Ses 1-2 | MIT 16.660 Introduction to Lean Six Sigma Methods, January (IAP) 2008

the following content is provided under a Creative Commons license your support will help MIT OpenCourseWare continue to offer high quality educational resources for free to make a donation or view additional materials from hundreds of MIT courses visit MIT opencourseware at ocw.mit.edu okay it's Oh nine hundred we're going to get started as a reminder my name is al Haggerty and we're going to try to get you oriented here and we call this the start of your your lean journey and there we go so by the time we get done you're going to be able to differentiate between lean and Six Sigma and I know that one of the attendees today mentioned that that's why they came we're going to talk about the 5s tool that's a derivative of the original Japanese lean concepts and we're going to be able to define the difference between lean and a lean enterprise and stakeholders and recognize why Lean Six Sigma principles are being implemented in aerospace because it's a it's turned out to be a very very valuable tool and and the fact that today is day one of a journey it's not something that you you just do once and finish and I was reviewing some of the latest changes and my wife said gee you've done this a lot of times what are you doing I said we're on version six and she said what you changed it six times and I said this is continuous improvement so we're going to talk about that so this is a excerpt from the machine to change the world and sometime if you get a chance get that book and Womack and Joan's ex MIT professor she's still alive and it's still kickin and a very very interesting guy developed a whole bunch of data but it started with the automobile industry the book machine that changed the world is about the automobile industry and you know in the late 1800s cars were brand new and they were assembled by hand and then Henry Ford revolutionized the production of cars and and the big thing that he came up with was the interchangeable parts because before that we handmade parts and he came up with the concept that if we could make all the parts the same we could put them in an assembly and that started the mass production well Along Came Toyota after World War Two and Toyota made this huge improvement in how we built cars part of it was the concept of statistical process control in terms of how they how they literally made the parts but they invented and what the whole concept of lean and as you may know last year 2007 which is you know just finished the Toyota Production now exceeded General Motors production for the first time and from market capitalization numbers of shares times the value of the stock they're the largest automobile manufacturer and as you know we've gone through a lot of problems with Chrysler was part of the dom let benz until this recently when siberius just bought them back but our our automobile industry is in trouble I just read the other day that General Motors lost 36 billion last year part of that was buying back the rights of the the displaced workers when they you know the severance pay and that kind of stuff and their health care and so forth but you can see the difference between if you look at this the auto production in the u.s.

These guys and with the ups and downs and every time you do one of these we know you get these giant layoffs the nice smooth Japanese production is as a function of lean they've continued to improve and they have a stable workforce the products continue to be better and better and you know I do a lot of jogging and if you jog along the road won't let you take a look at the old cars the old cars that come down the road there are Honda's and and Toyota's and and you know the Japanese automobiles the old Chevy's and the old Fords I mean you see some of them but they don't last as long and and a good reason is the fact is that these cars I mean you I tell industry groups I mean you ask any college kid about you know driving a car to a 200 thousand miles and they'll say yeah I got a Crowell I got a Camry I got a you know I've got a Honda and and there's a reason for it because the fact is that they they have all the bells and whistles and all the bells and whistles keep working so we just talked about that in the post-world War two period the General MacArthur wanted to rebuild the industry as part of his he was the supreme Allied commander and in in Japan and he tried to get the industry going and he brought Deming from MIT basically to to help get the nd a bunch of experts and he instituted a lot of the statistical process control and the Japanese took it you know took it for granted they said they did it with a passion whereas in the u.s.

