CAPTURING VALUE FROM ITEM UNIQUE IDENTIFICATION (IUID)
By
Alexey Salamini
B.S.E. Mechanical Engineering, Princeton University, 1999
Submitted to the Department of Mechanical Engineering and the Sloan School of Management in
partial fulfillment of the requirements for the degrees of
Master of Science in Mechanical Engineering
AND
Master of Business Administration
In conjunction with the Leaders for Manufacturing Program at the
Massachusetts Institute of Technology
June 2005
C Massachusetts Institute of Technology, 2006.
All rights reserved.
Signature of Author
May 6, 2006
i
Certified by
epartment of Mechanical Engineering
Sloan School of Management
_
Daniel Whitney
Senior Research Scientist
Department of Mechanical Engineering
Thesis Supervisor
Certified by
_ _
_
_w__
_ _
_
_
Koy w eiscn
Professor of Statistics and Management Science
Sloan School of Management
A Thesis Snnervisor
Accepted by
/
Debbie Berechman
utive Director, Masters Program
Sloan School af Management
Accepted by
Profesfor Lallit Anand
Chairman, Graduate Committee
Department of Mechanical Engineering
MASSACHUSETTS INSTITUTE
OF TECHNOLYY
JUL 1 4 2006
LIBRARIES
BARKER
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1
2
CAPTURING VALUE FROM ITEM UNIQUE IDENTIFICATION (IUID)
by
Alexey Salamini
Submitted to the Department of Mechanical Engineering and the
Sloan School of Management
on May 6, 2006 in partial fulfillment of the requirements for the degrees of
Master of Science in Mechanical Engineering and
Master of Business Administration
Abstract
The Department of Defense has issued a mandate aimed at improving its capabilities in
determining the location, value, quantity, and condition of government assets. The
mandate requires marking specified assemblies and components with a unique identifier
using two-dimensional data matrix technology. Item Unique Identification (IUID),
comprised of data matrix technology and the Unique Item Identifier (UII) data construct,
was chosen to create a global standard for identification and because it showed promise
in providing lifetime tracking of assets.
Currently, Raytheon's implementation strategy to address the mandate has focused solely
on compliance and does not aim to extract value from the IUID mandate or the UII
construct. However there are many potential benefits of these capabilities. This thesis
attempts to identify potential usage scenarios, determine if they are a worthwhile
investment, and develop a more deliberate IUID strategy for Raytheon as a corporation
within the context of the existing tracking and information landscape.
It was determined that company wide pre-tax net savings of $10.6 ( 5.4) Million
annually are possible from leveraging IUID technology in repair operations alone. This
study recommends a pilot program and if successful, to continue to leverage IUID in
those repair programs with: more than 500 units processed annually, more than five
workstations, and an IUID requirement in place. This study also recommends that
Raytheon should not mark above contractual requirements but should encourage
customers to implement IUID marking for high volume programs.
This study led to additional recommendations for operations strategy at Raytheon.
Automated rather than manual (keystrokes) data entry should be promoted in all
operations; specifically in high volume applications. Raytheon should also make a
practice of purchasing scanners that detect both bar codes and data matrices for all
operations. Finally, the UII construct should be adopted in company wide operations
independent of which technology (bar code, 2D Matrix, or Radio Frequency
Identification (RFID)) is used to read or deliver it.
Thesis Supervisor: Daniel Whitney
Title: Senior Research Scientist, Department of Mechanical Engineering
Thesis Supervisor: Roy Welsch
Title: Professor of Statistics and Management Science, Sloan School of Management
Keywords: IUID, UID, RFID, Tracking, Traceability, UII, Bar Code
3
4
Acknowledgements
I would like to thank Raytheon for its support of the Leaders for Manufacturing (LFM)
program which has indirectly paid for my education. Without this fellowship, I would
not have had the opportunity to attend graduate school.
Thanks to Brad Koetje, Dennis Coyner, Beryl McCadden, Andy Blanco, Daniel Whitney,
Roy Welsch, and Gilbert Dias for their extensive support and mentorship through this
project. I would specifically like to thank Dennis and Brad for allowing me the flexibility
to choose my own direction for this thesis. The house on the beach was great as well.
Also, I would like to thank Don Rosenfeld and the administrative staff of this unique dual
degree program. You gave me the wonderful opportunity to explore the wealth of
knowledge at the institute which led me to discover my passion in medical device design.
Chris Kilburn-Peterson, thank you for introducing me to this amazing program and being
my guiding light during the rough spots. You held my hand from application to
graduation.
Finally, I would like to thank my parents and my sister for pushing me to attend graduate
school and for continuing to peel me off the ground when I fall. You have been the best
teachers I have ever had ...
Note: Will be sure to include San Marzano
5
6
"The insightprovided through this basic, but effective means of uniquely and
unambiguously identifying parts is only limited by the ingenuity of smartpeople with
creative ideas and our combined ability to recognize its value."
The Office of the Under Secretary of Defense for Acquisition Technology and Logistics
7
Table of Contents
ACKNOWLEDGEMENTS.........................................................................................................................
5
LIST OF FIGURES
..........................................................
9
LIST OF TABLES
...........................................................
9
THE SHORT LIST OF ACRONYMS...................................................................................................
10
1
INTRODUCTION .............................................................................................................................
11
COMPANY BACKGROUND..........................................................
HYPOTHESIS.....................................................................
T HESIS STRU CTURE....................................................................................................................
11
11
THE MANDATE ..............................................................................................................................
14
1.1
1.2
1.3
2
T HE PRO BLEM ............................................................................................................................
T HE N EED ..................................................................................................................................
V ISION AND SCO PE.....................................................................................................................
14
THE TECHNOLOGY ......................................................................................................................
20
2 .1
2 .2
2.3
3
3.1
3.2
3.3
3.4
4
TECHNOLOGY OVERVIEW ..........................................................................................................
COMPETITIVE TECHNOLOGIES.................................................................................................
ADVANTAGES AND DISADVANTAGES OF THE DATA MATRIX..................................................
B EN CHM ARKIN G ........................................................................................................................
THE CURRENT STATE .................................................................................................................
4.1
4.2
4.3
5
15
15
20
26
28
29
31
CURRENT IMPLEMENTATION STRATEGY AT RAYTHEON FOR ITEM UNIQUE IDENTIFICATION..... 31
CURRENT TRACKING AND INFORMATION LANDSCAPE...........................................................
35
RADIO FREQUENCY IDENTIFICATION IN USE AT RAYTHEON ......................................................
40
NEED FINDING ...............................................................................................................................
5.1
5.2
5.3
12
M AP OF RAYTHEON ....................................................................................................................
FO CUS G RO UPS ..........................................................................................................................
SELECTION PROCESS ..................................................................................................................
44
44
45
53
6
SCENARIO EVALUATION: REPAIR OPERATIONS...............................................................
56
7
ANALYSIS ........................................................................................................................................
60
7.1
7.2
7.3
7.4
8
PART I: A SSU M PTIONS: ..............................................................................................................
PART II: CHANCE OF ERROR.......................................................................................................
PART III: FIXED AND VARIABLE COSTS/SAVINGS CALCULATIONS...........................................
PART IV: ERROR ANALYSIS ....................................................................................................
RESULTS ..........................................................................................................................................
8.1
8.2
8.3
8.4
8.5
FIXED AND VARIABLE SAVINGS/LOSSES FROM SCENARIO IMPLEMENTATION .......................
BURDEN VS. No BURDEN ...........................................................................................................
TEN YEAR CUMULATIVE SAVINGS AND RETURN ON INVESTMENT ...........................................
LABOR VS. MATERIAL SAVINGS AND DISCOUNTED VS. NON DISCOUNTED SAVINGS...............
REA LITY C H EC K .........................................................................................................................
CONCLUSIONS ...............................................................................................................................
9
9.1
9.2
9.3
RETURN ON INVESTMENT - SHOW ME THE MONEY! ................................................................
TECHNOLOGY EVALUATION - WHERE IS THIS TECHNOLOGY GOING? ........................................
PROCESS EVALUATION ...............................................................................................................
8
61
62
64
65
67
67
68
69
71
73
74
74
75
76
10
RECOMMENDATIONS..................................................................................................................
10.1
10.2
10.3
TACTICAL RECOM M ENDATIONS ...............................................................................................
CORPORATE IUID IMPLEMENTATION STRATEGY RECOMMENDATIONS ...................................
CORPORATE OPERATIONS STRATEGY RECOMMENDATIONS....................................................
A PPENDIX .................................................................................................................................................
APPENDIX A:
A PPENDIX B :
A PPENDIX C :
APPENDIX D:
78
78
78
79
81
81
SUMMARY OF CALCULATIONS AND SENSITIVITY................................................................
82
A SSUM PTIONS.....................................................................................................................
84
CALCULATIONS...................................................................................................................
SELECTED ERROR ANALYSIS: PROGRAM A CALCULATIONS AND EXTRAPOLATION ACROSS
A L L PB LS .................................................................................................................................................
BIBLIO GRAPH Y ......................................................................................................................................
86
90
List of Figures
FIGURE 1: SCOPE OF IUID MANDATE IN ASSEMBLY HIERARCHY ...............................................................
FIGURE 2: DOT-PEENED MATRIX, SERIAL NUMBER ON CHIP, COGNEX DATAMAN MATRIX READER...........
FIGURE 3: DIFFERENT MARKING METHODS (L-R) INK JET, CHEMICAL ETCH, DOT PEEN, LASER ENGRAVE.
FIGURE 4: TECHNOLOGY FOOTPRINT FOR 90BITS DATA STRING (NOT TO SCALE)' ......................................
FIGURE 5: TECHNOLOGIES, CONSTRUCTS, AND ENABLERS: RAYTHEON TRACKING AND INFORMATION
LAN D SCA PE .........................................................................................................................................
FIGURE 6: MANUFACTURING PROCESS MAP OF RAYTHEON.......................................................................
FIGURE 7: N EED FINDING PROCESS...............................................................................................................
FIGURE 8: NEED SEARCH NARROWED TO THREE SPECIFC OPPORTUNITES................................................
FIGURE 9: ANALYSIS M ETHODOLOGY ...........................................................................................................
FIGURE 10: LABOR AND MATERIAL SAVINGS OVER TIME: PROGRAM A OVER TIME...................................
FIGURE 11: SIGNIFICANCE OF DISCOUNT RATE...........................................................................................
18
20
22
28
36
44
53
59
61
72
72
List of Tables
TABLE 1: GOVERNMENT VISION OF RFID AND IUID MANDATES ..............................................................
TABLE 2: SURVEY OF REPRESENTATIVE SAMPLE MARKING COMPANIES....................................................
TABLE 3: ROLE OF DISCIPLINES IN IUID COMPLIANCE................................................................................
TABLE 4: CONSTRUCTS ON LABELED INVENTORY IN WAREHOUSE AUTOMATION CONTROL (WAC)............
TABLE 5: DIFFERENT DATA STRUCTURES FOR PARTS MANUFACTURED AT RAYTHEON (MAKE ITEMS) ........
TABLE 6: RELEVANT PROGRAM BASED ASSUMPTIONS .............................................................................
TABLE 7: LOGIC TREE FOR CHANCE OF ERROR ...........................................................................................
TABLE 8: PROBABILITIES FOR ERROR**........................................................................................................
TABLE 9: SAM PLE ERROR A NALYSIS.............................................................................................................
TABLE 10: FIXED AND VARIABLE COSTS/SAVINGS ACROSS SAMPLE PROGRAMS ......................................
TABLE 11: FIXED AND VARIABLE COSTS/SAVINGS EXTRAPOLATED ACROSS PBLS, REPAIRS, AND
O PERA T ION S ........................................................................................................................................
TABLE 12: TEN YEAR FUTURE CASH FLOW AND RETURN ON INVESTMENT FOR PROGRAM A UNDER THE
FU LL B URDON SCENARIO ....................................................................................................................
TABLE 13: TEN YEAR RETURN ON INVESTMENT .......................................................................................
TABLE 14: SAVINGS ATTRIBUTED TO DATA ENTRY ERRORS VS. KNOWN LOSSES.......................................
9
17
23
32
37
38
62
64
64
66
68
68
70
71
73
The SHORT List of Acronyms
1. IUID: Item Unique Identification
2. UII:
Unique Item Identifier
3. RFID: Radio Frequency Identification
4. PBL:
Performance Based Logistics
10
1 Introduction
1.1 Company Background
With over $20 Billion dollars per year in revenue and over 80,000 employees worldwide,
"Raytheon Corporation is an industry leader in defense and government electronics,
space, information technology, technical services, and business aviation and special
mission aircraft." 1
This five month study was carried out at one of the seven Raytheon businesses, Space
and Airborne Systems in El Segundo, CA. Space and Airborne Systems produces
satellites, airborne radars and detection systems, and specializes in sensing and
electronics systems for both airborne and space applications. Compared with the other
businesses of Raytheon, the product portfolio of Space and Airborne Systems in
particular can be characterized as low volume and high variation.
Although this study was centered out of Space and Airborne Systems, it was closely
followed by Raytheon Corporate. The scope of the research and the application of the
findings have spread across several businesses including Integrated Defense Systems,
Network Centric Systems, Raytheon Missile Systems, and Raytheon Technical Services
LLC.
1.2 Hypothesis
As supply chains and the logistics required to support them have matured, more advanced
tracking and tracing technologies have been adopted. Various systems which comprise a
holistic tracking or identification technology can help supply a host of information (some
needed and some not) about location, identification, and history of materiel.
Raytheon Company: About Us. Raytheon Company. September 25th 2005, <http://www.raytheon.com
(Home>About Us)>.
11
The Department of Defense has issued a mandate called Item Unique Identification
(IUID) intended to uniquely mark its assets. This construct was created with the intent to
facilitate access to information on materiel. Currently, the Raytheon implementation
strategy for IUID is aimed solely at compliance and does not aim to extract value from
IUID.
The hypothesis is that there could be potential benefits of this identification capability.
This thesis will examine previous research in this area, identify potential usage scenarios
for this technology, determine if they are a worthwhile investment, and apply the findings
to more generalized frameworks representing a broader product portfolio. The findings
of this thesis will help develop a more deliberate IUID strategy for Raytheon as a
corporation as well as influence the policy of IUID adoption amongst other stakeholders
including the customer, primary contractors, and suppliers.
1.3 Thesis Structure
This thesis is organized by ten chapters which are outlined below:
1. Introduction: This introduction provides a short background on Raytheon, the
motivation of the project and insight into the structure of the thesis.
2. The Mandate: This chapter introduces the problems unique identification is
attempting to address through Item Unique Identification policy. It also describes
the vision for the future of the technology and the scope of the current and
anticipated implementations.
3. The Technology: This section gives an introduction into the technology behind
mass unique serialization and introduces the important elements of marking,
reading, and information technology infrastructure. The advantages and
disadvantages of IUID technology are then compared to substitute technologies.
Finally, benchmarking of past IUID implementations highlight potential
applications within Raytheon.
12
4. The Current State: This chapter highlights Raytheon's current implementation
strategy for IUID and how it correlates with its existing and anticipated
infrastructure to support tracking and information around the company.
