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Lean

Lockheed Martin

Background

Lockheed Martin Corporation, the world's largest defense contractor, has been implementing lean production techniques corporate-wide since the late 1990s. Lockheed Martin's "LM21 Operating Excellence" initiative provides a common management and operating system for implementing lean and Six Sigma tools throughout Lockheed Martin business units and facilities. As stated in March 2004 by Lockheed Martin Chairman and CEO Vance Coffman, "LM 21 acts as a catalyst for facilitating improvements in every aspect of the design and manufacturing process. At last count, the LM21 process was responsible for more than $5 Billion in net savings across our corporation. Those savings not only hold down costs - which, by the way, are mostly passed through to our customers - but they also accrue over time, resulting in streamlined operations, reduced overhead, better quality, less re-work, improved productivity and enhanced overall performance." While initial implementation of LeanSigma1 focused on manufacturing operations (e.g., airplanes, missiles), application of "lean thinking" has expanded to research and development operations as well as to administrative and support activities. The status of LeanSigma implementation varies by both business unit and facility. Lockheed Martin participates in MIT's Lean Aerospace Initiative.

Primary drivers for LeanSigma implementation at Lockheed Martin include business competitiveness, customer expectations (U.S. military interest in lean), and the desire for a standard, continuous improvement quality management and operating system and toolbox throughout diverse business units. Competitive pressures have intensified in the U.S. defense sector since 1990, as federal defense budgets contracted and defense contractors consolidated through mergers. The post-1990 period has been marked by strong pressures from the U.S. Congress and the Pentagon for contractors to cut costs, to increase the reliability of current military assets, and to phase in some new technologies on delayed schedules.

Lockheed Martin's Manassas, Virginia, plant belongs to the Maritime Systems and Sensors business unit and manufactures sonar systems for defense applications. Lockheed Martin acquired a portion of the Manassas facility (one semiconductor facility and light manufacturing operations) from Loral in May 1996, with the other semiconductor facility at the site purchased by BAE Systems Inc. The acquisition reduced significantly the business scope of facility operations (manufacturing scope was reduced by 80 percent), creating limitations on staff, space, and spending.

The Manassas facility has been applying LeanSigma and the LM21 Operating Excellence system to non-traditional manufacturing, research, and support activities since its acquisition by Lockheed Martin, drawing on support from corporate LeanSigma experts. In February 1995, managers began applying "lean thinking" to restructure Chemical, Environmental, Safety, and Health (CESH) operations. As part of the process streamlining, five departments at the facility-Operations, Engineering, Chemical Management, Environmental, Health and Safety, and Industrial Hygiene-were consolidated into one department. The facility is ISO 9001/14001 certified. CESH personnel often participate in or serve as a reviewer of 6S events conducted throughout the Manassas facility.

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Lean-Environment Integration

Lockheed Martin's Manassas, VA plant has primarily approached lean-environment integration by applying LeanSigma tools to improve internal environmental management business processes. In addition, the facility relies on knowledge-based expertise through the occasional involvement of personnel with environmental expertise in Lean Sigma events that have an important environmental dimension. Two employees at the facility have both Six Sigma training and environmental management backgrounds.

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Case Examples: Leaning Chemical and Hazardous Waste Management

In 1995, the Lockheed Martin Manassas Plant's CESH department conducted improvement events to apply lean thinking to its chemical and waste management activities. The key drivers for this initiative were to significantly reduce the cost, space, and staffing needed to support chemical and waste management activities at the plant. These were critical needs since Lockheed Martin divested themselves from one of two semiconductor manufacturing operations at the Manassas plant to a single one. The one finally kept is smaller in scope, and it focuses on research and development rather than production. In their light manufacturing operations, semiconductors needed for production are purchased from offsite suppliers.

Before Lean Prior to the lean event, chemical management at the facility focused around a chemical storage warehouse (64,000 square feet) containing a large buffer inventory of chemicals to ensure 100 percent availability. Chemicals were typically ordered quarterly in larger volumes under a blanket purchase agreement. Chemicals were stored in the warehouse until withdrawn by operations. Lockheed Martin found that a significant portion of warehoused chemicals were going directly to the hazardous waste stream without ever being used, when they expired on-shelf or when they were no longer required for research or production. Prior to the lean event, hazardous waste management activities at the plant were governed by a RCRA Part B permit.
What Was Done

The lean event aimed to move toward a just-in-time chemical management system, where chemicals are delivered three times each week in "right-sized" containers to meet real-time demand (influenced by prior week consumption rates). The objective was to dramatically reduce chemical inventories, except for selected specialty chemicals with longer lead times for acquisition and delivery. Several lean principles guided the events: (1) optimize performance for the entire system even if per unit chemical purchase or waste disposal costs increase, (2) focus on actual needs, not worse-case contingencies, and (3) focus on smooth flow of materials through the facility.