We didn't and and therefore their cars and and their products have worked significantly better so if you take a look at the early craft concept that was used in the Industrial Revolution and past just think of a jeweler a watchmaker each one of those little parts are made by hand and filed by hand put together and if you want to become a jeweler you became an apprentice and then you became a journeyman and then you became a master craftsman and that was how in fact you made the kinds of parts and if in fact you could think of a better way of doing it the master craftsmen would do it but it was not spread anywhere I mean maybe he would teach his apprentice or so forth but mass production which we just talked about Henry Ford that kind of concept if we were going to build years ago if I was going to build twelve Apaches we put 14 parts in the line 14 14 sets of everything why 14 if we're going to build 12 because we're going to scrap them you know that we don't do that anymore but that was typical what we would do and that that's pure waste and the concept was you know mass production reduced the cost you know gets the efficiency up and there's no question that this was a lot more productive than the master built it one at a time kind of a thing of a crafts person but here's an a big big difference inspection was a second stage we would build it and inspect it build apart in space today in Lean Thinking we build the quality process into the production of the part and we're going to show you later on that inspection does not catch all the errors does not catch all the errors in fact I guess the poker chips that we just saw before was a good demonstration of that and and another significant improvement is that the master you know the master carpenter the master furniture builder the master bricklayer any any innovation was driven by the guy that was doing the work here we had industrial engineers and manufacturing engineers expert periodic improvements to the process under the lien concept we want every worker to contribute every worker to contribute in terms of being them there's no question that the real experts and the job of the people that do it every day and trying to glean that information is part of the value of Lean Thinking and the biggest thing is really the focus on the customer see here the craft the jeweler was focused on the task of building that watch but the mass production you know focused on automobiles well we still want to build automobiles but the focus was on the product here on the leans thinking we're trying to deliver value to the customer and we'll talk more about that later on but trying to deliver value want to deliver a mach 1.6 supercruise high payload vertical or short takeoff and vertical landing aircraft called an f-35 to the warfighter the vet that's the value and we want to be able to do it for thirty five million dollars apiece that is the value to the Air Force which is the macro customer the pilot the mechanic or the detail customers of how we think so big big difference in the way we approach the concept now we talked about Six Sigma Six Sigma this is developed by Motorola in the 80s now not too many people wear pagers anymore but when I was a young engineer ever that it was sort of like a status symbol to have a pager I never got one of the darn things but but pagers were a big deal and Motorola pioneered that business and they had 80% market share until once again the Japanese and the Koreans came along and they added a whole bunch of features to those things where they could tell you you know when the buzzer went off they could tell you you know who it was and you know where they were coming from and what time it was and a whole bunch of features and they delivered it to the United States cheaper and all of a sudden Motorola's business went the tank and they they try to analyze what was going on and they decided that they did a Pareto analysis will teach you about Pareto charts here but they did basically made a ranking of what the issues were and one of the biggest issues was the fact is that the that they had to scrap and rework a bunch of these pagers and their quality was not as good as the Japanese and they didn't last as long the pagers didn't last as long for quality reasons and so they said how can we fix this and basically started to apply the Deming statistical process control to the various design processes manufacturing processes and so forth to improve the quality and they regain their market share regained their market share on the page so anyway Motorola in the 80s in fact I live in Scottsdale Arizona now and the Motorola facility was the one there that did that but it was improving quality by eliminating defects and the concept is reduced variation we're going to talk a lot about that we're all but on the lean we're trying to trying to remove waste and waste is not the fact that people come to work every day to you know to waste things it turns out that waste is the fact is if this is the perfect way of doing it and we're doing it now the difference between what we're doing now and how good it could be is a definition of waste the Six Sigma is focused on those issues of variation that in fact are causing the problem we focus on the flow and you're going to hear the term pull versus push and so forth as we go through this and we're trying to get rid of the waste to improve the business performance and it's a lot of small improvements many of them coming from the workers who do the job every day and I had to work in a Boeing sent me to Japan I worked in a Japanese factory for a week and after two days of training had to improve the productivity of a Japanese worker who was making large industrial air conditioners and that guy was 55 years old and he was moving so fast and my job was to improve his productivity by 30% and I thought to myself there isn't a worker in