5. Need Finding: In the search for potential usages scenarios for this technology, it
was important to perform a comprehensive search across the company's
functions. This chapter provides insight into the production life-cycle at
Raytheon and how each function plays a role in that bigger picture. The needs of
specific functions are discussed and the study narrows focus to one need area
where it is hypothesized that IUID could add the most value
6. Scenario Evaluation: Repair Operations: This chapter focuses on the specific
needs for identification within the repair process and how IUID could satisfy
those needs.
7. Analysis: The analysis quantifies potential savings derived from using IUID in
four different repair programs.
8. Results: This section reviews the validity and applicability of the analysis and
determines financial return on investment over a ten year time horizon.
9. Conclusions: Through interpretation of the analytical results, a technology review,
and qualitative system analysis this chapter assesses the long term implications of
using IUID in the repair and manufacturing process.
10. Recommendations: This chapter provides concrete recommendations for the
Corporate Raytheon IUID implementation team and the Operations Strategy team.
13
2 The Mandate
2.1 The Problem
The Item Unique Identification (IUID) Program was started by the Department of
Defense in response to the Chief Financial Officers Act of 1990, and subsequent acts,
which were instituted to promote accountability and reduce costs. The Department of
Defense highlighted the need for improved tracking and valuation of plant, property, and
equipment to not only address Congress's concerns, but to comply with Federal
Accounting Standards Advisory Board's requirements. 2
Added urgency from a September 1992 report for the General Accounting Office stated
"... the federal government lacks complete and reliable information for reporting
inventory and other property and equipment and cannot determine that all assets are
reported, verify the existence of inventory, or substantiate the amount of reported
inventory and property." 3
Meanwhile, as pressure came from the accounting departments there were also problems
arising from the battle field. The Gulf war in 1991 and 1992, the United States' first
major combat operations since Vietnam, uncovered that often supplies were ordered that
were not needed due to limited asset visibility on the battlefield. 4 Tracking the
government's capabilities on the ground was in fact crucial to an effective deployment
and helped reinforce the need for improved logistical capabilities. This need is also
applicable off the battlefield in government responses to natural disasters such as
hurricanes or earthquakes.
2 Office
of the Under Secretary of Defense Materiel Readiness and Maintenance Policy, "Department of
Defense Unique Identification Implementation plan for Maintenance Depots", May 2005, p 1 1.
3 Ibid.
4 Deb Navas. "Inside the DoD Mandate." Supply Chain Manufacturing and Logistics, November 2 3rd 2004.
14
2.2 The Need
The Department of Defense identified the need for a global standard for unique
identification that is applicable across all elements of the value chain. Constructs and
technologies vary widely even within departments of the government, not to mention
across the entire value chain. The Department of Defense needed a standard that would
be applicable across the entire industry. This standard would enable improved item
management and accountability as well as cleaner audit opinions for financial statements.
There was also a need for lifetime tracking of parts, so the methodology and technology
was chosen to withstand elements of weather and any environmental limitations that an
asset may be exposed to. In addition, the database architecture needed to be easily
transferable and compatible throughout the value chain to promote information sharing
with the use of a universal construct.
2.3 Vision and Scope
The Department of Defense's vision is that the application of these capabilities will
enable and improve logistics, operations, inventory management, repair, maintenance,
property, and many unforeseen needs of the future.5 "The insight provided through this
basic, but effective means of uniquely and unambiguously identifying parts is only
limited by the ingenuity of smart people with creative ideas and our combined ability to
recognize its value." 6
Three alternatives were considered by the Department of Defense which eventually led to
the implementation of IUID. The first was to use existing marking approaches and
tracking technologies, the second was putting the burden on the Department of Defense
for marking all items as they enter inventory or inspection, and the third (and only
5 Ibid.
The Office of the Under Secretary of Defense for Acquisition Technology and Logistics, "Cost Benefit
Analysis of Unique Identification (UID)", March 2005, p8.
6
15
accepted alternative) was to develop an industry wide standard marking methodology
which leverages existing commercial marking and reading methods.
On July 29, 2003 the department of defense issued a memorandum "Policy for Unique
Identification of Tangible Items - New Equipment, Major Modifications, and
Reprocurement of Equipment and Spares" to apply IUID for all solicitations of new
equipment since January 1, 2004.7 All new equipment, in this case means all inbound
materiel. In reality, IUID marking for new equipment has been negotiated on a contract
by contract basis and the actual marking of items only began on a select few programs at
Raytheon in spring of 2005. This is primarily due to the speed in which IUID has
appeared in government contracts. The slow adaptation of the mandate has delayed much
of the haste in compliance.
In a major update dated December 23, 2004, a memorandum entitled "Policy for Unique
Identification of Tangible Personal Property Legacy Items in Inventory and Operational
Use, including Government Furnished Property (GFP)" extended the scope of IUID from
simply newly manufactured items to all significant items in the Department of Defense
inventory.
Government furnished property includes; special tooling, special test
equipment, industrial tooling, and other plant equipment. In yet another update to the
policy an IUID registry has been created which catalogues all property owned by the
government. The registry has led to the establishment of a virtual Unique Item Identifier
which enables a data base entry of a Unique Item Identifier and its associated pedigree
data, while postponing the physical marking of the item.9
There are also mandates in place regarding use of Radio Frequency Identification (RFID)
tags for tracking delivered items from point A to point B. Table 1 highlights how RFID,
IUID and bar codes coexist.
-
7 Office Of the Under Secretary of Defense, "Policy for Unique Identification (UID) of Tangible Items
New Equipment, Major Modifications, and Reprocurements of Equipment and Spares", July, 2 9 th 2003.
8 Office of the Under Secretary of Defense Materiel Readiness and
Maintenance Policy, "Department of
Defense Unique Identification Implementation plan for Maintenance Depots", May 2005, p11.
9 Office of the Under Secretary of Defense, "Guidelines for the Virtual Unique Item Identifier", December
29, 2004, p1.
16
Table 1: Government vision of RFID and IUID Mandates
Government
Current
Vision
Landscape at
Raytheon
Pallet Level:
Passive
Bar Code,
RFID Tag
Passive REID
Tag (starting)
Carton
Passive
Level:
RFID Tag
Package Level:
Passive
Bar Code
Bar Code
RFID Tag
urnos W..
Assembly
IUID Tag
Bar Code
Level:
(when
(some), IUID
specified)
Tag (starting)
Sub-Assembly
IUID Tag
Bar Code
Level:
(when
(some)
specified)
Inventory
Bar Code
Stores: Lots,
Items, or Kit
The Department of Defense has initially drawn a line in the sand indicating that all
delivered materiel above $5000 in value must be marked provided that it is on their own
Contract Line Item Number (CLIN) or sub-Contract Line Item Number. The mandate
becomes even more far reaching in the inclusion of all "Department of Defense serially
managed parts." (These are not the same as Raytheon serial managed parts.) The
mandate further highlights that any materiel or subcomponents that the government
chooses to designate for IUID (even if it is under $5000) can be marked. This gives the
government a fair bit of flexibility in how broadly it wishes to unroll Item Unique
Identification and the contractual power to enforce it.
17
The reason for the flexibility in the mandate is that the government itself does not know
yet exactly in what arena its investment in IUID will pay off most. The Department of
Defense can tailor the mandate to fit its needs depending on what application extracts the
most value: virtual IUID, distinguishing items that are visually similar, high volume
programs, high value hardware, or high mobility hardware. This study provides specific
recommendations in reference to these criteria on how to extract the most value from
IUID.
Figure 1 shows a framework of assembly hierarchy and how much flexibility the
government has in its mandate in terms of the scope of IUID impact. The dotted line
indicates the domain in which the scope of the mandate can include.
High Level Marking
Battleship
Low Level Marking
System
LRU
(Lkne
Replaceable Unit)
SRU
Repairable Items Reportable Items
(Subassembly Replaceable Unit)
Resistor
(Serially tracked items)
Scope of Govemment Mandate
Figure 1: Scope of IUID Mandate in Assembly Hierarchy
The new F/A-22 is a good example of the scope the government expects from IUID. The
plane contains approximately 30,098 parts, approximately 1,727 of those are tracked and
approximately 900 will have IUID marks on them.
Although the Department of Defense will indirectly pay for the cost of IUID
implementation, the burden of the direct costs of the marking equipment is on the
suppliers. The engineering department of the supplier is responsible for determining the
marking type and method. Drawing changes to update existing (legacy) products will be
financed by the government and marking costs will be rolled into the contract for the item
18
itself. This cost structure gives neither an incentive nor a disincentive for the suppliers to
use IUID in any way. This thesis directly addresses the cost structure of compliance and
determines if the IUID mandate is an opportunity worth exploiting. Now that the
government mandate has been introduced, specifics of the technology behind IUID will
be discussed.
19
3 The Technology
This section gives an introduction into the technology behind mass unique serialization
and introduces the important elements of marking, reading and information technology
infrastructure. The advantages and disadvantages of IUID technology are also compared
to substitute technologies.
3.1 Technology Overview
The technology chosen to bring Item Unique Identification to life was the two
dimensional data matrix, a more advanced form of the bar code, shown in Figure 2. The
use of bar codes as a means for inputting data quickly was conceptualized in the 1930s,
invented in the late 1940s and early 1950s, and commercialized in the 1960s. It was soon
realized that a global standard needed to be developed, but it was not until 1974 when
this standard was implemented.
In the late 1990's the National Aeronautics and Space Administration (NASA), in
partnership with the bar coding industry, developed the two dimensional (2D) data matrix
as a successor of the traditional Bar Code. As shown in Figure 2, just with as the system
of bar codes, there is a marking process, a reading process and a link to a database.
Figure 2: Dot-Peened Matrix, Serial Number on Chip, Cognex Dataman Matrix Readerl
1 Cognex: In-Sight Fixed-Mount ID Readers, Cognex Corporation, November
<http://www.cognex.com/products/ID/InSight-IDReaders.asp>.
20
2 2 "d 2005,
3.1.1 The Mark
The mark appears as a matrix of dots as shown in Figure 2. Unlike bar code technology,
which relies on the relative position and size of the lines to contain information, data
matrix technology measures the presence or absence of a dot in the matrix. The symbol
is redundant which allows for up to 30% of the mark to be destroyed without
compromising data integrity. However, data can be compromised through isolated
destruction of four specific bits.
3.1.1.1 Construct
The string of data that a mark holds which enables uniqueness is called the Unique Item
Identifier (UII) and has been standardized in the form of two different constructs.
- Construct 1: Commercial and Government Entity Code*, Serial Number
- Construct 2: Commercial and Government Entity Code*, Part Number, Serial Number
* Commercial and Government Entity (CAGE) Code is a number that indicates the location of manufacture
Construct 1 applies only if all parts are serialized within an Enterprise. Since this is not
the case within Raytheon, Construct 2 is being used.
3.1.1.2 Marking Methods
As shown in Figure 3, the mark of a 2D data matrix can be created in several different
ways on a variety of different surfaces and materials. The available marking techniques
ensure that there are virtually no limits on the types of materials that be marked with the
data matrix. Generally, there are two classifications of marking, intrusive and nonintrusive marking methods. Both can be used for either direct part marking or creating a
label or a badge; specifics of these options will be discussed in 3.1.1.3. Intrusive marks
may reduce the structural integrity of a part being marked while non-intrusive solutions
do not.
21
Figure 3: Different Marking Methods (1-r) Ink Jet, Chemical Etch, Dot Peen, Laser Engrave"
Non Intrusive:
Ink-Jet: Ink-Jet printing can be used either for direct part marking or for generating
labels. Printers for Direct Part Marking are around $10,000, and printers for labels are in
the $3,000 range.' 2
Laser Bonding: Laser bonding is an additive process which heats a foreign material and
melts it over a part - Laser cost $20k-60k.13
Other less common non-intrusive techniques include: laser engineered net shaping (same
as laser bonding, except weld pool is created on part), silk screen (stencil), liquid metal
jet, automated adhesive dispensing, casting, forging, and molding.
Intrusive Marking:
Dot Peen: Micro-Percussion through rapid local deformation of a surface with a carbide
or diamond tipped stylus can create the matrix of dots. Dot Peening is typically used on
metals. Prices range from $10k-$25kl 4
Laser Marking: Laser Marking includes Laser Coloring (discoloring material), Laser
Etching (melting material), Laser Engraving (vaporizing material), and several other
techniques. Laser Marking is typically used on hard materials like metals or printed
circuit boards. Prices range from $20k - $100k.1 5
" Ibid.
Office of the Under Secretary of Defense Materiel Readiness and Maintenance
Policy, "Department of
Defense Unique Identification Implementation plan for Maintenance Depots", May 2005, p 3-12.
" Ibid.
12
4
Ibid.
'5 Ibid.
22
Electro-Chemical Marking: Electro-Chemical Etching removes material through
electrolysis and the pattern is dictated by a stencil. The process is fairly manual and
slow. Prices for equipment range from $5k-$12k. 16
Other less common intrusive techniques include abrasive blasting, engraving, milling,
fabric embroidery/weaving.
Table 2 shows the relative cost of outsourcing versus in house marking using the different
marking methods. This thesis does not focus on the important engineering and business
decisions that are required to choose the appropriate marking method for compliance, but
understanding the scope of marking processes highlights the capabilities of the
technology.
Table 2: Survey of Representative Sample Marking Companies1 7
Approach
Method
Outsourced*
In House Marking
Breakeven
Reader Type
Volume***
Gummed labels
Data Plates
Polyester
Metal Foil
$0.20-$1.00
per label
Plastic
$0.50-$2.00
per label
$0.50-$3.00
per label
$1.00
Metal
Direct Part
Marking (DPM)
$0.10-$0.50
per label
Inkjet
Chemical
Etching
Dot Peening
Laser Bonding
Laser Etching
$2000 printer
$700 software
$0.05 per label
$2000 printer
$700 software
$0.05 per label
$5,000 machine
$0.50 per label
$20,000 laser
$0.50 per label
$10,000 machine
per mark
$2.00
per mark
$0.50 per mark
$2000 Printer
$300 Chemetch
$700 Software
$0.50 per mark
$3.00
$10,000 machine
per mark
$0.10 per mark
$2.00
$25,000 machine
per mark
$0.30 per mark
$2.00
$25,000 machine
per mark
$0.20 per mark
* Dependent on order quantities with minimum set-up charges of $200-$300
** Costs based upon non-complex part geometries and conditions for the part
5,300
Requires high
contrast readers
2500
3,100
7,800
19,400
1,800
Requires low
contrast reader
3,300
14,500
13,700
to be marked
*** Assumes high end of outsourced cost range
16
Ibid.
.
17 The Office of the Under Secretary of Defense for Acquisition Technology and Logistics, "Cost
Benefit
Analysis of Unique Identification (UID)", March 2005, p5- 6
23
Through a simple analysis of the fixed and variable costs of outsourcing versus in house
marking, the "break even" volume required to justify in house marking was calculated.
As mentioned in more detail in Chapter 4, Raytheon intends to do in house, centralized
marking by site. In light of the cost of marking and expected short term demand for
marking volumes, this strategy matches the equipment purchasing plans that Raytheon is
undertaking.
3.1.1.3 Direct Part Mark vs. Badge
One unique attribute of data matrix technology is that directly marking the physical part
is possible. The alternative to direct part marking is a creating a badge and affixing it to a
part. A badge can take the form of a sticker or a label (often metal) which can be marked
and then affixed to the item.
