacturing activities into value-added design and supply chain services.

A new set of services
In many ways, Solectron is no longer a traditional contract manufacturer. If yesterday's EMS provider focused largely on building systems and providing pc-board services to OEMs, today's leaders distinguish themselves on the basis of their value-added propositions.

It's there that Solectron is quietly distinguishing itself and winning accolades from customers. In manufacturing, for instance, Solectron has overhauled its services and now offers customers a complete supply chain suite of support activities (see page 52). Crucial changes have also occurred in the company's manufacturing operation, where a unit headed by Lean manufacturing and six-sigma veterans drawn from GE and Toyota Motor Corp. is constructing a proactive and customer-sensitive design and production system that they believe will alter the role of EMS providers in the electronics sector.

"Our customers are saying to us, 'We can't tolerate a 16-week lead time anymore,' " London said. "What we are doing is going to these customers and saying, 'Let us take over your parts management, let us take over your logistics, let us take over your repair depot. We'll do it for you, and we'll do it faster and cheaper.' That's getting a lot of traction."

The rigorous Lean manufacturing system upon which Solectron is building its ability to offer complete services described by London and Onetto is now being rolled out globally at the company's plants. In line with Toyota's approach, all players in Solectron's manufacturing operations are being trained and encouraged to offer suggestions for ensuring the optimization of the process.

"Lean is not just the job of the people at the Milpitas [headquarters]," said Ravi Ramanan, vice president of functional excellence at Solectron. "The energy of our people has to be unleashed."

Solectron has held training seminars for executives and other employees over the last couple of years, and it actively encourages customers to embrace the principles of Lean. Additionally, the company offers customers what Ramanan described as value-stream mapping, a procedure whereby Solectron helps an OEM review its operation to identify areas that require improvements.

Are you certified?
For component suppliers, the willingness to support Solectron's strategy could prove decisive in future contract negotiations. Recognizing the dependent nature of the electronics-manufacturing system, Solectron executives say they know overhauling their own operation and making it Lean-compliant won't be successful if they don't involve component suppliers.

"The first thing you need to do is to change yourself," Ramanan said. "Our next step is to work closely with customers and suppliers."

Ramanan said that Solectron envisions a time when it could approach OEMs with a "Solectron Certified Supply Chain" system that would include a list of component suppliers that have joined the Lean parade. A supplier that is not Solectron-certified could be locked out of certain contracts under this scenario.

Solectron might be on to something. Some OEMs would want nothing less than a system where the contractor is paid to handle thorny issues such as ensuring suppliers are compliant with regulations like the European Union's RoHS and WEEE directives. Other manufacturers want their EMS providers to handle the entire production process satisfactorily and act as an extension of the OEM's facility.

One such executive is Stephen Schwartz, chairman, president and chief executive of Asyst Technologies Inc., a supplier of fab automation equipment and services to the semiconductor and flat-panel display markets (see story on page 46). Solectron has worked with Asyst during the past two years to reorganize its supply chain, slashing costs and helping improve key operational metrics. Today, Asyst relies primarily on Solectron for all of its manufacturing activities.

"What impressed us most about Solectron was their willingness to adapt to the business model that was necessary for us," Schwartz said.

To Solectron executive, a statement like this proves the company is on the right track. "We will win only as long as our customers say we are different and continue to give us more business," Ramanan said. "Certainly, we cannot win accolades from every corner. But some of the key ones are telling us we are making a huge difference."