the United States that's working as hard as fast as this guy and he was doing all these jobs I had to figure out that literally it was a repetitive job and and try to improve and you know but if that was a combination I did it but it was a combination of a whole bunch of small things and that's what we're trying to do so we're going to learn a lot about variation the fact that variation causes problem and in fact we're going to talk about flow and how to get the waste out of the out of the process yes sir statistics yeah the I think that yeah there's a chart we're going to show you later on to buy a day after tomorrow that will actually explain that but basically in in statistics Sigma in terms of variation so you know 1 Sigma is like 30 percent apart to two Sigma's like 66 percent 3 Sigma you know so forth Six Sigma is like 99.99999% perfect you know kind of still standard deviation in statistics so ah we I just came from Boeing helicopters I was on there for a for a week last week helping him on the routine fatigue problem on the Apache attack helicopter advanced composite rotor blade program and there's a routine problem and the but and I was there to fix it but we literally take six specimens has nothing to a Six Sigma per se but six specimens and then run out the fatigue test and determine what the high confidence 99.999% stress level is that we can guarantee the life of the part and so it's used a lot we talked about the fact that lean optimizes flow and eliminate waste Six Sigma stresses quality through the elimination of variation and certain companies have put all their focus on Six Sigma and other companies have adopted lean and over the last ten or fifteen years we've seen a convergence of companies that that use both and the idea being is that if the basic quality problem is something that we can apply Six Sigma methods it might it make sense but quite often in the big in the big picture the flow is all mixed up and and therefore concentrating and limiting the waste and the flow so there's a lot of companies that in fact instead of having a Six Sigma General Electric for example and instead of a pure lean have in fact merged those two and so you can see here Rockwell Collins calls it lean electronics Textron Six Sigma air force new new system is a FSO 21 Boeing now calls it lean plus and that's a that's a change just in the last two years so all these things that have merged together so we're going to talk about the fundamental concepts that underscore both of those we were talking about someone mentioned early in the Icebreaker and why they were going to come here they wanted to learn the terms there's a bunch of terms that we're going to expose you to over the next three days and these these terms are the the language of lean and and we'll go through those and believe it or not when you take your value test at the end you'll be a lot more knowledgeable and to be able to explain really what those are so that's good and I won't go through those at this point so we talked about the 5s there are literally five terms and in Japanese that began with the the S word and I can't pronounce them but they have been translated into English to mean sort straight and scrubs standardized and sustained and I'm not sure you can see this but this is a typical Factory sorting area receiving receiving inspection where the parts come in and they get sorted and inspected and this is before and if you can see that right now there's a place for everything and everything's in its place and that has a huge impact on the ability to get the job done efficiently let me just relate that to your father's toolbox your father's toolbox on his workbench or the plumber that you see or the mechanic on your car and you know they're in a toolbox I know that ratchet wrench is in here somewhere what our job is to do to as the converse of that in terms of sorting and straightening is to be able to say I want our mechanic on the line to have all the tools so that he can be like a surgeon it can be a surgeon scalpel right and it's all right there and and and he knows exactly where it is and we want to give them the parts and the paper and the tools okay the parts that I need right here the tools that I need to do the job and instructions so that he knows what to do next if it's in fact he's building multiple products so it may we want to be more efficient and we'll find out that that actually straightening out and sorting out is a big big improvement so we're going to do an exercise everybody go into your notebook into your orange notebook and there's a piece of paper that says 5s exercise 5s exercise looks like this now what we're going to do is we're going to do a 5s sighs and we're going to measure our improvement we're going to put metrics on this and we're going to in fact put you in shifts of 30 seconds and what what good job to do in on the when I tell you to turn the page all time you've got 30 seconds and what we want you to do you'll see a bunch of numbers don't look bunch of numbers and what we want you to do is to find number one cross it out then find number two cross it out number three up to 49 you have to do it in order one two three four five six seven eight nine ten find the number cross it out find the number cross it out and then stop when I tell you to stop ready set go okay three so round one the highest was 11 the average you know the average might have been five or six something like that so I'm just going to say okay that's cool okay so now what we're doing is that we're talk about 5s is the second s is we're going to sort these we're going to sort these and what we've done is that we've removed some waste out of the system and we remove the numbers between 50 and 90 and for our product we don't need those so what you can do is the same thing we're going to go in order you know find the one that cross it out find the two