Direct part marking often requires the part to be fixtured during marking which lends
itself well to applications on assembly lines. Creating a badge which is attached to the
product is generally easier for items of low production volume or items that are very
bulky.
Gummed labels are usually the most inexpensive solution, but are only acceptable for
parts that live in a fairly benign environment. Straying from direct part marking opens up
the possibility for errors between the marking process and the affixing of the mark to an
item. However, due to fixturing limitations mentioned above for direct part marking, a
centralized marking area (if desired) for a larger subset of items generally can be
achieved more easily through the use of badges or labels.
3.1.2 The Reader (and Verifier)
Data Matrix readers take the same physical form as traditional bar code readers and can
either be hand held (human operated) or fixed mount for high speed assembly lines. The
24
technology behind reading a data matrix is based on a digital image rather than an optical
sensor (usually infrared) which bar code scanners use, thus the reading technology is not
compatible.
An image is needed to measure the absence or presence of the dots. Thus, the reading
equipment has a large influence on how small the mark can be. Software and longer read
times can make up for poor mark quality. Fixed mount readers can read 2D data matrices
at a rate of over 7,200 parts per minute. The range of costs for readers is between $800
and $3000. The MicroScan MS-Q Basic and Code Corp CR2 are well regarded cordless
scanners in the $900 range which actually perform both barcode scanning and data matrix
reading.' 8 These models can automatically discriminate between all major 2-D matrix
and linear bar code symbologies. An important note is that the cost of these scanners is
only about $250 more than bar coding scanners widely used at Raytheon, the Symbol
LS4004 and the cordless Intermec Sabre 1552.
The Department of Defense mandate currently requires verification of a two dimensional
matrix shortly after marking. This step (not required for all uses outside of the
Department of Defense) is unique to the data matrix technology from traditional bar
codes. The verification of a mark is essentially a report on the quality of the physical
mark. This policy was instituted to create a standard due to the large variety of marking
surfaces, and processes. In reality, as a process is fine tuned (especially in a higher
volume setting) the need of the verification step is arguable. Verifiers cost between
$10,000 and $12,000 USD and can also perform mark reading. 19
3.1.3 The Database or Operations Software
Just as with other tracking technologies perhaps the most important feature of the Item
Unique Identification does not lie in the mark or in the reading system, but rather in the
18 Cognex: In-Sight Fixed-Mount ID Readers, Cognex Corporation, November
<http://www.cognex.com/products/ID/InSight-IDReaders.asp>.
19
25
2 2nd
2005,
database and in the decision of how to utilize this information. IUID allows rapid access
to an infinite amount of information that can be tied to a specific part such as:
" Test History
" Assembly/Production History (lot number, date, assembly technicians)
" As-Built Configuration (Part(s)/assembly configuration and identification)
" Repair History
*
Deployment History
*
Usage History
The Department of Defense has initiated an IUID registry for all items that receive a
Unique Item Identifier. This registry covers the entire spectrum of government assets
from legacy property to new equipment. This registry is linked to Wide Area Work Flow
(WAWF) which is an invoicing, shipping, receipt, and acceptance link to the customer.
The registry can contain any amount of information pertaining to the item.
In many manufacturing and repair environments at Raytheon, Shop Floor Management
systems, such as Visiprise Management, are designed to trace many of the pieces of the
information listed above. With the software in place, adding readers as data input devices
is as simple as plugging a keyboard into a computer.
3.2 Competitive Technologies
One Dimensional Bar Codes: One-dimensional bar codes are ubiquitous throughout
supply chains and manufacturing operations. A bar code's biggest advantage is that it is
inexpensive and biggest disadvantage is its limit in data storage capacity.
Two Dimensional Bar Codes: Two-dimensional bar codes function like bar codes in that
the spacing and size of the lines dictate the information gathered from them; however
unlike traditional bar codes where an optical sensor can read the code, a digital image is
26
required. Two-dimensional bar codes have higher storage capacity per unit area than
traditional bar codes.
Memory Buttons: Memory buttons take the form of un-powered tags with read write
memory which can store information about a specific item directly on the part. The
information can be accessed through probes which can read or write information onto the
tags. These tags are typically used in military, aerospace, industrial, utility,
transportation, and maintenance applications.
Memory buttons minimize interaction
with a central database and can be accessed anywhere or anytime without the need for
additional infrastructure. Memory buttons are the most useful in environments where
database access is challenging.
Radio Frequency Identification Tags: Radio Frequency Identification (RFID) Tags are
small inductive coils that are attached to a small bit of memory. When the inductive coil
is energized, the circuit is powered enough to transmit a small signal containing the data
stored on the tag memory. An RFID tag's greatest advantage is that line of sight is not
required to read the tag, enabling high throughput scanning with very little infrastructure.
RFID's main disadvantage is that read rates are not 100% reliable and that they have
spotty performance on metal objects.
There are two major types of RFID tags; Passive and Active tags. Passive Tags do not
have a battery and are required to pass through a scanner at relatively close proximity
(less than 3 meters) to be read. Active Tags do have batteries which help transmit the
signal a longer distance and enable a tag's precise location to be pinpointed.
"What is a Contact Memory Button?" MacSema Incorporated, November
22nd, 2005
<http://www.macsema.com/buttonmemory.htm>.
Klaus Finkenzeller, RFID Handbook (1s edition, : John Wiley& Son, Ltd.,) 1999, p. 100-110
20
27
3.3 Advantages and Disadvantages of the Data Matrix
Advantages:
There are three main competitive advantages of data matrix technology. The
comprehension of these competitive advantages is fundamental to isolating the scenarios
where a data matrix carrying a Unique Item Identifier will add the most value.
Size: The data density of a data matrix is an enormous advantage which facilitates
marking of both extremely small parts and parts with little available surface area for
marking or tagging. The ultimate limits on tag size are marking and reading resolution,
which in theory have the capability to function at the nanometer level. However, some
standards have dictated that the size range of a data matrix carrying 90 bits will be
between 0.05 and 0.25 cm2 . This is between 40 and 200 times smaller than standard
RFID or Bar Code technology at the time of this publication.
Figure 4 highlights the
size differences between four technologies for 90 bits of information.
1D- Barcode = 20 cm 2
Passive RFID = 11 c m 2
all ggg||
2D-Barcode
10 cm2
Data Matrix
.25 c m 2
Figure 4: Technology Footprint for 90bits data string (not to scale)
' 2
Robust: Direct part marking enables very durable marks which facilitate lifetime
tracking of items even in the harshest of environmental conditions. Due to the redundant
nature of the code, even if part of the matrix is damaged it can still be read.
22
Ibid.
23 "Alien Technology - RFID Tags," Alien Technology,
August 16th 2005,
<http://www.alientechnology.com/products/rfid tags.php>.
Cognex: In-Sight Fixed-Mount ID Readers, Cognex Corporation, November
<http://www.cognex.com/Droducts/ID/InSi2ht-IDReaders.asD>.
28
22 nd
2005,
Universal: Due to the large number of marking techniques, there are few limitations on
the types of materials and surfaces which a data matrix can be placed. This positions data
matrix technology in a different space from RFID and bar codes because it is a universal
standard that can mark all items, with no exceptions.
Disadvantages:
Line of Sight: Line of sight is required to read the mark.
Alignment: For automated reading of the mark, alignment is critical, while nonautomated reading requires human intervention.
New Infrastructure: Marking equipment, reading equipment, and installation software
is unique to this technology, thus no old infrastructure can be leveraged.
3.4 Benchmarking
Data matrix technology is most prevalent in the electronics and automotive industries.
Solutions for electronics typically leverage the size attribute of data matrices, while
solutions for automotive components usually leverage the robust attributes of the
technology. It should be noted that both of these industries usually use data matrices for
high volume parts.
Other industries that have adopted data matrix technologies include aerospace, financial
institutions, medical, pharmaceutical, packaging, equipment manufacturers, and
consumer goods manufacturers. Outlined below are four cases studies highlighting the
application of data matrix technology:
Turbine Blades: Pratt and Whitney - The turbine module center was having difficulties
using serial numbers to save inspection results of the static moment measurement of the
airfoils. In addition, the center was having difficulty tracking one piece flow through
work cells. Applying data matrices carrying the part serial number directly on the part
29
made saving inspection results easier and more reliable. In addition, automating serial
number entry and eliminating manual human data entry by hand improved traceability of
the turbines blades throughout the cell. 25
Shop Floor: Hamilton Sundstrand - Assembly required multiple time consuming data
entries of unique serial numbers. In addition, maintaining an accurate bill of materials (or
AS-built configuration) with constant human intervention was challenging. Two
dimensional data matrices enabled a reduction in build time and an increased accuracy of
database updates for bill of materials tracking. 26
Cylinder Head Marking - Any form of mark on a cylinder must be robust in order to
withstand the environmental constraints - data matrix technology satisfies this need. Data
matrix technology enables cylinder heads to be tracked down to the specific lot number,
date, and time of manufacture throughout the life of the parts.
Marking of Integrated Circuits - After a certain size threshold, marking small
electronic components with readable serial numbers becomes physically impossible. By
marking small components with a data matrix, assemblers are able to verify component
configurations during manufacture. 2 8 OSRAM and other electronics companies routinely
use data matrices to label their extremely small transistors, capacitors, and integrated
circuits.
"Pratt and Whitney Parts Marking/UID", Pratt and Whitney 2D Part Marking & Traceability Initiative,
December 2003.
26
25
Ibid.
Technifor: Success Stories, Technifor Corporation, November, 22 ", 2005,
<http://www.technifor.com/htm/success/autoO
I.htm>.
28
Ibid.
2
30
4 The Current State
Now that the mandate and the technology are better understood, this chapter will discuss
Raytheon's current implementation strategy for IUID as well as the current tracking and
information landscape at Raytheon.
4.1 Current Implementation Strategy at Raytheon for Item
Unique Identification
Not long after the July 29th 2003 department of defense issued memorandum, Raytheon
formed a corporate task force to address the issue of compliance with the IUID. The
following section summarizes some of the decisions made by Raytheon Corporate and
the different businesses regarding its implementation strategy to date. This section will
provide partial recommendations on these decisions, but they will be revisited after the
analysis on potential uses of IUID.
4.1.1 Loose Corporate IUID Strategy - Implementation left to
Businesses
It was determined that since the implications of IUID varied substantially across and even
within businesses, each business should take charge of its own implementation plan.
This strategy was also consistent to the culture of Raytheon which typically does not use
the corporate platform as a strong base from which to launch initiatives. Raytheon
Corporate has discovered that more autonomy by the business units generally leads to
more success in implementation than dictating from above, even if the risk is run of
inefficiencies due to miscommunications and lack of common standards.
Raytheon Corporate has taken the role of ensuring that each of the businesses is
communicating effectively, and when possible, some standards of implementation
strategy and best practices are shared.
31
Each business has carried out interdisciplinary workshops (Six Sigma Blitzes) to develop
an implementation plan to prepare for IUID compliance. Compliance with IUID requires
an extremely interdisciplinary effort between Contracts, Engineering, Supply Chain,
Operations, Finance, and Quality. By default, Supply Chain was put in charge of leading
IUID implementation. Since IUID compliance is viewed as more of a burden than a help,
it is not a project that Supply Chain has been overly enthusiastic to take on. Table 3
highlights the role of each function for IUID compliance.
Table 3: Role of Disciplines in IUID compliance
Function
Role
Contracts
Engineering
Supply Chain
Operations
Finance
Quality
Negotiate and Create IUID bid and contract appropriately
Determine Mark Type
Supply Mark or Badge
Ensure process for assembling mark or badge
Finance IUID program
Verify that IUID is implemented in accordance to mandate
The loose corporate implementation strategy has been fairly successful at disseminating
the proper information to the businesses while still communicating information across
businesses. As IUID marking volumes increase it will become more evident how
successful the loose governance has been based on the number of inconsistencies or
problems that appear across programs.
4.1.2 Feet Dragging (Stalling)
Of the seven businesses nearly all of them have identified an IUID requirement in their
contracts. However, as mentioned in Chapter 2, the speed at which the IUID clauses
have entered into the contracts has not been swift. The first pilot for IUID compliance
for Space and Airborne Systems (SAS) was executed in Forrest Mississippi in the spring
of 2005.
Although the clock-speed of the defense industry is slow, there are more subtle reasons
for the pace of the adoption of the mandate. Within the Department of Defense there is
32
disagreement over the breath of IUID implementation. This can be attributed to the fact
that it is not clear yet exactly how much value its investment will bring and through
which usage scenarios.
This reluctance and uncertainty within the government has, promoted a default strategy
amongst contractors (including Boeing and Northrop Grumman) to discourage IUID from
entering contracts and to perform only minimal compliance required. Rather than
stalling, Raytheon should be more proactive about asking its customer the important
questions about the value add of specific implementations of IUID.
4.1.3 Centralized vs. Decentralized - Direct Part Mark vs. Badge
Raytheon's business is typically lower volume with higher differentiation between the
types of products that it produces; known as "high mix, low volume." As with some of
the industries that were benchmarked, this high mix low volume lends itself to centralized
versus a project specific marking and verification strategy. Although reevaluating this
decision is important, for the time being, Raytheon has made the correct decision on
performing centralized marking.
As mentioned in section 3.1.1.3, centralized marking generally makes direct part marking
much more difficult and necessitates that most of the marking is performed with labels or
badges. The overwhelming majority of IUID marked parts at Raytheon will be
performed with stickers, the most inexpensive marking method. Direct part marking is
occurring in isolated circumstances such as marking the outside of a missile for Raytheon
Missile Systems. As mentioned in the marking section of Chapter 3 affixing metal
badges to lower volume products makes a fair bit of sense for Raytheon and they should
continue with this policy.
33
4.1.4 Supplier Marking
The Raytheon position on supplier marking has not been firmly established, and has
essentially been handled on a case by case basis. The spirit of Item Unique Identification
that the government and many of the major prime contractors are tying to impart is that
supplier marking is a critical element to the system wide benefit of IUID. As the
complexity in systems increases, the need for a global standard increases as well. In
addition, by having suppliers mark items the opportunity for them to share information
with Raytheon improves.
The concern with having Suppliers mark items is that Raytheon loses control of the
process, and thus the quality. In certain circumstances, supplier marking is a necessity
when direct shipments of parts from Suppliers to Customers are required (drop ship).
Due to the $5000 dollar line item requirement of the mandate, there is also concern that
by allowing suppliers to mark certain parts themselves, they are gaining information on
the resale value of the goods being delivered.
While Raytheon should maintain quality standards for marking, it should be encouraging
its suppliers to mark as much materiel as possible. It increases Raytheon's ability to use
tracking upstream in the manufacturing process at no extra cost. Due to the flexibility
and inconsistency in which IUID requirements have been placed in contracts, Raytheon
should not be concerned with signaling pricing of materiel to a supplier.
4.1.5 Marking Beyond Contractual Requirement
Over the course of the past few years, there has been very little work (if any) to evaluate
the potential benefits of IUID for Raytheon. Most of the evaluation has been speculation,
but very little has been analytical. Thus, the implementation of virtual or physical
marking above and beyond contractual requirements of the mandate is a concept that has
hardly been addressed. This study will directly address this question in the analysis.
