Enterprise Value: The New Lean Horizon Product Realization in the Defense Aerospace Industry March 27, 2002 Presented By: Mandy Vaughn 2LT, USAF Research Sponsored By Lean Aerospace Initiative Background ❍ 21st century aerospace challenge ❍ Industry maturity perspectives ❍ Implications on the aerospace industry 2 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Higher, Faster, Farther The 21st Century Enterprise Challenge Aerospace has four core missions: ❍ ❍ ❍ ❍ Enabling the global movement of people and goods Enabling the global acquisition and dissemination of information and data Advancing national security interests Providing a source of inspiration by pushing the boundaries of exploration and innovation These missions will never be routine and require the best technology and the best organizations “The “Thecore corechallenge challengefor forindustry industryin inthe the21st 21stcentury century involves involvesidentifying identifyingand anddelivering deliveringvalue valueto toevery every stakeholder. stakeholder.Meeting Meetingthat thatchallenge challengerequires requireslean lean capability capabilityat atthe theenterprise enterpriselevel.” level.” 3 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean The Needs of Aerospace Customers are Changing From a focus on single vehicles to platforms… To networks of platforms and… More flexible challenges in their employment Innovation Innovation in in the the industry industry is is thus thus shifting shifting from from single single vehicles vehicles to to networks networks of of capability capability 4 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Cost of Tactical Aircraft Source: Augustine’s Laws Then-Year Dollars One Quintillion One Quadrillion duct o r P l tiona a N s Gros udget B e s n Defe st o it C n ft U a r c Air One Trillion $ One Billion One Million One Thousand 1900 1950 5 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology 2000 2050 Year of Initial Operation 2100 2150 web.mit.edu/lean Model of Product and Process Innovation ❍ ❍ ❍ Rate of product innovation highest during formative years As product matures rate of process innovation overcomes product innovation Very mature products have low levels of both product & process innovations Source: William Abernathy & James Utterback, 1978 6 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Utterback’s Dynamics of Innovation Model Number of Firms Emergence of the Dominant Design Fluid Phase: Rapid technology innovation, many firms founded Transition Phase: Shakeout, competition shifts to process Specific Phase: Stable, small number of firms competition shifts to price Destabilizing changes in technology or process can destroy industry! Time Source: Utterback, Dynamics of Innovation, 1994 as adopted by Hugh McManus , 2001 7 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Dominant Design? 1958 1995 8 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Dominant Design? 1953 1972 2002 9 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Aerospace Industry Industrial evolution and the emergence of the dominant design 35 50 40 80 Cars: enclosed steel body Typewriters: Open, moving carriage Aeronautics: Jet transport and jet fighter-bomber 30 60 20 40 Government intervention motivated by cold war 1860 10 Natural progression? 1880 20 15 20 10 0 Number of major automobile companies Number of major typewriter companies 30 1900 1920 1940 1960 1980 Number of major U.S. Aerospace companies 25 5 0 2000 Year 10 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Implications of Post Dominant Design ❍ Little product differentiation ❍ Incremental product innovation ❍ Acquisition cost becomes focus ❍ Operating costs more of a concern ❍ Mergers, acquisitions & exits ❍ Process innovation dominates ❍ Organizations become more rigid & hierarchical ❍ Less risk taking ==AEROSPACE AEROSPACEINDUSTRY? INDUSTRY? 11 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Fine’s 3-D Concurrent Engineering Model PRODUCT PROCESS Performance Specifications Technology And process Planning Recipe, Unit Process Product Architecture, and Make/buy Time, Space, and Availability Details, strategy Manufacturing System, Make/buy SUPPLY CHAIN Source: Charles Fine, Clockspeed, Perseus Books, p. 146 12 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Fine’s Model and the Aerospace Industry in the Transition Phase PROCESS In a post dominant design environment two relationships predominate PRODUCT ❍ ❍ SUPPLY CHAIN Product interactions become more interlinked with process and the supply chain Supply chain integration and process improvements have a predominant impact on cost Design Designmust mustbe bemuch muchmore more interactive interactivewith withmfg mfg&&suppliers suppliers Source: Shields, LAI Joint