cross it out find the three okay and on your mark get set go stop okay to kill all right how many 1390 30 to 20 20 to 50 highest number was 22 and the average is about 11 you know brought roughly around two okay we made we've had a productivity enhancement we've gone from like 11 up to 22 now we're going to do what we call set in order or straighten and weave in just think about a factory we installed a rack system to help locate the numbers and the numbers go the numbers go from the bottom to the top and from left to right okay that sort of makes sense right bottom to the top left to right and that'll help you so we start over on the left and then go up and then go to the to the right side and we'll talk about it okay stand by on your mark get set go good ok so round 339 was our top and the averages you know certainly you know like approximately 30 good okay now you see that straightening straightening paid off the third s is what we call scrubbing it's tough to scrub a piece of paper you know I mean so but basically cleaning the factory cleaning if you think of an electronics Factory if you had a dirty electronics factory need somebody put a chip down you'd ruin the chip I mean that's it that's a simple example but there's lots of processes we make compiled I just said I was in a routine factory making making rotor blades composites have to be absolutely clean so having a factory that's clean helps product so but we can't I can't do something on that one so we're just going to skip that next one okay the next one is what we call standardize and we've created a system of ordering the numbers from the lowest to the highest from the left to the right and top to bottom we've put one number in each box okay make it easy to get our tools and we know where our plans are so this is a this is you know we now know where the screwdriver is we now know where the wrench is and that kind of stuff okay standby ready set go okay you can see on round four you know we basically did it everybody we significantly improve the average why don't you review that cute roughly look at it the the range and and the eyeball mean you know we started out real low kind of consistent consistently bad right as we as we went through sort of intermediate steps notice the variation actually got bigger right some people took to the improvements quickly other people didn't always actually more variation fact that this last step we had a weird bimodal distribution I heard a lot of thirties a lot of teens right some people got that system some didn't but the really good system with some odd exceptions right both got a perform his way up and very important that our variation damn there's actually just a couple of outliers here almost everybody was on that on track now basically let me let me translate that to an aircraft example years ago I mean I started this business like in 1962 they would give a worker a job ticket a job ticket and said you know the supervisor get together that you know seven o'clock in the morning and say okay you're going to bring you're going to build the horizontal stabilizer today you've done that before we know how to do it here's the job ticket clock in on the job you'd go clocking in the job and it would tell you that in fact you had to go to the blueprint crib and you pull out the blueprints for that and you'd spread them out and then you tell you that you had a part kit and you go to the parts control and you get that kit and then it says oh I need this tool and you'd go to the tool crib and get the tools and now you know we start at seven o'clock it's about 7:30 and you know you've been trying to get your stuff together today we don't do it that way today a you get your parts and your instructions in fact we f-18 Apache and those kind of things our paperless paperless you have a computer that right now and tells you a Ellis trated way of getting the job done and it's right in front of you and the parts are right there the tools are delivered with the job or they're at your desk or at your workplace all the time and you can see you can see from 5 to 6 to 49 how this is important in terms of being able to sort straight and standardize ok so now you know what 5s is now the the fifth s is sustained and what that really means is that clean factory we saw the fact is that at the end of the day you want to be able to put the tools back in the in the rack where you found them so that you know exactly the morrow morning when we start exactly where they are we want to continue to have a clean factory so that if we drop a chipper something like that we're not we're not ruining anything so that it's tough you know this is like clean your bedroom Yes Mother right I've cleaned it I want it clean next week – right keep it clean and we're going to in and it as they say here it's hard to achieve I used to do a walkthrough and created the golden broom award the golden broom and we literally had a hardware store broom that we sprayed with gold paint and we'd walk the factory to make sure that you know they've got the folks that had the cleaner shop the sheet metal shop the machine shop you know we wanted to keep it clean aerospace has you know is the largest exporter in the United States when we talk about the the balance of payments the the aerospace industry always leads in terms of number of exports it's a flag shop industry obviously you know today everything is air shipped you know you've got FedEx and UPS and UPS has a very large fleet it's not just round trucks if they've got a large number of cargo travels but we get products used to be only high-value products now we get a lot of things sushi is flown in daily fresh iced tuna flown in from Taiwan every day it's hard to believe flies right into San Francisco so we move people and goods you know with our global positioning system and so forth we and our satellites we've got wonderful