34
4.2 Current Tracking and Information Landscape
Now that the IUID mandate, technology, and implementation strategy are understood, the
current tracking and information landscape at Raytheon can be studied in more detail.
Only once this current landscape is understood can a more deliberate IUID strategy be
created for Raytheon.
The complexity of the Tracking and Information Landscape at Raytheon is truly
astonishing. The genesis of this complexity, some of which is a necessity, stems from a
variety of different elements ranging from customers, to Raytheon's organizational
structure, to the dynamics of the aerospace and defense industries.
In the past, the high mix low volume environment has yielded program or division based
autonomy and power, rather than a more operations driven environment where a central
architecture is adhered to by all platforms. For example, traceability and information
requirements for a one-of-a-kind satellite vary substantially from higher volume radar
systems. This has resulted in substantial complexity in the tracking and information
landscape and architecture. Although balance of decision making power towards
programs has its advantages, Raytheon has recently made a substantial effort to improve
consistent operational practices within Raytheon. In the future, programs will have less
ability to design or set up their own tracking systems, but rather will work within the
framework of Raytheon operations.
There have been several mergers and acquisitions in the defense industry which have also
added an interesting element to the development of tracking and information
technologies. For example, two of Space and Airborne Systems major sites include the
El Segundo campus which was originally Hughes Aircraft and the McKinney campus
which was originally Texas Instruments. Old systems have often been retained,
modified, and patched together.
35
Different customers also drive this complexity in the tracking and information landscape.
For example, bar code requirements between the navy, army, and the marines can vary
substantially; even if the same product is being used by both agencies.
On top of this all, different functions within the complex network of Raytheon require
specific tracking and information needs. Finance, procurement, invoicing and shipping,
point to point tracking, inventory management, shop floor management, and other
functions all have their own separate specialized software or data construct which is
optimized for their particular needs. Figure 5 highlights the complexity of the landscape
in terms of tracking technologies, data constructs, and strategic enablers. Section 4.2.1
and 4.2.2 will discuss in further detail two types of tracking technologies at Raytheon.
Technologies
+
-- +
II D
- Visiprise Management (Shop Floor
- License Plate Number
- Warehouse Automation Control
- Purchase Order
- Kinaxis (Management Reports)
- ePro (Requisitions and Purchase orders)
- Serial Number
- National
Readable
Serial
Numbers
Management)
m
Tr
- Tracking Number
- Supplier Identifier
Documentation
Strategic Enabler
* M-Trak (point to point tracking)
- Part Number
- Serial Number
Bar Codes
RFID
Data Construct
Stock Number
- Lot Number
- Reference Designator
.
... and more
- Wide Area Work Flow (invoicing, receipt
and acceptance link to customer)
- El Segundo North (Inventory,
Requisitions, Manufacturing Resource
Planning Software)
APEX (Financials)
..and more
Figure 5: Technologies, Constructs, and Enablers: Raytheon Tracking and Information Landscape
4.2.1 Study A: Warehouse and Store room Tracking
Example A: In a specific example, the Warehouse Automation Control (WAC) system
controls a specific subset of the inventory in El Segundo North. Table 4 shows the
different constructs on a Warehouse Automation Control label:
36
Table 4: Constructs on labeled inventory in Warehouse Automation Control (WAC)
Number
Part Number
Inventory Department
Project Code
Location
General Leger Account
Number
Purchase Order
License Plate Number
RR Number
Mid Receipt Number
Access Number
Explanation of Number
Part number
Department number
Number linked to Project
Bulk, Carousel, etc
Billing account for the Inventory Department and Accountants
Number linked to a specific purchase
Unique number to a specific part number or set of part numbers
Identification for the PO that arrives into Receiving and Warehouse
RR number is translated by Stores Transaction System (STS) and is an
input for WAC. It is also known as the Access Number.
Access number is the same number as the Mid Receipt #. It is used to
generate the License Plate Number in WAC.
Other systems outside of Warehouse Automation Control, which support a different
subset of inventory, run on different platforms which have different architectures.
All of the numbers on the label are printed and are intended to be human readable,
however the only bar code on the label is the License Plate Number. This number, when
entered into a computer, can bring up all of the information on the package. At the time
of publication, the license plate number was a concept created only two years ago. The
unique item identifier (UII) or a sequence of Ulls could easily replace the license plate
number. It need not be represented in Data Matrix form, and can even be put on a bar
code to not disrupt the technical infrastructure.
4.2.2 Study B: Operations and Kitting Tracking
4.2.2.1 Man-Man - Old Shop floor management system
For the old shop floor management system, parts manufactured at Raytheon (make items)
have five structures shown in Table 5 which can be entered into the current shop floor
management software package called ManMan.
37
Table 5: Different Data Structures for parts manufactured at Raytheon (Make Items)
1
2
3
First Number
MFG Code
MFG Code
Work Order Number
4
Work Order Number
5
Work Order Number
Second Number
Date Code
Serial Number
Date Code
Serial Number
Parts which are shipped to Raytheon from suppliers (Buy Items) have seven current
structures for traceability! Thus, the current architecture for "make" or "buy" items can
allow similar items to be marked twelve different ways. The Unique Item Identifier (UII)
could easily replace these numbers and constructs.
4.2.3 New Shop Floor Management System - Visiprise Management
Raytheon is currently in the process of implementing a new software platform called
Visiprise Management (VM) which is intended to link a variety of the strategic enablers
and to automate and/or computerize a tremendous number of the operations that were
previously performed manually and tracked on paper. Visiprise management creates a
digital version of the Build History Books which document all of the operations,
processes, and history behind all of the materials and parts which comprise a product.
Currently many elements of the books require handwritten signatures for many of the
operations. Visiprise management on the shop floor will enable better tracking of the bill
of materials (configuration control) and will track parent child part architectures. The
intention is that Visiprise Management will carry over to the repair side as well and will
track all of the changes to the bill of materials as the assembly composition evolves.
An important clarification is that in many cases automated data entry has not happened
with the initial shift to Visiprise Management. Shifting from a paperless system to a
digital one means that instead of numbers handwritten on paper, they are, for the most
part, manually entered by finger strokes on a keyboard into the computer system.
38
The vision is that eventually all parts that are assembled onto hardware will be bar code
scanned ("wanded") so that the part numbers are uploaded automatically to the computer
systems keeping track of the bill of materials. Some programs have already initiated
automated data entry with bar code scanners. In subsequent chapters this thesis directly
addresses the benefit of automated data entry versus manual keystrokes.
Current Visiprise Management Systems require the manual entry of three numbers to
verify that a part has passed from a kit onto an assembly or that a process has happened.
1. Operation number: This refers to the operation that is being undergone. Example
E4-Clean, Assemble xyz
2. Resource number: This number refers to which station number where the
operation is occurring. Example: Station #2. Often there is only one station.
3. Shop Floor Control (SFC) number: This number is a composite between the part
number and the serial number.
The Shop Floor Control number is the only number for which there is a bar code on the
kitted part. This number could easily be replaced by the unique item identifier which
would create a consistency between shop floor management and warehouse management.
Visiprise Management was designed for higher volume facilities than Raytheon's. For
low volume operations, the Shop Floor Control (or Unique Item Identifier) should
probably be entered first which could then bring up defaults for the operation and
resource number. Again, it is important to remember that the Unique Item Identifier does
not have to be carried in the form of the data matrix.
It is important to note that all of the research performed for this project was carried out
prior to widespread Visiprise Management installation at Space and Airborne systems in
El Segundo. However, recommendations for implementation and usage strategy for
Unique Identification take the adoption of Visiprise Management into account.
39
4.2.4 Replace vs. Add: "If it ain't broke, don't fix it?"
One big problem that has plagued the tracking and information landscape has been
unsuccessful attempts at fixing it. Band-Aids, while solving temporary or localized
problems, often add complexity down the line. Simply adding new structures and
constructs onto a flawed backbone is not a long term solution.
Item Unique Identification can fall into either category. If it is attempted to be used, it
should not be used as a Band-Aid or add-on, it should be used to REPLACE a more
complex construct and manual solution. Its emergence as a global standard should be
leveraged especially as complexity of supply chains increase. If Item Unique
Identification is used with this mindset, it will be a success, but if it is used to piggyback
off of existing technologies and constructs then it will add complexity to the entire
system.
As will be discussed later in this study, in order for the UII to replace structures or even
eventually bar codes, it must first prove itself in pilot studies and subsequently in specific
usage scenarios, once it has been proven, then it might be a candidate for replacing other
architectures.
4.3 Radio Frequency Identificationin Use at Raytheon
Currently, manual entry and barcodes dominate the data entry landscape at Raytheon.
They are used in receiving, transfer, inspection, warehousing and testing. However, as
highlighted in section 3.2, Radio Frequency Identification (RFID) tags represent a very
rapidly evolving technology that has and will have vast implications on in the tracking
and information landscape. It is clear that advances in RFID tag size, read rate, range,
cost, and information density are making returns for candidate usage scenarios more and
more likely. However, just as with IUID, a critical analytical evaluation of these usage
scenarios is imperative.
40
In the defense industry there has been a mandate on the adoption of RFID for all
outbound packages. This necessitates a new number which is assigned to the
transportation of item X from point A to point B. Just as this study has searched for
potential uses of IUID above and beyond the requirements of the mandate, there have
been similar studies to determine potential benefits of RFID at Raytheon.
4.3.1 RFID Study A: Tracking Property
One program focused on tracking property (including special test equipment, test
equipment, tooling etc) around a specific facility in Goleta, California. It has been useful
for financial accounting, audits, preventing unnecessary purchases or rentals. However,
the main savings was in time spent looking for the equipment. The pilot tagged 1138
pieces of equipment with active tags in sixteen different labs. It determined that 3,027
man-hours per year at a cost of approximately $400,000 per year was spent looking for
the lost equipment. Fixed costs of installation of the RFID equipment was about
$185,000 while approximately $25,000 per year was spent annually to support the
program.29 This pilot proved substantial savings which has yielded a larger scale
implementation of RFID for property in Goleta.
4.3.2 RFID Study B: Tracking Inbound Material - Pilot
Another major program involved tracking inbound material for the McKinney, Texas
facility using RFID. The goal was to tag all high value items to reduce part loss and as a
result reduce labor wasted attempting to assess part loss. For the pilot (phase 1) started in
2003 and completed by the summer of 2005 the McKinney facility was tagging all parts
over $1,000 which amounted to as many as 5,000 inbound parts per month. 30 The
cumulative five year projected project costs of about $85,000 yielded a savings of about
Mike Rattray, "Radio Frequency Identification Asset Management for Electronic Warfare Systems in
Goleta, CA", April 12, 2005.
30 Michele Ellison, "McKinney RFID Project",
August 10 th 2005.
29
41
$250,000.31 Phase 2 will begin in December 2005 and is expected to have a 10 year
cumulative savings of about $2.OM, or $1.2M when adjusted for present value.3 2
4.3.3 RFID Study C: Tracking Inbound Material - Analysis
Just as the pilot was getting underway in the McKinney Texas facility, a theoretical study
performed by Ronak Shah (Leaders for Manufacturing Fellow 2005) studied the scenario
of using passive tags for inbound materials at a Raytheon facility in Andover,
Massachusetts. Ronak studied four benefits: reduction in cycle time for identification,
reduction in lost material and time looking for material, reduction in injury rates, and
reduced inventory levels and how they applied towards the usage scenarios of: receiving
identification, identification speed, carousel cycle counting, and asset visibility. The
study included experiments on reading reliability. Interestingly, this study, which was
similar to the implementation in Texas, did not find Radio Frequency Identification to be
a positive investment. Although there were a variety of assumptions that do not enable
direct comparison of the studies, it seems the cause of the discrepancy can be attributed to
Ronak's low estimate of labor costs. This discrepancy between Study B and C highlights
the sensitivity of theoretical models to assumptions. Thus it is quite important to use
pilot studies to verify analytical estimates generated from theoretical studies such as this
one.
4.3.4 The Future of RFID
The success of these pilots has prompted discussion about the scalability of these types of
programs and the application of RFID to new scenarios. In turn, it has caused an
examination of RFID in the context of current tracking landscape. Does it merit the
elimination of bar codes? Will RFID coexist with Bar-Codes? Will RFID co-exist with
Item Unique Identification? How sensitive have past projections been and how should
we take this into account as we attempt to scale up programs? How does the interaction
31
Ibid.
32
Ibid.
42
of these systems influence the functionality of the entire system? These questions lie at
the heart of this thesis and will be addressed later after a full analysis of IUID and its
potential roles.
Now that the implementation strategy and the tracking and information landscape at
Raytheon have been introduced, Chapter 5 will review a thorough and broad company
search to identify potential applications for IUID.
43
5 Need Finding
In order to determine the potential usage scenarios of Item Unique Identification, it is
important to understand how Raytheon Space and Airborne Systems functions as an
organization. This requires understanding the importance of each function as well as how
functions interact with one another. Only once the specific tracking and information
needs of the individual functions are understood can a more holistic solution be applied
for the company. As was highlighted earlier, it does not make sense to implement a
change that may help one discipline, but hinder another.
5.1 Map of Raytheon
Figure 6 illustrates a very high level schematic of Raytheon which shows the lifecycle of
a manufactured product and how functions are involved. From this mapping exercise, it
was easier to identify the specific stages in the process which might benefit most from
leveraging IUID. Generating this tool required substantial research and uncovered major
deficiencies in many employees' comprehension of the bigger picture of how functions
relate to one another. Sharing this big picture perspective is imperative to avoid localized
optimizations of operational challenges.
Contracts, Operations, Supply Chain, Quality, Finance, Human Resources, Engineering, Six-Sigma, Information Technology
Emter]al Program Manage ment
Logistics
Operations Prog ram Mana=ement
-+
Kitting
0
IUID Opportunity
Bar Code or
RFID Opportunity
Figure 6: Manufacturing Process Map of Raytheon
44
Assembly, Test, and Rework
-
Custome r
Delivery and Support
5.2 Focus Groups
In order to learn the tracking and information needs of the company, over 150 employees
were interviewed. These exchanges focused on the specific needs of particular groups in
the context of the larger system. The following sections highlight each group, its
function, and its needs for improved tracking and information. Not all functions within
Raytheon were interviewed however those that were hypothesized might have something
to gain from leveraging IUID were studied.
As per the marking continuum presented Figure 1, the need search was performed across
the entire assembly spectrum, an even broader spectrum than the scope of the mandate.
Four levels of IUID implementation were considered. Some or all of these levels may
apply to a specific function's need. These implementation scenarios were:
1. Mark According to contract and use IUID with those items
2. Mark Parts/Assemblies further down in assembly hierarchy than contract specifies
3. Replace all ID bar Codes with data matrix technology.
4. Replace current constructs with the UI (technology independent)
The scope of implementation will be revisited later in the analysis of specific uses of the
technology.
At the time of these interviews the shift from paper based to electronic systems had not
yet occurred, but was discussed as this information was gathered. The following six high
level functions were interviewed along with several specific sub functions.