Workshop ”Integration-Framing”, Jan 30, 2002 13 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Conclusions ❍ ❍ ❍ Aerospace industry innovation shifting to systems of systems In a maturing single product environment ❍ Product and life cycle cost predominate ❍ Best addressed by process & supply chain improvements Enterprise strategy should change in recognition of this new competitive landscape Lean beyond the factory floor means shifting the enterprise focus from product design to product realization 14 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Research Overview ❍ Research objectives ❍ Manufacturing System Design Framework ❍ Research Design ❍ Introduction of the case studies ❍ Results - with Bonus material! ❍ Conclusions 15 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Research Objectives ❍ Goals guiding the research effort: ❍ ❍ Study and improve available tools in use Understand the processes used in industry to design manufacturing systems ❍ Propose a model for industry to use ❍ Test this model in industry ❍ ❍ Establish key characteristics of this design process Create analytical models to predict manufacturing system performance 16 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Elements for a Manufacturing System Design Framework ❍ A holistic view of manufacturing system design environment ❍ Visual depiction of “design beyond factory floor” ideas ❍ Manufacturing as part of the product strategy ❍ Manufacturing system design is strategy driven, not product design driven ❍ Combines multiple useful tools ❍ Provides insights into order and interactions ❍ Not prescriptive ❍ Can lead to innovative & new manufacturing system designs ❍ Shows the unending design cycle -- Continuous Improvement 17 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Manufacturing System Design o ❍ Manufacturing system “infrastructure” design ❍ Manufacturing strategy ❍ Operating policy ❍ Partnerships (suppliers) ❍ Organization structure details Manufacturing system “structure” design ❍ Buildings, location, capacity ❍ Machine selection ❍ Layout ❍ WIP 18 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Stakeholders Society Suppliers Customers Corporate Level Employees Stockholders Mgmt Govt. Manufacturing System Design (Corporate Strategy) [Seek approval] [Interpret] Business Unit (Business Strategy) Product Strategy Product Design Manufacturing Marketing Requirements/Considerations/Constraints Manufacturing System Design/Selection ` Implement (pilot) Optimizing Evaluate/Validate Full Rate Production Modifications Suppliers Stakeholders Manufacturing System Design Corporate Level [Seek approval] [Interpret] Business Unit Product Strategy Product Design Make/Buy Risk-sharing Partnerships Manufacturing DFMA,IPT 3-DCE Concurrent Engineering Marketing Customer Needs Technical Feasibility Feasible performance guarantees Requirements/Considerations/Constraints - Miltenburg, - 3P, - 2D plots, - MSDD, - AMSDD - design Kaizen Manufacturing System Design/Selection - Analytical Tools, - Simulation Tools Implement (pilot) Fine Tune Evaluate/Validate Finalized Product Design Modifications Suppliers • VSM • Kaizen • Trial & Error • Kaikaku Rate Production Stakeholders Manufacturing System Design Corporate Level [Seek approval] [Interpret] Business Unit Product Strategy Product Design Make/Buy Risk-sharing Partnerships Manufacturing DFMA, IPT 3-DCE Concurrent Engineering Marketing Customer Needs Technical Feasibility Feasible performance guarantees Requirements/Considerations/Constraints - Miltenburg, - 3P, - 2D plots, - MSDD - AMSDD - design Kaizen Manufacturing System Design/Selection - Analytical Tools, - Simulation Tools Implement (pilot) Fine Tune Evaluate/Validate Finalized Product Design Modifications Suppliers • VSM • Kaizen • Trial & Error • Kaikaku Rate Production Research Design ❍ Assembly operations ❍ Site selection criteria ❍ Framework Evaluation Tool ❍ Performance Metric 22 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Data Collection ❍ ❍ ❍ 30+ site visits since June 2000 Over 240 interviews ranging from vice presidents to shop floor workers Real time “fly on the wall” or retrospective observations 23 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Case Studies - Air ❍ Major Aerostructures (6): ❍ ❍ 737NG, F-18 E/F EFF, F-16, F-22 (wing/aft, mid), X-35 Electronics (2): ❍ Wedgetail, TDR-94 24 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Case Studies - Space ❍ Launch Vehicles (2): ❍ ❍ Space (4): ❍ 25 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology EELV: Atlas V, Delta IV A2100, AEHF, Iridium, HVSP web.mit.edu/lean Framework Validation Results Framework Congruence versus Performance 3.5 R2 = 0.71 Actual/Planned Performance 3.0 2.5 2.0 Group 2 1.5 Group 1 1.0 0.5 0.0 20 30 40 50 60 70 80 90 100 Framework Congruence 26 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Scoring Breakdown ❍ Framework Congruence Phase Presence Timing Breadth 96 94 91.9 81.7 78.3 77.67 69 57 53.5 50.3 45.3 26.73 25.90 25.90 22.48 18.57 23.24 20.90 21.24 17.24 13.33 12.33 15.00 7.33 30.71 30.00 29.00 26.62 24.19 25.90 26.62 19.76 15.90 17.90 18.76 11.76 39.38 38.05 40.38 36.62 30.86 30.86 21.19 20.14 24.29 20.14 12.29 7.67 Group 1 Group 2 How important are the different aspects? ❍ Which of Phase Presence, Timing or Breadth impacted the ability of the system to meet its planned performance? 