information now that we never had you know from our satellites obviously national security and the concept of you know hopefully going back to the Moon and Mars and you know the innovation that that technology provides is made aerospace an exciting place to work but some terrific work that was done here at MIT in terms of studying the evolution of products and innovation this is in in green color I guess that sort of green the number of major typewriter companies in the world and you can see it goes up and down like that and at the peak at the peak that we're like 75 companies making typewriters now my mother was a secretary and she used to her favorite typewriter was a smith-corona well Smith was a typewriter company in Corona was a tempered a company and they merged and they made good typewriters ultimately Remington made typewriters and then IBM made typewriters and when I was a young engineer a and some of you may have seen these but you can't even find them anymore typewriter the head a ball on them IBM Selectric and instead of having keys that went like this the little ball would just flip to the right position and type and the really good typist could type much faster on those things and it was a status symbol for the secretaries if you get a IBM Selectric typewriter but what happened is that the advent of the computer later on I mean you can't even find typewriters today I mean you know they're in museums what the research is indicated was is that when a invention happened a whole bunch of people jump into the industry and then as the product stabilizes where innovation they've gotten about all the gadgets into it that make it better the process not the product innovation but the process innovation who can make the typewriter more efficiently and deliver it to the customer at lower cost and there's some consolidation Smith and Corona get together and become a one company and they in fact the numbers of companies reduce automobile industry I mean I can endure all and all that we can remember Hudson automobiles when we were kids Hudson automobiles and Studebaker and Nash you folks probably have never you know you might have heard of them but these companies the Studebaker company started in the world and making Conestoga wagons to go out west and then they wind up making early automobiles and in the late 40s after World War two they had a very unique company the automobile industry has gone down from cars enclosed steel body cars look at all this there were you know a whole bunch of companies in that industry and now we have three in the United States and then you know a couple years ago Chrysler was not really a US company was you know Tamla benz so the same product phenomenon happened in automobiles and here we are here there's a chart that I sent annalisa the other day we had 50/50 for aerospace companies and you know in like 1940 and that has consolidated down to where you've got in the commercial airplanes you got Boeing an Airbus then you got some big Embry air and assessments over the folks that make business jets but the number of companies is really dramatically reduced and the same phenomenon would have been predicted down here except during the Cold War it was important to keep companies alive and keep in a hot would call warm base or a hot base in order to be able to produce them but the question is has happened here and here as the efficiency improved only those companies that had a better business model really stayed in the business and so the question is you know are we in trouble in our space we hope not but the point is the very fact that we're doing lean Lean Six Sigma and transforming ourselves into very very efficient companies you know hopefully that will in fact sustain the industry so that's something to keep in mind because you know we used to say in the Pentagon budgeting but only you know only the healthy Tigers survive the weak ones get eliminated and and so the name of the game is to keep going so the question is the industry that came of age in a cold water cannot survive with an obsolete business strategy and so we're going to talk about that strategy now for many many years starting with World War two the name of the game was high priority developed the aircraft this is even pre missiles and the way we got the price was what was the cost the government would audit the cost and then you'd put ten or fifteen percent profit on top of that and that determined what the price was over the last ten or fifteen years the customer has gotten a lot smarter and it said you know look this is what we're willing to pay and this is what we think is reasonable profit you know same as this ten or fifteen percent and if we're going to buy it from you you better get your cost down otherwise you know a you don't get the business or be you don't make any money so the customer determines the price and we have we an industry have to lower the cost to achieve the profit so when we go through a design process our design has to come up with the fact is that we've got to meet the range you guys are Aero engineers range and payload and reliability and maintainability and so forth all of those specs but one of the key specifications we're going to talk more about this when we talk about cons when the key specifications now is achieving the cost so we talked about design to cost design to cost and we keep iterating the design until we achieve that cost and those companies that don't iterate the design to achieve the cost at the beginning wind up not making money not making money so big issue so we used lean to help us achieve and to make sure that we're efficient in all of our processes so here's some basic data now this is the return on invested capital and in here this is the average of the capital goods companies these are the big companies in the United States that manufacture they're not these are not service