" Quality (supplier, program, receiving, manufacturing)
" Supply Chain (Material Program Management, Sourcing, Production Control,
Logistics),
* Operations (Performance Based Logistics, Solid State Microwave, California
Manufacturing Center)
* Engineering
* Accounting
* Finance
45
5.2.1 Manufacturing Engineering & Processes Group
Function: The function of this group is to monitor and improve manufacturing through
studying metrics like: Cycle time of production, Test failures, Work in Progress - Turn
Around time, Yields, Defect Data etc.
Needs: Item Unique Identification could enable free and easy tracking information for
determining metrics like cycle time, and throughput time. It could also help correlate
failures to specific serial numbers which could help with better diagnosis of systemic
problems.
Holdups: Measuring these metrics is particularly applicable for high volume product
lines. Using Item Unique Identification for manufacturing processes where cycle time
needs to be constantly monitored makes sense. If constant monitoring is not needed then
there are other methods that could be used to accomplish the same thing: typing in serial
numbers, scanning bar codes of packaging for parts being assembled, RFID et cetera.
5.2.2 Receiving Inspection & Test and Inventory Management
Function: This group accepts all inbound material, stores it, and delivers it to other
storerooms or directly to programs through "kits" which comprise a set of parts.
Needs: As mentioned in the tracking and information landscape in Section 4.2,
Receiving and Inventory Management have many systems in place to satisfy the tracking
and information needs of the company. The key problem seems to be that there are too
many systems in place. The hypothesis is that UII is one construct that could help these
functions, especially if it can be used across functions. However, an important note is
that most of the items that are handled through Receiving Inspection & Testing are
packaged. If IUID were to aid in this type of scenario the Unique Item Identifier would
be the universal construct that would be placed on the package label in addition to any
requirements for a data matrix to be placed directly on the part.
46
5.2.3 Supplier Quality and Customer Quality
Function: Supplier Quality's function is to monitor the quality of the incoming parts from
suppliers and help establish the specifications and metrics through which the quality of
the material will be analyzed. Some employees are on site at the suppliers, others assess
new suppliers, and others inspect inbound material.
Need: IUID could enable electronic test records to be linked to specific parts. Currently
there is little consistency for data from part to part or even within part numbers. Records
are traditionally on paper so accessing them in the data bank becomes difficult and time
consuming. Organizing test data to match specific contract requirements would also be
beneficial.
It seems that data matrix combined with a clean database could be beneficial. The
database organization would be the driving factor in enabling quick access to test data.
The data matrix technology would just be one method for achieving this result. Since bar
codes are typically on the packaging for the parts it would be harder to use bar codes for
this application. Serial numbers, on the other hand, could easily also be used for this
application. This solution requires suppliers to mark the parts and to integrate databases
with Raytheon.
5.2.4 Quality Assurance (Program/Manufacturing Quality)
Function: Each Program has its own quality control to ensure that deliverables are made
to specification.
Need: Often times an entire lot of one item needs to be extracted from a set of
deliverables but it is unclear which lot the hardware came from. In one instance, two
different lot codes were assigned to one Purchase Order. Unfortunately the Purchase
Order was the only basis for numerical tracking of the component so there was no way to
47
discern which components belonged to which lots. Unit level data matrix serial
identification would have solved this problem.
5.2.5 Configuration Management
Function: The Role of Configuration Management is to maintain records of the specific
components that are contained in an assembly. Often times, the prescribed components
(often called the AS-Designed) may not match the set of components that comprise the
configuration on the actual piece of hardware, called the AS-Built configuration. These
discrepancies must be highlighted, understood, and justified.
Need: There is a great need to be able to identify a part immediately through scanning it
and correlating with a database to determine its unique identity. The current tracking
numbers make this possible, but uniqueness down to all of the small components is not
always marked directly on the parts but rather is catalogued in the build history books
associated with the deliverable. IUID on all components could help this identification
process.
It is expected that Visiprise Management (VM) will help configuration management in
comparing the As-Built vs. As-Designed configurations. However it should be noted that
time spent in the process is generally not in identifying a discrepancy, but rather in
determining the cause of the discrepancy.
Another large problem that triggers errors in configuration management is that bar codes
are often incorrect due to manual mis-keying errors. Unique Item Identifiers are assigned
by computer and not keyed inputs which would help minimize this error. In addition, in
the event that Unique Item Identifiers are manually entered, they do still need to be
verified. The verifier could help diagnose this type of error.
48
5.2.6 Operations
As highlighted in section 4.2.2 there are a number of opportunities using the Unique Item
Identifier or sequence of Ulls (with or without the data matrix) within the context of the
Shop Floor management System. The concept of using a universal construct that is
consistent across the industry is powerful. The difference in construct from the Shop
Floor Control number is simply addition of the Commercial and Government Entity
Code, so executing the change would not be difficult. The following sections are focus
groups that were held within the operations function.
5.2.6.1 Operations - Solid State Microwave
Function: Solid state microwave assembly is a major center of operations within Space
and Airborne Systems.
Need: For rework and repair processes in Solid State Microwave assembly, a paper trail
with the serial numbers and of the current and maintained configuration follows the
components around in rework bins. Occasionally there is a mix-up between the
paperwork and the circuit boards. To prevent this, sometimes stickers with handwritten
part or assembly serial numbers are attached to assemblies. Item Unique Identification
integrated with Visiprise Management software could aid tremendously in preventing
mix-ups and in streamlining configuration management in the repair process.
5.2.6.2 Operations - California Manufacturing Center
Function: California Manufacturing Center is another Center for operations within El
Segundo.
Need: A similar type of tracking system has been put together for a specific program
within this manufacturing center. It involves marking stickers with sharpie markers to
49
track manufacturing through the assembly process. Item Unique Identification using
direct part marking (especially in conjunction with Visiprise Management) could
streamline production.
5.2.6.3 Operations - Strategic Systems
Function: Strategic Systems is a business unit within Space and Airborne systems which
focuses on Space applications.
Need: One big issue that is being addressed is the importance of separating and
distinguishing deliverable and non-deliverable hardware. Since so much development
and testing occurs at Raytheon it is difficult to separate development work and
production work. Great pains are taken to try and achieve this through physical
separation for work space, equipment, storage areas etc. Enforcement of this separation
is expected at the highest levels in the case of any audits. Item Unique Identification
would be an easy way to distinguish items that are deliverable vs. non-deliverable
hardware.
5.2.7 Production Control
Function: Production control's job is to verify that items are assembled according to the
specifications. There were a variety of tracking issues that production control faces:
Mix-ups from simultaneous assembly of multiple kits and products - Often times
there are multiple assemblies that are being worked on simultaneously. These assemblies
may have virtually identical assembly kits that are assigned to the particular assemblies
for the next phase of assembly. However this often leads to mix-ups where components
from Kit B do not go to Assembly B.
50
Rework Misallocation creates loss of trace and product loss - If a component ever
needs to be removed during assembly, its traceability can be lost (assuming all
identification is not clearly marked on the part or records linked to the build history
book). Often, systems are in put in place which match components to the assembly from
the packaging that they come in, but once packaging is thrown out often the trace is also
gone. Many times once a component is removed it needs to be disposed. Component
level IUID would help this problem.
Rework Misallocation prevents systemic problem identification - In the event that a
malfunctioning part is removed and traceability is lost, it generates an even larger
problem because this could prevent diagnosis of the problem to a larger lot. Item Unique
Identification could help minimize this phenomenon.
Non-kit Part can enter into the system - Lack of traceability at the part level can leave
the opportunity of foreign parts to enter onto the assembly that were not originally part of
a kit intended for the assembly.
5.2.8 Logistics - Shipping
It is shipping's function to validate that the item has been built according to contract and
that the correct items are being shipped to the correct locations. In addition, shipping
must load all deliveries to the government into a common system called Wide Area Work
Flow (WAWF). Currently there have been numerous efforts to integrate RFID into
shipping and loading into the Wide Area Work Flow software. However RFID has not
addressed unit level identification and verification before shipping. Currently this is done
with either bar codes or manual data entry of end item identification information.
51
5.2.9 Logistics - Property
Within Logistics, the property group is involved with tracking, maintaining, purchasing,
and accounting for property both owned by the government or by the contractor. While
there is an Item Unique Identification mandate on Government Furnished Property or
Contractor Acquired Property including Special Tooling, Special Test Equipment,
Industrial Tooling, and other plant equipment, there is not a mandate on all property
within Raytheon. As stated in Chapter 4, RFID pilots have shown that there may be
potential benefits to implementing IUID above and beyond the mandate to help with
internal processes such as improved tracking, unneeded rentals, and property loss. 33
Unique Identification also provides the opportunity for enhancing the accuracy of
property maintenance records and the speed at which they are updated.
5.2.10
Financial Accounting
Every year, property accounting (involving the completion of a1662 form) consumes
almost an entire month of activity for the property teams. Much of this activity consists
of physically hunting down and finding pieces of property. The introduction of the
virtual unique item identifier or unique item identifier provides opportunity for
expediting current identification techniques for both new and legacy equipment.
5.2.11
Components Engineering
Engineering, which is responsible for the design and development of hardware, also
highlighted a few problems that enhanced part traceability or information could improve.
It echoed many of the same problems that are plaguing production control and
configuration management in terms of maintaining traceability. In addition, property
Office of the Under Secretary of Defense Acquisition, Technology and Logistics, "Government Personal
and Real Property In the Possession of the Contractor (PIPIC) - Guidance for Industry Transition from the
DD Form 1662 in Support of Defense Federal Acquisition Regulation Supplement", August 18 2005.
3
52
tagging and distinguishing between flight and not flight hardware were needs that were
identified.
5.2.12
Repairs, Depot Operations, and Services
Repair processes on Raytheon Equipment are performed at a variety of locations within
the value chain. Initial investigations highlighted that there were several opportunities
for IUID to help in the repair process; these will be elaborated upon in the following
chapter.
5.3 Selection Process
The four week intensive study of many of the functions and their needs for traceability
and information was comprehensive. Over twenty need areas for Item Unique
Identification were highlighted by the different functions. As shown in Figure 7, this
study requires a more detailed focus of a few of the largest needs, thus the 22 needs were
narrowed down to one area of focus.
Preliminary Need Finding:
-19 Functions
ooooooooooo
Uoo o0
V0
0
-100+ interviews
- 22 Needs identified
Three Major Need Areas:
- Assembly Operations
- Repair Operations
-Property Management
Figure 7: Need Finding Process
5.3.1 Three large opportunity areas
As shown from the manufacturing process map in Figure 6, the major categories of
Quality, Operations, Supply Chain, Engineering, Accounting, and Finance all have a fair
53
bit of overlap. Within these major categories three major subgroups emerged as the most
promising: manufacturing operations, property management, and repair operations.
There were a few factors that led to this first set of narrowing.
With the onset of Visiprise management bar codes have become ubiquitous for packaging
on inbound materials. With the exception of using Ulls on packaging, it seems that IUID
part mark would add the most value for applications where components and
subassemblies have left their packaging and lost some of their traceability. This helped
identify manufacturing and repair operations as opportunities with high potential.
Further, there were a variety of applications that would have benefited from associating
data to the specific unique item identifier. While this is extremely valuable, the crux of
this type of implementation would lie in the database change and the link to information,
not in the medium or technology used for identifying the part. RFID, Bar Codes, or even
manual entry of serial numbers could be appropriate methods to use the UII construct.
This study chose to focus on capturing value from the investment that will already have
been made to comply with the mandate.
5.3.2 Property: Happening on its own
From the three target areas of property, manufacturing operations, and repair operations a
few additional considerations helped narrow the field further. While property seemed to
have some needs for IUID through improving accounting, maintenance information, and
reducing man labor in property tracking, it seems that RFID might lend itself better to
this application. Active RFID tags have all of the benefits of IUID and also enable
pinpointing the location of a piece of property. The property RFID pilot in Goleta has
already shown tremendous success. In addition, assigning virtual IUIDs and Unique Item
Identifiers to the registry are implementation requirements of the mandate that are
naturally going to lead to improved execution of the 1662 process. These realizable
benefits are low hanging fruit and will likely be achieved independently from this study.
54
5.3.3 Manufacturing Operations: On Hold
The final decision, to focus on Repair Operations over Manufacturing Operations was
based on four reasons. First, since the full implications of Visiprise Management have
yet been realized, it made sense to understand the effects of the changes before running a
pilot program. Secondly, since tighter controls over configuration can be achieved inhouse, there is a greater need for materiel verification of configuration when the
repairables come back in the door. Third, as mentioned above, this study focused on
capturing value from the direct investment made to comply with the mandate.
Incorporating the UII and IUID into manufacturing operations may require significant
additional investments to modify packaging and labeling. Finally, since the repair
processes are often simpler than manufacturing processes it was determined that there
was a higher likelihood to uncover better and more tangible data from the history of
Repair Operations (specifically Performance Based Logistics programs) than from
Manufacturing Operations.
However, even though the focus of this study is on repair operations, some of the analysis
has been applied to manufacturing operations because of the tremendous potential for
savings.
Figure 7 Summarizes the Need Finding Process and selection discussed in this chapter,
Chapter 6 will focus specifically on applications of IUID to Repair Operations.
55
6 Scenario Evaluation: Repair Operations
Raytheon has some type of repair program established for the majority of the products
that they deliver, be it a warranty, the selling of spares, established repair operations for
serious malfunctions, et cetera. The repair programs within Raytheon often have
different processes to achieve their goals; there is by no means a lone standardized
process. Many times repair operations and supporting software are different from
standard manufacturing operations for the same product.
The Army, Navy, Marines, and other customers all have their own protocol for repairing
damaged or malfunctioning equipment. In the Navy for example, simple repairs are
performed at what is called the organization level within some of the customer sites.
More complex repairs are performed at the intermediate maintenance level. These
repairs are typically characterized as those that need to leave the facility and move into
another building. Raytheon is seldom involved at the organization and intermediate level
of repairs. For even more advanced repairs, action is required at the depot level.
Raytheon often sets up Depot operations near the customer sites, or supports repairs from
the site of manufacture.
If a problem has been diagnosed to a specific Raytheon product or module, often the
customer is contractually prevented from opening or breaking the seals on the module.
Typically the module is extracted from the product and sent back to either a Raytheon
depot or a Raytheon repair facility.
Assemblies often return from the field with few or little indication of which assembly
they are, what location they came from, what problems they have exhibited, or what
diagnostics have been performed to date. Since the products have been out in the field,
the original packaging is gone and the repair depots need to make the assumption that the
configuration of the unit has been unchanged since it went out the door - unfortunately
this is not always true.
56
A specific class of repairs called Performance Based Logistics (PBL) programs have
contracts structured very differently than typical repair programs. Performance Based
Logistics Programs are structured such that Raytheon receives a set amount of money per
year to repair and maintain the fleet of products in the field. Raytheon is rewarded on
metrics such as the percentage of items that are operational in the field and turnaround
time for replacement products. Thus, Raytheon has an incentive to accomplish the repair
process as seldom and as efficiently as possible. Thus there is a large incentive for
Raytheon to reduce errors in the production process in order to minimize repair costs.
Any increases in operational effectiveness can help yield even greater financial gains for
projects. Performance Based Logistics programs were studied in detail for this analysis.
Research yielded several areas of opportunity for the application of IUID technology in
the repair processes.
1.