The new system also eliminated the chemical warehouse, replacing it with point-of-use storage (POUS) cabinets and right-sized containers of chemical supplies. Lockheed Martin has contracted with 5-6 suppliers (multi-year agreements) to deliver the chemicals to the facility's chemical handling dock. CESH staff then transport the chemicals from there to the POUS cabinets. Lockheed Martin has shifted its relationship with chemical suppliers to more of a partnership model, with provisions and incentives for ensuring prompt delivery and chemical availability, while limiting on-site inventory. The facility's Chemical Challenge Program poses questions up-front, at the product and process design stage, which explore opportunities to minimize chemical usage and risk.

The lean event also sought to reduce the total waste management system cost by eliminating on-site treatment and the need for the RCRA permit and shifting to regular hazardous waste pick-up by a waste management vendor. By switching from a practice that purchased and stored onsite quantities of chemicals based on estimates for the upcoming production to a purchasing practice that is driven primarily by purchasing chemicals just when needed (Just in Time; Point of Use (POUS); and rightsizing chemicals) they managed to slash significantly the quantities of wastes generated at the facility. They are now a 90 days RCRA -Subtitle C - Large Quantity Generator. In fact, they have several 90 days satellite storage areas. This is because they use chemicals and generate hazardous wastes at other parts of the facility in addition to the one they leaned out of a Part B permit.

Results

A summary table is provided below that compares the prior and current methods for chemical and waste management at the Manassas plant. The lean events achieved the following business results related to the chemical and hazardous waste management processes at the Manassas facility:

  • chemical inventories were dramatically reduced, freeing capital tied up in inventory;
  • chemical inventory turns dramatically increased;
  • chemical utilization rates increased dramatically, virtually eliminating chemicals expiring on the shelf or being mixed in larger quantities than needed;
  • chemical warehouse was eliminated, reducing chemical storage space from 64,000 square feet to 1,200 square feet; 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.

These business results from the lean events also produced several environmental benefits:

  • reduction in chemical inventories reduces likelihood of chemical-related spills and accidents;
  • virtually eliminated hazardous waste caused by chemicals expiring on shelf and from excess chemicals mixed in quantities larger than needed;
  • chemical authorization process and chemical challenge program tightened screening of chemical choices and increased attentiveness to chemical use and risk reduction opportunities; and
  • energy savings resulted from the significant reduction in warehouse space required for chemical storage.

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Summary of Lean Initiative Results

Activity Prior Method Current Method Benefits & Concerns
Scope Two semiconductor facilities and light manufacturing One semiconductor facility and light manufacturing Remaining manufacturing is 20% of scope
Total Facility Size 1,650,000 ft2 1,100,000 ft2 Several buildings sold but added four small facilities in other states (NY, CA, FL)
Basis for Chemical Purchases Support staff estimate based on prior use with buffer to ensure 100% availability Order as needed based on prior week consumption and lead time for specialty items No extra chemicals ordered. Virtually eliminated waste caused by expired shelf life and unused chemical waste
Contract with Supply Multi-year agreements Multi-year agreements with delivery and availability addressed Supplier more of a partner. Minimal inventory storage shifted to supplier
Hazardous Waste RCRA Part B permit Large quantity generator Went to pick up by vendor on a schedule. Minor increased unit cost, significant savings by eliminating permit requirements
Chemical Storage 64,000 ft2 1,200 ft2 Significant cost savings but minimal room for future growth
Staffing 64 17 Reduced work scope and elimination of unneeded work. No backup support
Departments 5 1 Consolidated engineering, operations, chemical, health, safety, environmnetal, industrial hygiene

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1LeanSigma refers to an integration of lean manufacturing tools with Six Sigma tools. Six Sigma is rooted in a collection of statistical analysis methods that were developed by Motorola to analyzw and eliminate process variations to a "Six Sigma" level of quality.

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