industries these are big capital make big equipment and you can see that basically almost eight percent margin net margin and you can see over here that the return on the invested capital is you know like 11 or 12 percent and you hear some of the aerospace companies in fact it's interesting as we've taught this course how many of these companies were down here falling and Lockheed and so forth we were all down here about five years ago and we've in fact become more efficient now this is okay this is 2007 so they actually it's funny to watch those things we're becoming more and more and Rockwell used to be down here and there they've gone way up here and they I actually Clay Jones is the CEO I met him back in like 2002 and he came to see McDonnell Douglas and because we were doing lean and he wanted to learn how to do it and he went back and now they have lean electronics and and they've done very very well done very well so the point of the story is that the aerospace industry has been moving up into the into what we call the Green Zone so we have red red yellow green and a lot of the military charts and a lot of industry charts now as a way of communicating red yellow green just like a stoplight chart not so hot you know caution great and the aerospace industry has become lean is moving in that direction and it's very it's a gratifying phenomenon we typically have underperformed capital goods manufacturers but lean is driving us in the to the right hand corner which is it which is great we're talking about enterprises and that's a key word in lean and there's lots of different kinds of enterprises programs Joint Strike Fighter the boeing 787 dreamliner Global Positioning System then you have a multi program Enterprise for example Raytheon I have Raytheon marine electronics on my big sailboat and we'll show you that later on the United Technologies is Sikorsky Pratt & Whitney carrier air conditioning the Otis Elevator Company you know lots of products lots of programs and then we've got the national and international enterprises the aerospace enterprise you know a whole aerospace industry military and commercial the European you know Airbus and and the other companies EAD s so we can have enterprises that are overlap each other intersect and we'll show you how they can in fact be connected so what is it enterprise and it says one or more organizations will have related activities a unified operation and a common business purpose so here we are here with the end-user and lean we focused on the end user and remember just a new concept of is the end user the airline that buys a 787 or is it the pilot and the maintenance mechanic because those are the real end uses and we want to make it easier for the pilots and easier for the for the maintainer and then engineering job is to conceive a product design that achieves the value that we want to deliver to the end user and then manufacturing operations and our supplier network add the value to create the product and it's a bunch of supporting organizations finance that keeps the books the human resources people that acquire the personnel and provide the benefits and so forth and do the training legal obviously and then product support in a military environment one third roughly one-third of the total lifecycle cost is the acquisition how much do we pay to the development and the the production but two thirds are the operations and support costs and it turns out that if you put the product out in the field and we've got a good customer here the maintenance cost the training cost think about training pilots fifty years ago it cost one hundred thousand dollars to train a pilot today it's in the millions but the amount of money for spare parts and repair and overhaul so two thirds of the lifecycle costs are in the product support area so all of these are part of an enterprise and you can see the intersections of the product development guys send specs to the suppliers to build the parts they also send specs down to manufacturing with the blueprints to do it and so forth so you can see those those intersections there so if you basically have a headquarters this could be the headquarters of what used to be McDonnell Douglas and st.

Louis and then you've got a factory there and it turns out that we in fact have suppliers and we in fact go out to our second and third tier suppliers what's a second and third tier supplier we bite – tinium from outfits like rmi we're buying titanium from Russia today they make they have a huge source of titanium we get Alcoa obviously aluminum and so those are you know first-tier suppliers but we also then go down below that to our machine shops that pixel machine shop on Long Island makes big machine parts for us and we have to make sure that that whole supply chain is in fact synchronized and working boeing is having trouble right now in the 787 because of the fact that the supply chain was a major it was a major new innovation the way they were going to in fact build this a crane because they gave design responsibility to major subcontractors who flow that down to sub levels and some of those parts didn't flow up on the same very very aggressive schedule that that they put in place for the 787 so supply chain is a key part of it and they're all part of the Lean Enterprise so here's a multi program business unit you've got the end user okay let's say that an airline but the end user is you know like a pilot and a mechanic and the you've got employees on the f-18 Boeing was the prime Northrop Grumman made the aft section on that Joint Strike Fighter the f-35 Lockheed is prime Northrop Grumman is making the app section British Aerospace is making the floored cockpit so those are partners you've got detail suppliers that make actuators and that make alternators and that kind of stuff you've got the unions the I am in which is the Machinists union in st.