Configuration Management- Improved tracking of the entire bill of materials
would provide the ability to track the "AS-built" vs. the "AS-modified" versions
of the assemblies
2.
Maintenance Data - IUID could correlate the lifetime of maintenance data
gathered in the field to specific units as they come in the door.
3.
Malfunction Diagnostics - Through in field updates, IUID could correlate
specific malfunction data and tests that were performed to expedite repairs. This
could streamline the process of initial malfunction diagnostics.
4.
Inventory Management - Improved tracking and logistics would provide better
visibility on the location of specific units and therefore the inventory required to
maintain a fleet.
5. Data Entry Errors - Through improved data entry of part identification numbers
costly rework errors can be avoided. Rework will create savings from both
material and labor. In addition, automated data entry, rather than manual, will
have direct labor savings.
57
Conversations with the heads of Performance Based Logistics programs provided great
insight into how IUID might best be used. After an initial investigation it was determined
that the first four opportunity areas would not be focused on for two main reasons:
First, although satisfying the need areas were critical to the repair process, the heart of
the solutions required connection of the tracking technology to a robust database. Thus,
since identification method was not necessarily technology dependent, there wasn't
sufficient evidence that an IUID solution was a superior to Bar Codes, RFID, or even
manual data entry given the volumes of repairs that Raytheon was handling.
Secondly, Raytheon Performance Based Logistics Programs have fairly well developed
software systems with manually entered (typed) inputs that were generally regarded as
satisfactory in addressing the first four needs.
However, by simply automating the inputs of identification numbers it was presumed that
costly data entry errors could be avoided, especially for higher volume repair programs.
Repair processes typically involved multiple workstations which required part
identification to be repeatedly entered manually at a dedicated computer terminal.
Several incidents in the repair process cited below could be diagnosed specifically to
incorrect product identification or data entry errors:
*
Paperwork errors
" Processes performed to wrong assemblies
*
Incorrect component removal
" Damage or loss of components or material
Figure 8 shows how the study was focused even further on addressing three very specific
questions about the repair process.
58
Preliminary Need Finding:
-19 Functions
-100+ interviews
0000000
- 22 Needs identified
0 0000
OOOO3OOOOOO
00
Three Major Need Areas:
- Assembly Operations
- Repair Operations
- Property Management
Nine Need Areas within Repair
Operations and Performance Based
OO*o
Logistics
OO
-L a.bor f ro r
- Maeilosfo
r r;i ndaaenr
aaetyerr
Figure 8: Need Search Narrowed to Three Specifc Opportunites
The challenge in this study is to quantify savings from using IUID to automate product
identification; the following chapter focuses specifically on the process used to perform
the estimate.
59
7 Analysis
Performance Based Logistics programs were chosen as study candidates for the repair
process. It was assumed that these programs were the most avant garde of the repair
programs and not only would have better data on their repair operations, but would be
more likely to adopt recommendations of this study.
Information on the thirty Performance Based Logistics programs across Raytheon was
gathered. This study isolated four specific programs for further analysis. The projects
were chosen to give an accurate representation of the different types of repair programs.
Thus they differ substantially in volumes, processes, logistics et cetera. Confidentiality
prevents detailed disclosures on program specifics and the nature of the repair items.
Two programs were in Goleta, CA, another in El Segundo, CA, and the final program
had joint operations out of Chula Vista, CA and Norfolk, VA. On site visits were
conducted for each repair facility to meet the management team for each program and to
have an improved understanding of the distinct repair processes.
Detailed calculations within the model were divided into major sections and can be
studied in Appendix A-D. This chapter explains the methodology and basis for the
calculations which lead to a complete model. Figure 9 shows the progression of this
methodology which will be walked through in this chapter. The most complex
calculation is the "Cost Error", this it will lead with a description of a "Chance of Error".
Sensitivity Analysis will not be included in Part I - III, but will be revisited in Part IV
*
Part I: Assumptions
*
Part II: Chance of Error
" Part III: Calculations of Variable and Fixed Costs/Savings
" Part IV: Error Analysis
60
Eq
sutmpbons
Eqn
Figure 9: Analysis Methodology
7.1 Part I: Assumptions:
Information on each program was collected through interviews, data mining, and
calculations on the following topics: detailed repair history, repair procedures, repair
duration, history of material loss and damage, repair volumes, data entry methods, work
flow et cetera. Approximately 75 assumptions were used in this model. Assumptions
were divided into two categories:
Strong Assumptions:
Strong Assumptions may be derived from:
* Detailed company records
" Accurate price quotes
Examples:
" Repairs per year
" Cost of labor
" Program Budget
* Cost of Readers
61
Weak Assumptions:
Weak Assumptions may:
*
Require some analysis
" Estimation from past experience
*
Require several assumptions based on averages
Examples:
" Annual component or material loss due to rework
* Time required to correct a paperwork error or make a drawing change
" Seconds saved through manual versus automated data entry
Approximately 20 of the assumptions were Strong Assumptions and 55 were weak
assumptions. The assumptions are listed in their entirety in Appendix B.
Relevant Program Based Assumptions
The programs studied varied substantially in repair process and type, Table 6 highlights
the critical differences in annual repairs and number of workstations. The differences in
these two variables are the heart of nearly all of the variation in Return on Investment for
the various programs. Due to confidentiality, program budgets are not disclosed,
however it is important to note that marking costs for equipment were calculated as a
function of program budgets.
Table 6: Relevant Program Based Assumptions
Program
Repairs Per Year
Workstations *
A
1400
14
B
284
7
C
44
5
D
200
1
* Stations in repair process with dedicated computer terminals where manual data entry of unit identification numbers
(serial number, assigned SPIT number, or a combination between part and serial number) occurs
7.2 Part H: Chance of Error
Although the types of problems that can arise from data entry errors are clear, the
frequency with which they occur is not. Studying all types of errors that have occurred
62
from known and unknown causes helped generate an estimate of the severity and
prevalence of data entry errors. From program data and conversations with the leads of
the repair programs, logic trees were created to estimate the probability of the following
events occurring after an incorrect identification error:
* Immediate correction of Incorrect Entry
*
Insignificant Error - Paperwork
*
Significant Error - Rework (labor only)
*
Significant Error - Labor and Material
*
Error not detected
One of the major assumptions of the model was that the inaccuracy of keystrokes is
1/300, thus with 95% confidence we can assume that every stroke has a 0.33 0.05%
chance of being incorrect. 34 Although there have been a few different studies which have
generated slightly different values for this estimate, this assumption is widely used by
numerous corporations that are comparing accuracy of bar coding technology to
automated entry. By contrast, once properly calibrated, data matrix scanners have a
0.0003% chance of reading a matrix incorrectly.35
After the identification number is entered, the logic tree develops as shown in Table 7.
For each program, probabilities were estimated, averaged, and assigned as shown below;
sensitivity will be addressed later.
TalTech: Resources, TalTech Incorporated, November 22 "d, 2005,
<http://www.taltech.com/TALtech web/resources/intro to bc/bcsymbol.htm>.
3 Ibid.
3
63
Table 7: Logic Tree for Chance of Error
Level 1
Level 2
Level 2
After incorrect entry is created:
Discovered Immediately, no repercussions
Discovered by Work Station, Subsequent Workstation, or Production Control
Error Not Found
Once Error is Discovered:
Error is insignificant - paperwork change
Error is significant and requires rework
Error is significant and results in Material/Component Loss
If Error is not detected
Error does not Cause Failure or Loss
Error does cause Partial Product Loss
75%
20%
5%
80%
15%
5%
90%
10%
These assumptions lead to the following probabilities:
Table 8: Probabilities for Error**
Probability
3.927%
2.945%
0.628%
0.118%
0.059%
0.177%
Scenario
Incorrect Data Entry*
Immediate Correction - no impact
Insignificant Error - paperwork
Significant Error - rework (labor only)
Significant Error - labor and material
Error not detected - no complications
* Assumes data string length of 12 characters.
** The overwhelming majority of paperwork and significant errors are discovered in
configuration management at the end of the repair process. Thus, it was assumed that increased
number of workstations in a repair process did not increase likelihood of discovery of an error.
7.3 Part Ill: Fixed and Variable Costs/Savings Calculations
The following were additional estimates that were key components to the model followed
by a few sample assumptions that were needed to derive the costs. Detailed Assumptions
and values are shown in Appendix B.
"
Cost of Errors: Material Loss and Time lost from: Immediate Error Discovery,
Insignificant Error, Significant Error et cetera.
*
Cost of Adding Scanning Stations: Cost of Scanner, Labor Associated with
Implementation, Software installation et cetera.
64
"
Cost of Marking: Equipment costs, raw materials used to mark the products,
time required to update drawings et cetera.
* Cost of Labor to update Drawings and MFG: Assumptions of Labor Rates for
associated functions required for update, duration of task for each function
* Extrapolation of Costs and Savings across Programs: Repair operations
program budgets, Performance Based Logistics program budgets. Extrapolation
assumptions were based on revenue of the programs studied as a function of
revenue of total program repairs.
7.4 Part IV: Error Analysis
Some assumptions were specific to a particular program; other assumptions (such as the
logic tree above) were derived from an average of the four values collected from the
Performance Based Logistics program leads. To simplify the error analysis, it was
assumed with 95% (two standard deviations) confidence that:
*
Strong assumptions were within
15% of estimated values.
*
Weak Assumptions were within
25% of estimated values.
These values reflect confidence in assumptions for nearly 20 participants that were
involved in the data collection and generation process.
Error analysis was performed according rules cited in John Taylor's error analysis for
independent and dependent variables. 36 The specific error estimates and how they
influence the model can be seen in Appendix D. Table 9 highlights a few examples and
shows how the error analysis was performed on the model. Two examples will be
expanded below.
For the product of X and Y in the independent case it was assumed that Variance (XY)
= Var(X)Var(Y) + Var(Y)[E(X)] 2 + Var(X)[E(Y)]2. Thus in the case that we are 95%
(two standard deviations) confident that x= 10 2.5 and y=100 25, we know that:
36
John Taylor, An Introduction to Error Analysis (Sausalito: University Science Books,
1982), p. 40.
65
Standard Deviation of X=1.25
Standard Deviation of Y=12.5
Variance of X=1.5625
Variance of Y= 156.25 since (Standard Deviation )2= Variance.
Thus according to the formula above we know both that:
Var (XY) = (1.56 * 156.25) + ( 156.25 * (10)2) + ( 1.56 * (100)2) = 31,494
StDev(XY) = 177.5
Thus we can determine with 95% confidence that the product of x and y will be 1000
355.
For the product of X and Y in the dependent case, the errors were multiplied. For
example, as shown in Table 9 we can assume with 95% confidence that the two weak
assumptions ( 25%) of x= 10 2.5 and y=100 25 can be calculated as follows:
Low:
7.5 * 75 = 562.5
High:
10.25 * 125 = 1562.5
Thus we can be 95% confident that the product is between the values of 562.5 and
1562.5. It is important to recognize that the overwhelming majority of variables in this
model were considered to be independent. The error of the sum of x and y is a much
simpler calculation and is highlighted in the table below:
-x
1000
xy
1000
xyz
xyz
562.51
645.1
1562.5
1354.9
90000 405 0,, 8750.0
90000 58040.0 121960.0
137.5
82.51
110
x+y
110
849
135 1
note 95% interval = 2 standard deviations
x+y
stdev variance: low % high
1.25
1.56:
0.250!
0.250
12.50 156-25
0.2501
0.250:
9.00
8100
0.2001
0.200:
%
Table 9: Sample Error Analysis
E
low
high
x10
5
12.5
y
125.0
1 00
7 5 .0
_____
90
72.0
1080
250.0
177.5
62500
Weak Assumpiton
Weak Assumpiton
Strong Assumption
31494:
0.438
0.355
0.563
0 355
Assumes Dependent - Consewatwe
Assumes Independent
320625 1.03E+09:
15980.0 2.55E+08
0.5501
0.355
0.875
0.355
Assumes
0.250
0.250
Assumes Dependent - Consevatve
Assumes Independent
13.75
12-56
189.06,
157-811
66
O 228
0.228
ependent - Consewative
Assumes Independent
8 Results
As shown in Figure 9, the previous chapter walked through the initial assumptions of the
model, the estimation of the chance of errors, the various costs/savings associated with
scenario implementation and how it was extrapolated across total repairs and operations.
This section will take the analysis and synthesize it one step further to yield results for:
"
Fixed and Variable Savings/Losses from Scenario Implementation
"
Full Burden vs. No Burden Results
*
Ten year cumulative post tax discounted savings
" Ten year Return on Investment
" Labor vs. Material Savings
" Discounted vs. Non Discounted Savings
" A "Reality Check" to determining accuracy of the estimate
8.1 Fixed and Variable Savings/Losses from Scenario
Implementation
The analysis in Chapter 7 walked through the methodology to calculate the variable
costs/savings for: Marking Costs, Labor Savings, and Material Savings. It also addressed
the fixed costs of: Reading Equipment, Marking Equipment, and Labor for instituting
IUID. Table 10 and 11 summarize these calculations for Programs and Extrapolations
across Raytheon.
67
erations
8.2 Burden vs. No Burden
No Burden scenarios are defined as cases where automated data entry capabilities were
created for a program that was already required to mark their assemblies with IUID
marks. Full Burden scenarios are those in which Raytheon decides to mark an assembly
on their own accord (not required by customer). Thus, the cost of Marking, Reading
Equipment, Marking Equipment, and Implementation Labor all need to be factored into
the investment cost.
Tables 10 shows the benefits of the full burden scenario for the specific programs
studied and Table 11 shows the benefits of the full burden scenario for the results
extrapolated across Raytheon. Extrapolation assumptions were based on revenue of the
programs studied as a function of revenue of total program repairs. No burden scenarios
can be calculated by not including the values in italics.
68
8.3 Ten year Cumulative Savings and Return on Investment
While the estimated savings through implementing automated identification are
substantial, it was evident that estimated savings varied significantly from Program A to
Program D and over time. Thus, several in depth cash flow analyses were created to
address the cumulative savings over a 10 year period. Taxes, depreciation, discount rate,
and inflation (and the corresponding uncertainty for discount rate and inflation) were all
considered in these discounted cash flow statements. Table 12 shows a sample cash flow
analysis of the full burden scenario for Program A to yield the net cumulative ten year
discounted savings after tax.
69
Table 12: Ten Year Future Cash Flow and Return on Investment for Program A under the Full Burdon Scenario
$
.......... ...................
................
.......................
.........................................
...........................
........................................................................
.....................
....
........................
.....................................
..................
..........
............
............
.........
-...
.....................
...........
..............
............
Progi-am A - Full Burden
Year
Year
Year
year
Yew
Year
Year
year
CASH FLOWM4PACT
Investmeftt
1
2
3
4
5
6
7
L:
8
L 9
10
Total
Investment
Cash
Flow
..................................
......................................................................................
..
..................................
......
...................
.....................
.....
..................................
..............
.......................................
..............
.............
.
....
......
..
....
.....
..
......
...
.....
.........................
.................................
...................
(assume captalzable)
S
6,446
S
6,446
Total Investment
(6 446)
(6,446)
PIV of............................................
Total Investment
(6,446)
(6,446)
...........
I...............
...............