27 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Determinants of Performance PhasePresence Timing Phase versusPerformance Performance Breadth Score versus versus Performance 3.5 Actual/Planned Performance 3.0 2.5 2.0 Group Group 2 2Group 2 1.5 Group 1 Group Group11 1.0 0.5 0.0 10 5 10 15 10 15 15 2020 25 25 2030 25 35 30 40 35 30 45 Phase Timing Score Phase Presence Score Breadth Score 28 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Framework Validation Results Framework Congruence versus Performance 3.5 R2 = 0.71 Actual/Planned Performance 3.0 2.5 2.0 Group 2 1.5 Group 1 1.0 0.5 0.0 20 30 40 50 60 70 80 90 100 Framework Congruence 29 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Strategy Presence Results Existence of Strategy versus Framework Congruence 100 Group 1 Framework Congruence 80 60 40 20 0 No Strategy Present Strategy Present Existence of Manufacturing Strategy 30 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Scope of Results Framework Congruence versus Performance 3.5 R2 = 0.71 Actual/Planned Performance 3.0 Example 1 2.5 2.0 1.5 1.0 0.5 0.0 20 30 40 50 60 70 80 90 100 Framework Congruence 31 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Corporate Level Manufacturing System Design Example 1 Corporate Goals Manufacturing Business Unit Manufacturing System Design/Selection - Review Requirements - Picked Cells Implement (pilot) Fine Tune Simulations Evaluate/Validate Finalized Product Design Modifications Stakeholders • VSM • Kaizen • Trial & Error • 5S Rate Production Scope of Results Framework Congruence versus Performance 3.5 R2 = 0.71 Actual/Planned Performance 3.0 2.5 Example 2 2.0 1.5 1.0 0.5 0.0 20 30 40 50 60 70 80 90 100 Framework Congruence 33 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Stakeholders Manufacturing System Design Example 2 Corporate Level [Seek approval] [Interpret] Business Unit Product Strategy Product Design Manufacturing Marketing Customer Needs Technical Feasibility Feasible performance guarantees Requirements/Considerations/Constraints 3P Outside Intervention Manufacturing System Design/Selection Simulation Tools Implement (pilot) Fine Tune • VSM • Kaizen Evaluate/Validate Finalized Product Design Rate Production Modifications Suppliers Scope of Results Framework Congruence versus Performance 3.5 R2 = 0.71 Actual/Planned Performance 3.0 2.5 Example 3 2.0 1.5 1.0 0.5 0.0 20 30 40 50 60 70 80 90 100 Framework Congruence 35 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Stakeholders Manufacturing System Design Example 3 Corporate Level [Seek approval] [Interpret] Business Unit Product Strategy (all products) Product Design Make/Buy Risk-sharing Partnerships Manufacturing DFMA, IPT Concurrent Engineering Marketing Customer Needs Technical Feasibility Feasible performance guarantees Requirements/Considerations/Constraints Manufacturing System Design/Selection Pre-Design Kaizen Simulation Tools Implement (pilot) Fine Tune • VSM • Kaizen • Trial & Error Evaluate/Validate Finalized Product Design Modifications Suppliers Rate Production Scope of Results Framework Congruence versus Performance 3.5 R2 = 0.71 Actual/Planned Performance 3.0 2.5 Example 4 2.0 1.5 1.0 0.5 0.0 20 30 40 50 60 70 80 90 100 Framework Congruence 37 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean Stakeholders Manufacturing System Design Example 4 Corporate Level [Seek approval] [Interpret] Business Unit Enterprise Wide Product Strategy Make/Buy Best Value Product Design Manufacturing DFMA, IPT Concurrent Engineering Marketing Customer Needs Technical Feasibility Feasible performance guarantees Requirements/Considerations/Constraints Manufacturing System Design/Selection - Simulation Tools - Scale Models Implement (pilot) Pilot Plant Pathfinder Evaluate/Validate Finalized Product Design • VSM • Kaizen •6-sigma Rate Production Modifications Suppliers Conclusions ❍ ❍ The role of manufacturing as a source for competitive advantage Framework Validation ❍ ❍ Framework congruence and system performance Key Characteristics ❍ Breadth ❍ Strategy ❍ Status 39 - MS/Mandy Vaughn - 032502 © 2002 Massachusetts Institute of Technology web.mit.edu/lean