Louis the United Auto space workers in Boeing Philadelphia Society in Congress there shall stakeholders in this thing because the fact is that you know Congress is paying for it and society is depending on these products a for transportation and for defense and so forth corporate leadership shareholders so all of these are stakeholders because they've got a piece of the action if we shut down a plant if we shut down a plant we shut down a plant in Columbus Ohio and you know there's a whole bunch of people that aren't working there anymore and it's that there's a there's a responsibility to the shareholders to get value but on the other hand part of the stakeholders in terms of society is for example the communities that we serve and so all corporations say most of the big corporations try to be good community neighbors and in fact try to do things that that don't hurt but I mean I was in I was on a consulting contract last February in Detroit when Ford said they're going to cut 30,000 people whoa boy talk about you know sad people so here are the what we're trying to do is have value for all of the stakeholders obviously the value we want the best value deliver to the customer we've promised performance we've promised price we've promised reliability to the end-users our employees we're saying to you you know make good products we'll sell a lot you'll have jobs you know for your families the unions it's the same situation the shareholders return on investment you buy a share of stock and you want to get dividends and you want to see the stock price go up the partners Northrop Grumman and Lockheed you know working together the suppliers and this is Eaton that makes electrical stuff and it's a parking boot area that makes actuators and Honeywell that flight controls and then society we're trying to in fact have the benefits of flat being able to fly and you know go see your grandkids kind of so what is a Lean Enterprise and good definition and in fact he just came back in the room but Professor Merman professor Merman pulled together a bunch of professors here from MIT about five or six years ago and wrote this book the lean enterprise value insights from mi t–'s lean aerospace initiative and it says a Lean Enterprise an integrated entity that efficiently creates value for the multiple stakeholders by employing Lean principles and practices and you remember these you know are all of the elements that it takes to create you know an enterprise and what we're trying to do is to create value you know for all people in the in the total supply chain and in the enterprise let me take it the other way around we have a army officer here the Air Force spent 20 years developing the f-22 it was called the Advanced Tactical Fighter the Air Force wanted that for 35 million dollars apiece took 20 years to develop and you can add inflation on that and you know whatever but the point is today's f-22 costs like 180 million dollars 180 million dollars the Air Force wanted to buy 750 them 750 them and what happened is is that Congress said you know we can't afford 180 million dollar aircraft and buy 750 them and what happened is over time now the Air Force can only buy 183 a hundred and eighty-three and they wanted 750 now there's a lot of pressure right now to try to keep the line going and whether that happens or not but I mean the chances are we'll never get to what the customer wanted and the issue here was the fact is that the value that the customer wanted the end customer was not delivered because the from a strategic and tactical standpoint having greater numbers gives you an advantage problem is we're not going to get the advantage because we're buying less so delivering value is a big deal my favorite example I'll probably talk about tomorrow is that if I told you that I have a wonderful Ford Focus outside on the curb and if you sign right here the only question 60 thousand dollars for the Ford Focus and you say al I don't think I want that right the point is that intuitively we know what value is and sixty thousand dollars for Ford Focus is it doesn't intuitively compute and so the name of the game is the market people tell us what is it that the customers want and it could be a mach 1.6 thirty five million dollar Joint Strike Fighter kind of a thing or it can be you know a two hundred twenty million dollar you know large 747 or it can be you know a laptop computer for nine hundred dollars but we all know intuitively what the features and the attributes that we're looking for and what we sort of want to pay and if in fact we can conceive the design and iterate the design and get the waste out of it so that we can deliver that value to the customer we'll be able to sell them and the enterprise will thrive and all those stakeholders all those stakeholders have a piece of the action and we've got happy employees and happy communities and happy shareholders so we talked about business acquisition market research engineering define the requirements iterating the product design and coming coming up with robust processes to make repeatably to get the variation out of them high quality managing the supply chain down through the second and third tiers and for efficiently producing these and now obviously we have to deliver them to the customers and then support them for the lifecycle and so those are those big lifecycle processes but then there's a bunch of supporting infrastructure finance information technology human resources and so forth and lean applies to these to these every one of these processes can be more efficient I used to do lien lectures at Boeing and in addition to my job as vice president engineering and I had a contracts contract administration person was actually a lawyer and all a sudden he says al I got it you know I can see why we want to be able to get on contract sooner because we have a whole bunch of people you know trying to trying to wait for the contract go ahead and these guys are still fooling around trying to get the terms and conditions young and so they were trying to get the contracts administration folks even leaner so that's the the book and I hardly recommend that you get it Jim Womack and Dan Jones and Dan Bruce and the story of lean production how Japan's secret weapon in the global auto Wars will revolutionize Western industry and it is spread from the automobile industry in Japan to the aerospace industry and now hopefully Detroit's going to get the message but a three-star general in the Air Force said can the concepts and principles and practice of the Toyota Production system be applied to the military aircraft industry and they gave that they gave a contract a sturdy contract MIT and in the early 90s the answer was a resounding yes and if we focus lean on enterprise valuation and creation and professor Mirman