........................................
................................
.........
.....
...........
..................
.............
...............
...............
......
........................................
..............................
..........
...................................
...........
.......................
.......
..............
------.........
...
. ---------------------.....................
.---------OperatingCash Flow
.............
........
........
....
--- ---Expenses .................................................................................................
..
..
..
..
.....
....
....
...
.....
..
...
... .......
.
......................................
...
...
..
...
...
....
............
........................................
........................................
.........................................
..................
...............
......
..
.................................
...........
645 S
645 3
645 S
6.446
S
645 S
645 S
645 S
64 S
645 S
645 S
Depreciation of Equipment Purchases .......
...
..
..... 3
Implementation Costs for Reading Stations
13 20,400
S 20,400
-------------------------------------------------------------........
....
LabDF..........
fDr-.1
UID
update...
(assumn
......
Legacy ftem)
38,0191
5 ......
38,G19
............................
........................................................................
..................................................
..
...........................
............
....................
...............
............
.................................................................
..........
...............
................
........
I..
............
Marking Costs (Labor + Materials)
3
919DS S 10,206 3 10512 13 10828 1S 11,153 S 11487 S 11,832 S 12,187 S 12,552
12,M i 5 113,596
Project Management
.............
............
S .........
13
197 ..........
3 ..............................
13 574 --3--------------------178,460-13...
11,47+2
3 ..................
11,797 3 12,132 S 12,476 S 12,831
3 68,973......
S 10,851
S 11,157
Total Expenses .. ........
.............................
..................
....................
.......................
- ..........
...
.....
...............
...
.....
..........
...
....
..........
.........
..
..........
........................
.......................
.........................
..........
..........
.............
..............
.....
...........
.....
..................
...
....................................
savinas
---------------------------------------------------S ..............................
6,016 5 52,853
S .............
SSD5 ..................................
S
5,670 ........
S ....
5,840
5,038...
1...
S.......
S
5,345 ............
4,610 S
4,749 S
4,891
S
3
Cost
of Labor
for Entry
i......
..
...
......................
..
..
...
..
..
..
.......................................................
.. ......
.................................
..
.....
...........
.............
I...............
...............
.....
5 442,140
3 47,434 ...................
S 48,857
S 50,323 .........................
S 44,711 3 .....................
46,052 ........................................
39,725 .....
3........
40,917 S 42,144 1S 43,409
38,568 3........
Cost
of Labor
from Data. Entry Errors
..................
.............
...................................
....................
.......................
--............................................................................................................
73,136 S 75,330 S ------661,854
13 57,734 i 3 59,466 3 61,250 S 63,087 1S 64 9W 1S 66,M S 68,937 S 71,OH
Parts
Cost of
------- ------- S
.........
.... frDm Data Entry Errors
......... ......
131668
$1,156,848
103,WO
107,058 3 1,10,270 1S 113,578 S 116,995 S 120,495 S 124,110 S I ?T,83 3......
$ 1+00912
I.....
Savings
Projected
Total
...............................
.............................
......
..
..
...........
....
.................................
...............
.......................
..............
.......
..........
...
..
...
. ...
..............
.......
..........
...............
I.........................
..........
...............
..........
......
................
................
................
..........................
.........................
.................
............................
.......................
...........
............
...............
................................
....
..
..
..
......
.....
..........
...........
.............
...................................................
1,14,636
3 118,094
$.................................
108,018 ............
..
....
....
...
S 978.388
8
93,089 3 95,9DI S 98, 7971, 3 101
Net Savings and f xpense
41,333
S 342,436
i
$
40,123
$
3
37,806
S
38,947
35,623
S
36,699
$
34,579
S
3
32,581
S
33,565
3
11t179
Tax
Income
......
...........
...............
.
....
.
..
.
......
.................................
.
..
.................................
.
.........
.....................................
.......
..................
.
...............
.............................
..........................
...........
.......................
.........
..........................................
....................................................
....................................................
645 S
6,446
645 S
W IS
645 S
64-5 3
645 S
645 S
645 S
645 3
645 3
DepreciatiGn ...................
Add. back
I.................................
..........
.................................
S 21,05 3 61,152 3 62,980 S 64,863 $ 66,802 $ 68,799 S 70,856 3 72,975 S 75 1581 $ 77,406. $ 642,398
Cash
Flow After Tax
Operational--------------------.......
..
...
...
.............................
....
....................................
.......................
....................
..............
............
........................................
..............
.......................
..
.......
..
...
..
..............
...................
..........
.....................
............................................................
77,406 S 635,952
S 68,799 S 70,9561 3 72,975 $ 75,158
$ (6,446)i 3 21,405 3 61,152 3 62,M S 64,863 S 66,802
Total Cash flow
................
........................
..........................................
...............
I.
..................
41,104
S
1S 43,981
38,414 $ 35, 1 S 33,552 $ 31,357 S 29,306 S 364,012
Present Value Total Cash flow
3 (6,446)1 3 19,424 S 50,356 1; 47,061
..........
...............
............
.......................
..............
............
...............
..............
...
........
.
..........
.......
. ......
.......
.....
................
..................................
.....
..................................
.....
................
...................
..............
...
...
..
..................
.......
...
....
..
..
..
..........
....
........
.............
...................
.......339,556 S 410,4131 S 483,388
1..........
S 635,952
558,546
$ ....
635,952
203,,955
S 27-0,757
S..................................
139,092 t................................
1 S ...........
76,112
14,960
13
(6,446)13
Cash
Flow
Cumulative
........
..........
....
.*..
..............
..
..........
--...............
...
.............................................
--............
........................
..........
........................................
.....
..........................................................................................
.....
.......
...............................
$ (6,446)1 3 12,97-9 3 63,334 3 110,39515 154,3771 $ 195,48D S 233895 S 269,796 3 303,348
Present Value Cumulative Cash Flow
......................
.........................
.........................
................
I.............
.........................................
.................
.............
...............................
-
-
FinalStatistics .....................
ASSUMPTIONS
.................
............
....................
...........................
...
.................
.......................
..
.........
..
...
...
..........
.........................
..........
........................
...............
..............
.......................
..............................
.......
.....
....................
..................
$635,952
Net Cash Flow-- Life-of-Project
'Tax Rate
---- ---------------- 35.0%
- - (aliKIM
..... .. ... ..... ... ..... ..... ... ............
3",012
ValueI...........................
(after tax)
Net Present
10.2% ...........................
Discount.Rate
.....................
............................
........................
.........................
.................................
...
...
...
....
......
.............................
-...............................
...............................
........................................
......
...................................................................
....
..
..
..
..
....
...
2.2
Rol
3.00%
Increasing Cost of Labor and parts
......................
................................
....
........................................
....................................
..........
.......................
70
From the cumulative savings, it is easy to calculate Return on Investment over the same
ten year period, as shown in Table 13. It is obvious that Programs A, B, C, and D exhibit
quite different returns which can be directly attributed to variation in program repair
volumes. Table 14 summarizes the return on investment and its uncertainty for the four
programs.
Table 13: Ten Year Return on Investment
8.4 Labor vs. MaterialSavings and Discounted vs. Non
Discounted Savings
Figure 10 highlights the savings attributed to material versus labor over a ten year period
for Program A assuming a no burden scenario. Figure I1I highlights the significance of
the discount rate on the projected savings over a ten year period. Again, the sensitivity of
the discount rate and inflation were factored into the confidence intervals in Table 14. To
simplify calculations, the Discount Rate and Inflation were assumed to be weak
assumptions with variation of +/- 25% over the 10 year period, not within each year of
the ten year period.
71
Program A Cumulative Savings
Savings
$500,000
$450,000
$435,448
$400,000
$350,000
$300,000
$250,000
$200,000
$179,436
$150,000
$100,000
$50,000
$8,411
$(50,000)
0
1
2
3
4
5
6
7
8
9
10
-
Labor Savings - Data Entry
-
Labor Savings - Data Entry and Error Prevention
-
Material and Labor Savings - Data Entry and Error Prevention
Year
Figure 10: Labor and Material Savings over time: Program A over time
Cumulative Cash Flow
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$(100,000)
0
1
2
3
4
5
6
7
Figure 11: Significance of Discount Rate
72
8
9
10
8.5 Reality Check
Depending on the program, material loss constitutes between 55% and 85% of total
savings derived from using IUID for part identification. Very approximate figures of
annual material loss and damage were estimated by each Performance Based Logistics
lead at the outset of the study. As a "reality check" the estimates of material savings
from the study constitute an acceptable percentage of total losses as shown in Table 15.
If, for example, the study had highlighted that more than $60,000 in savings could be
achieved from a reduction in material loss and damage for program D, it would be hard to
believe, considering that losses attributed to ANY cause were estimated at $60,000 per
year.
Table 14: Savings attributed to Data Entry Errors vs. Known Losses
A
$300,000
B
$300,000
C
$75,000
D
$30,000
$300,000
$300,000
$75,000
$30,000
Total Estimated material losses from any cause
$600,000
$600,000
$150,000
$60,000
Calculated material loss/damage per year from
part Identification Data Entry Errors
% of Product Loss or Damage attributed to
part Identification Data Entry Errors
$57,734
$35,135
$3,240
$2,356
9.6 %
5.9 %
2.2 %
3.9
%
Program
Estimated material DAMAGE per year from
rework
Estimated material LOSS per year
Since the projected annual savings from data entry errors constituted less than 10% of
estimated annual material loss or damage in all four cases, it can be determined that these
estimates are indeed within acceptable bounds. This reality check adds credibility to the
accuracy of the analysis.
73
9 Conclusions
The quantitative analysis in this study focused on addressing a very specific problem.
However, it required understanding of the much larger landscape of tracking and
information technologies at Raytheon. It is important to recognize that this analysis has
been performed on only one cost saving opportunity and that it is quite likely that there
are additional benefits from IUID and the UII construct. In order to encompass both
macro and micro level implications of this study, three questions will be addressed:
" How much money is this going to save?
" Is this technology going to last?
*
Is this a process improvement?
All of three of these elements need to be satisfied to justify leveraging IUID.
9.1 Return on Investment - Show me the money!
In order to justify a process change, it is critical to quantify how much savings can be
generated. A ten year evaluation on return on investment was chosen because it
adequately reflects the clock-speed of technology adaptation in the aerospace industry.
From a financial perspective, it is difficult to justify implementation based on solely a 2x
return on investment over a ten year period, especially considering the uncertainty
associated with the estimates. Thus larger projected returns such as 5 and 10 times the
initial investment must be expected in order for a program to be seriously considered.
As shown by the analysis, the proposed solution of using IUID scanners for automated
assembly identification (in the repair process for programs where IUID has already been
mandated) can achieve in excess of 20x the rate of return in specific scenarios. Volume
of repairs and number of repair stations drive savings. The model shows that one can
expect greater than a lOx return on investment (with approximately 50% uncertainty) for
programs with over 500 repair items per year as well as at least 5 manual identification
stations. This was derived from applying average values for all of the program specific
assumptions.
74
The extrapolation of the analysis for the proposed solution through both repairs and
normal operations generated a savings of greater than $21.8
12.2 M per year for a full
adoption of this method. As the analysis shows, it is likely that the minority of programs
with high volumes and many repair workstations will constitute the majority of savings.
9.2 Technology Evaluation - Where is this technologygoing?
From the outset of the project it was apparent that there is uncertainty within the
Department of Defense and throughout the defense value chain about data matrix
technology and its viability as a long term standard. This study concludes that Bar Codes
offer few advantages over data matrix technology. The main advantage that bar codes
offer over data matrices is cost and ease of read. However, the gap in cost and ease of
use is narrowing through technological advances and as a result data matrix applications
are expanding rapidly into the bar code space. Raytheon should expect this trend to
continue.
As RFID becomes smaller and more robust, it is likely that it will provide superior
solutions over IUID for many applications. However, each technology has applications
which suit it the best. Tagging items that are constantly cycled out into the field or
extremely small items are applications which suit the data matrix technology well.
Identifying the technological limitations of RFID will help Raytheon predict adoption of
different tracking technologies.
75
9.3 Process Evaluation
Two main conclusions can be drawn about IUID and its potential for process
improvement for Raytheon.
9.3.1 Automated data entry saves costs
It is conclusive that elimination of manual data entry saves time and reduces errors. It
also is conclusive that the volume of data entries drives savings from this type of process
change. It is not conclusive that the two dimensional data matrix is the best or only
technology to achieve this automation. The cost benefits that were highlighted in the
analysis for data matrix technology are directly applicable to the successful automation of
data entry using bar codes or RFID as well.
As Raytheon continues adoption of the Visiprise Management system across many of its
manufacturing capabilities, the transition should be watched closely. As in the cases of
the Performance Based Logistics programs studied, paperless systems do not always
imply automated data entry. Visiprise Management is a very good advancement for
Raytheon and will be a channel to facilitate automated data entry and utilization of data
matrix technology in manufacturing operations. Finally, since installation of software
and hardware is simple, establishing IUID reading capabilities is highly scaleable.
9.3.2 The universal construct should be leveraged
It is important that the benefits of the data matrix technology and the IUID program are
divorced from the benefits of the Unique Item Identifier (UII). It is likely that the
standardized construct of the UII could facilitate the simplification of the information
landscape across functions including: receiving, manufacturing operations, and repair
operations.
76
Raytheon has an extremely complex tracking and information landscape and needs
improved standardization of constructs across businesses and across functions. If IUID is
used simply as a band-aid and adds to the portfolio of technologies and constructs that are
being used in the system, then it will be a burden. However, if the Unique Item Identifier
can minimize the number of identification data strings then it will be a success.
Specifically, elimination of the separate constructs of part number, serial number, license
plate number, shop floor control number by linking all database information to the lone
construct of the Unique Item Identifier could be tremendously beneficial.
IUID and the UII are on their way to becoming the industry standard. Raytheon needs to
recognize this and should be proactive to leverage this powerful tool to simplify the
tracking, identification and information landscape.
77
10 Recommendations
10.1 Tactical Recommendations
First, Raytheon should run a pilot study for using IUID in repairs on Program A. The
initial investment will be $25,000 and results should be seen within the first year of
implementation. This study will give tremendous insight into the potential of the
technology and will also reveal many unpredicted problems.
Assuming the pilot goes well, repair programs that will benefit the most from this study
are those that conduct over 500 repairs per year, involve at least 5 work stations with part
identification data entry, and already have a government IUID requirement.
10.2Corporate IUID Implementation Strategy Recommendations
10.2.1
Marking Strategy - Good for high volume, bad for low
It is obvious that Raytheon has tremendous influence over the customer in terms of the
pace of adoption and the scope of the mandate. In the past, since the Department of
Defense, Raytheon, and its suppliers have not been certain which areas of IUID
implementation would provide the most benefit, the mandate has not been challenged.
This study concludes that for Raytheon, the highest volume and the highest mobility (the
parts the come in and out of the door the most) parts and assemblies are undoubtedly the
best candidates for IUID marking. Raytheon needs to leverage this knowledge and
influence the government in the scope of its mandate. For instance, one customer is
requesting than an IUID is provided for a unique satellite assembly that will be sent to
space and never return to earth. This application of IUID probably does not make sense
for either the customer or Raytheon. It is Raytheon's responsibility to share why this is
true.