for more than ten years led this whole effort and was very very successful in developing a body of knowledge a body of knowledge that really works all then the major aerospace companies are using it it does produce value in fact now it's trying to spread it to the healthcare industry and other other organizations and but lean does pay off and in fact the Air Force said you've got this great body of knowledge and we now know that it does work how do we spread that and diffuse it so that it's being taught in colleges and the Lean Academy of which this is a piece was created about five years ago to disseminate the whole body and knowledge by conducting courses like you're in right now so here's some examples this was General Dynamics and then Lockheed on the Atlas program you can actually see that on the initial development it used to take 48 and a half months and they actually got it down to 36 months and down 27 months ultimately got it down to like 18 months going through a series of major changes and and going through the lean processes to to in fact achieve what they want the f-18 Super Hornet huge change in requirements more payload three times greater ordnance bring back when they land on the carrier's 40% increase in Unruh fuel range five times more survivable designed for growth big change in reduced support costs and multi mission and they did it within budget did it on schedule actually ahead of schedule thousand pounds underweight and there's a high correlation between those program management practices and our lean enterprise and that's all the way from trying to do all of these various missions as you can can see here it's one of the big success stories of of Industry and Rockwell electronics we mentioned clay Jones before 25% improvement of productivity 46% reduction inventory cycle time reduction big deal 75% and you know it also works in the office on technical manuals on paper processing accounting publishing cycle time 72% reduction work in process reduction 70% 38% productivity improvement so it does apply everywhere we're going to give you some exercises that the talk about it Kanban is a Japanese word and it's a lean tool that we use a lot we use it in the office in terms of processing engineering drawings and we use it in the factory and there's several ways of making and apply to the movement of material and parts in the factory or information information like in drawings and parts cards and so forth and sometimes it's actually done with a card and we're going to go through some Kanban exercises here but basically what it says is that you remember I told you originally if we're going to build 12 Apaches that I put 14 parts out there and you'd give all 14 forgings to a machinist and say here's a job cut dough do it now we give them one and we in fact when he was finishes machining that he looks over here and there's a card that says he can go get his next piece and then he puts it carded and we move it we do single piece flow because if he makes a mistake on 12 forgings in machine IAM we've got 12 rework parts at 12 scrap parts so empty part one way of doing it is an empty parts bin so in fact he sees an empty one that parts guy fills it up an open space on the production floor we paint yellow yellow boxes on the floor and so if there's a if the part is there I grab that part when it's empty the production control guy says we'll give them another part so that's another way of doing it it reduces inventory it reduces scrap and rework and we do the same thing with engineering you can have racks on the wall for them to do that so it took 30 years for Toyota to develop all aspects of this system and you can see that they did their early experiments with Karen bond in the 50s took them 10 years they put it company-wide and then they they drove it all the way down to their first and second third tier suppliers and that continuing developed what we call the Toyota Production system Boeing now for example cause that the bps the Boeing production system which is basically the Toyota Production system and they're very very proud of that so how much how long do you think it might take a large aerospace company to implement lean thinking across their enterprise starting with the knowledge now available so in your in your folders you got some cards colored cards I think they're three by five cards they're colored cards okay how long do you think it would take there's a blue card for twenty years a red card for ten green for five and yellow how long do you think it would take a large aerospace company to implement lean across their enterprise just hold up the card at blue card okay okay you can hold them up well I see a bunch of red cards yeah red and blue you're right it takes a long time it takes a I I mentioned to you that I was I in addition to being vice from engineering I was the head of lean for blowing integrated defense systems and when you think about the Apache in the c-17 and the f-15 in the f-18 and you know the Chinook and the Apache and I had all those it takes a long time to get all the organizations up to speed and to drive all these principles down and it's just a lot of work and it's it's a continuous journey so welcome you've taken step one and the takeaways on this is that Six Sigma started with the Japanese automobile industry and then of the electronics industries and now into the aerospace industries and I mentioned to you now that the hospitals and the healthcare people are interested in and if you watch your next time you go to the hospital or your mom and dad go to the hospital and all that you see the bill for an operation or something like that you know how how very very expensive it is my daughter a daughter my sister just had both knees replaced seventy thousand dollars a meter and Medicare paid for that and because she was having trouble walking but I mean seventy thousand dollars is you know a lifetime of tournament but our medical business could stand some lean thinking an enterprise is a core okay and extended boundary and with the extended boundary the employees and the suppliers and the communities and the stockholders and certainly you know today is step one of learning this and you can continue to to bring it back and and keep thinking about it and in almost anything you do so just just on a card on one of those white cards just write down for example for your your particular Department I guess we're a little later but but anyway write down just quickly who are the stakeholders if you've had an internship in industry an internship and Industry just write down you don't have to put your name on it write down who the stakeholders were for that function if you were an engineering design who was the the stakeholders put it down okay you

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