78
10.2.2
Mark above and beyond contract - not yet
This study also recommends that if Raytheon has to bear the burden of cost for marking,
equipment, and engineering updates (either for new or legacy programs), then it is not
financially beneficial to implement the usage scenario. Thus, Raytheon should not mark
above and beyond current government contracts.
10.2.3
Marking hierarchy - keep it high level
Raytheon should also encourage the government to mark high level assemblies and
replaceable parts first before requiring marking of other parts. Since the database
architectures are advanced enough to link an entire AS-build and AS-maintained
configuration directly to a high level assembly number, then it makes the most sense to
start simply by marking higher level assemblies and replaceable components first. Again,
Raytheon should explain to the government why it is important to follow this strategy.
10.3 Corporate Operations Strategy Recommendations
This study led to additional recommendations for operations strategy at Raytheon.
10.3.1
Automated Data Entry saves costs
This thesis focused on achieving automated data entry through IUID and the data matrix.
However, benefits achieved from automated data entry can also be realized through
successful implementations of bar codes or RFID tags. These savings are correlated with
volume. Automated rather than manual (keystrokes) data entry should be promoted in all
operations - specifically high volume applications.
79
10.3.2
Reader purchases - 2 in 1
At Raytheon, the cost of the preferred bar code scanners that read only bar codes is $650
while the cost of scanners that read both bar codes and data matrices are approximately
$900. As Raytheon purchases more scanners during its ramp-up of Visiprise
Management software, it should purchase the scanners with dual functionality as a smart,
minimal investment for the future.
10.3.3
Use U11 in operations (with or without data matrix)
Much of the value of IUID lies in the Unique Item Identifier construct which is here to
stay as the global standard in the industry. Since it would be quite simple to use the UII
instead of license plate numbers and the shop floor control numbers, it should be used as
a universal construct. Changing of these codes is only a software change and small
process change. The UII can be read and delivered not only through the data matrix, but
through human readable numbers, bar codes, or RFID tags.
80
Appendix
Appendix A: Summary of Calculations and Sensitivity
Program Calculations
Extrapolated Calculations
Return on Investment Calculations
81
Appendix B: Assumptions
Pro)
pecific Give ns
Units
Souirce/Exptairiation
.....................
T.1 02ram C
Program D
.....
.....
1-1 ..................
1;Number of f #Ors Per Year
1400
284
44
200 R#p
POL Leads*
Z Number
of Entries ofI...........
Data Strinq
Per
114 .................
7.
1 ...
..
.......
..M
...............
........
...........
....................................
.................
.......
....
.......................
..........
........
..................................
.....................
........
...............
...........
.....................................
3: Cost
of Labor......
(2006 Fabrication..........................
MFG with...............
Fringe.
Overhead,
and
94.1DT
94.09.....
94 09 $1hour ..........Tom Schnutz
.......
............
...........................................
.............
....................
.................
............ ..................
...................
i .94.09
........
....
........... ..............
......
4: Cost
of
Labor
(2006
Engineering
with Fringe,
Overhead,................
and P W ...........
.73
12613 ......
$/hour
Tom Schnutz
..............
.........
..............
--................
...
...................
..........................
.................................
........
....
..........
.......
..................................
............
-...
.......................
...........................
..........................
6:Averaoe Data Stfing LengthEntered at each station
12:
12
12i ..................
................
12
PE3L Leads
........
......
................
I.....
.............
.............................................................................................................
..................
............................................
30,066 f .................
$
751..000 i S
300,000 '...................................................
$
300,0001$ ...........................................
'Total Material/Component Damaqe due to Rework Per Year
..........
..........................
..............
.........
_1 .......................
........................
I....................
j6 66 ._ ei __
...........
................
...
......
.......
...............................
7 Total
Material/Comp
99M.
ye K.(any.jp
...
...
..
.............
............... 0,............
0:..
5,
0,
S
...................
..........................
..............
S... 22,700,000 i S
20?.PqO,.q
3
S
92,300,000 $
PeL Leads
Annua...Prowa.m
Buoget .........................................
..................................
....
...
..
....
.......
..................
.9Appro)dmateCost..of,,Rep.ana.bte,,.Uni.t.
...
....
.....................
..
......
.......
......
00,00
.- -...- - -- .., ...
T_S.I
...........
......
I~~ I 1 11.1..-Goo, , iI $---- , ..W
, , WI
-10 Different Type of Repairable Units (requiring marking)
4
3
31
M
!w
T ------...............
-----Program D
mp#pri5et 1: Chance of Error
Program
A
Program B
.............
.......
--------------------------IProgram
033%,
Peric4nn Iticorporated; Benefts of Autol
0,33%;
0.33V
013%
1: Percentage of Keystrokes. that are incorrect
.................
UID scans that are incorrect
ZPe
tage of.......................................................
%........................
Pencon IncoW rated; Beaefits of ALAo4denfication
0.00003%
0.00003%
0.00003V
0.00003%1
...........
....................
..............
.......
.....................
....
.........................................
..........
entry
is created:
3'After
incorrect
.......
...........
....
..........
....................
..........
..
.............................
...........................
....................
....................
............
..............
................
............
.................
...........................................................
.....
..
.....
...........
%
75%
..
..........................
.....
75% ........................................
75V ...................................................
75%1..
Discovered Immediately, no rep.eq s ions......................................................................................
........................
I.........
...............................
75%
75%%
75Wt..............................
or Production
Controll ..................................................
Workstation,
qve!o. by.V rk Station, Su.0
..............
....................
I.............
..
...
.....
...
.......
.........
...
..........
....
.....
....
...
.......
.........
...
...........
......
..
........
;Error Not Found......................
75% '...................................................
75% t ................
...........
...............
.....
........
.....
75%...
...........
.............
.............
......................................
......................................
...............................................................................................
............................
............................................................
..................................
...........
......................
................
......................
. ..............................................
....
................
........
.......
80%%
80% ....
66 .....
1...................
eis rwo cha nge....
80% .......
..........
...........
.....................
...........
...........
...................
.......
............
....
............................
...............
......................
...........
1 %, ............
15%:...........
Error is .......
significant
and
requires
rework
..........
............
..........
...
......
..............
..................
......................................................
....................................................................................
..............................
iiN ..........
..
...........
5W
5........
%........
'Error is significant and results in Matenal/Gornponerit Loss
.....
...........
..........
.......
_
5 If Error is not detected
...................
-------------........
....
........
....
........
.....
....
................
..........
......................................
............
M
Error does not Cause FWure or Loss
......
.........................
............
.......
........................
.....
---------------,0%,- ..........
1_0 %-------- ----.............................
...............................
........
...........
........................
...............
......
..............
Erro r, do e s caus e Pa rt a....
...............................
j
M
a
10 i%
....
..........
.....
......
..........
......
.............
..........
..........
.....................................
........
............
.............
6.1
....
......
............................
..
........
:Pro(-tram A
D
Pro
Assumption Set 2: Cost -of-Eiro''i
Jq............
lp!
...............
. .........
.....
-iPrPqr
..........................
.........
......
?
....
............
.................
.....
..
.....
.
......
..
.......
.........
...
.....
..
......
*
..
..
..
..
.....
0..0167
Hours
..
0.0167
*
.....
011671
0.016T
..
.......
..
of Enw
..
.. ..................................
from
Jmmediate
Discovery...................................................................
..
1 Time Lost ............
....
..............
................
............
..........
.............
..............................................
...............................................
....................................
...................................................
Hours
1
Error ....................................
2:Time Lost
from Insimific4int.
I..................
...............................................
II..
...........
....
...........................................................
.............
-..................................
...........................................................
...........
..............
Hours
8
8
+
ost
cant
............
...............................................
.................
4! .........................................
...................
.............................
..........................
.................................................
.......................................................................................................................
..............................
8 ..............................
Hours
a ......................................
8: ...............
ant Loss
#
4':Time Lost from.! "
. . .........
...................
......
.....
...........
............
.....
.....
.
..
.......
...
....................................................
$20,001)
Dollars
$25,000
$5,1100
$30,0001
Component
Cost
5 Aver
Repairable
........................
..
.............
.................................
.......................
.........................
.....................
..................
...........
......................
...........
....................
..............................
.........................................................................
_jj*
p9dj ', Pemon IncorpofatedRenefts of Autoldentdication
121
1Z.
EnPY ............................
7 Du ration of M.zinu.at Data
I .......................
...............
......
..
....
...
...
..........
.................
........
....................
.......
.........
3
Seconds
Pencon Incorporated. Benefts of Autoldentification
3
ration of Scanned Data Entr...
..............
...........................
................
......
....
...........
...
..............
.........
....
...................................................
..........
.......
...
y......
......
.............................................................................
..
.........
..........
...
......
.........
.. ................
...
........
......
.......
L eg end
...
.....
.......
..............
..
.....
.............
-----------S trong Assu M ptlGn ........
.....
.................
..............
-------------------nish ..........
calculations
Weak Ass u mp6on, need to vervo ..apix
dw ie jala, JimmY Miyamoto,
Ghuck.Di
man, Paul TDussaint,..N
q
...............................
..................
...............
...........
.....
.....
..........
.............................
................................
1).................
..........
......
....
.........
....................
I..........
..............
.
....
......
....
....
.........
B.
$
Prpqq
-
Program A
%
..........
82
d
...........................
.....................
....................................
...............................................................................
......................................
.................................................
:............................. ............ .....
...........
-.1.......................
.................
I.............
...............................
..........
.....................................
.
q!9p..Set 3: Cost of Addlng.. ! p lqq..5
ps
J
.A
iProgram
B
IP!RW pm
D I.........
.................
.......................
..................
.Pro
..........
.......
I......................
....................
...
..........................
...............................................
..........
...........................
.................................
1,000 .00C
ost
of
R
ea
de"'r
....
...
..........
*............
:$1,000
-0
0$1,000
-DO
$ 1,0D0.00
$ fdnk
Hngins
.
.
.
.
#
#
# #
.
$
.
.
..........
...........
...................................................
...............................
............
.......................................
..........
..................................................
2s Labor Associated with Installation
11GO.00 ..........
S ..................
..............................
I.......................
....
..............
....................................................................................................
............
.....
S cott F ernandez/ C oq!iex
---.
..............
......
- . .....
....
.......
.....
..........
.......
-- .....
..................
:
..........
............................................
I...........
........
..............
...............
..............
.......................
...............................
ixed
Cost
for
datab
im
plem
entaio
n
$ I5...............
*..........
.....
*..
....
.......
ow .00
.........
..............
......
...........
............
th
n
ayt
27
28
P sBw
iU
iRheon
......
.........
-..................
.............
...
..........
.........
....
.....
................
C-41
D
iaz
-F
.............
p!!"Set 4; Caluculations for Marking
Costs ---------Pro(
Trogram B
Proaram C
---------Recurring Costs
.......
..............
.............
.....................................
..........
....
...............
...............
Item
11i"r for Legacy
7 5 .....
75
............................
....................
..........................
..........................................
.........................
j46 rs - -- 'Tom Schmitz
........
........................
.....................................
I ..........
.............
..............
lIncromental
Cost
Per
7 ................
0.5i
D oD IU D C qvt B ian efit Anafy-sts - 0
0 .5
..............
.............
- - ............................
....................
...............................................
..
.........
....
.Mark
....................................................
... .......
.......................
............
..
...........................
mark
per
increase
Labor
4'IncrementW
....... . .
H ou
0 .1 ;..................................................
.......
....................
.........................
....................................
.......................
........................................
..........
..
.......
........................
............
osts
C
rrina
e
-R
on............
A
..........
..........
..................................................................................................
................................
........
..................
...................................................
...................................................
...................................................
...................................................
................
: q4iprn
t pon ..................
UID
5,679,000
$
5.679,000
$
5,679000
1$
6 6 79,0110
To Support
............................
.............
$
- ...................
........................
....................................................
:.........................
.....................................
i .............
&Raythew
Annual
Revenue
$20,000,0110,000;
$20,000,000,M.......
$20,000,000,000 ....
2.0 .0.0 .0..0.0.0 ..0.0.D $
2004 Annual Report
..........................................................
...........................................
..........
......................................
......................
.................
.................................
...........................................
................................................
..............................................
Max
Population
MOW
550
WWI
500 w
...................................
......................................................
.............................................
.................
................
.............. ........
....
.*..
......................
-----------....
....
......
..........
I....
......
........
........
............................
............
..............................
................
..
......................
................................
.........
..................
..........
..
...............
.........
..
.......
...............................
..............
.......
...............
. ---------------_ ----------- .......
--------------------------Assumption Set 5: Extrapolation to other PBUs, Repairs, and Operations
.........................................
................
...
...........
. ...
..........
I X ' af*
6 "ani*r'i*9-s "a'............
c* 'r*osS'
a*1-1 PB-U-s------_,*
- , R,yaih-ion 'f-r'
_ _ -..........................
- .......
..........
I .................
...............
.............
.....
..
.........
2 Annual Manual Data entries across Rvatheon fw all Repairs TP _BT3n ......
-__----'___-10-1 , -------------- --------Anfkuifi 6 i 1)
nos
MFG operations/ Repairs
..
.......across Raytheon
- ---------------for
----------------4: Manual Data
Stations across Raytheon........................
for all PBUs
160
.................
......
5' Manual
Data
..
S
tations
across
Raytheon
for
all
RepairsipaL
Repai
10,
.................
............................
..........
...........
......
...................................
-._ _ ........... ...
.....
..
..
.......................................................
_4
..........
........
... ..............
...
6: Manual
Data Entry
Stations across
Raytheon for
MFG operations/
Repairs
1
a
.............
1.11.1 ...........
.........................................
-.1.............
...........................
.............
................
.................
... .........................
...............
-.-.-.-...................... .........................
7iAveraw
Repairable
Component
Cost
20,000
1$
r
........
..............
...
..............................
...........................
...........
..........................................
..........................
..............................
.........
q3 ptsl Popul.ati.qn qf.R " ko ! .Y!* O or? B us ....................
..........................................
..............
.............................
..........
.............................................
..........................................
..............
-..............
....
......
...............
9;Avef
Production
Duration/
2
10
ears
............................................
......................
I.........................
....................................
-........................................
....
.......
........
............
...........................................
.-1-.........
Y ..........
TA
...
Re arable H.iqh Level Assembly per program
..
...
3.75
.......................
..............
p
.........................................................
.................
........................................................................
...........................
..................................
.......
...............................
...............
................
..............
.............
...............................................................................
..................
........................
-...........................................
.....................
................
...............
..................
........
......
......................
..............
oqep d
: ....
...
.......
..............
..............
...............
................
.........
......
Assurn ....................
ion
... ....
.. ...
...
*..........
...
......
............
...
.....
..
...........
....................
.....
....
...........
................
...............
........................................................................
.........
..............
.
.........
.......
............
..........
.........
...............
.....
..........................
...............
...
............
..........
....
-.................
........................
s* s-ium'plion, need to
] Weak 'A
...
........
! .calculations
..................
.....
_Y'12
...................
...... ------------------Charlie Jala, Ji.mrn Miyarnoto, Chuck Dipman, Paul Tou saint, Alexey Salarnini
.........
...................
------ --------------
83
Appendix C: Cakulations
...
....
..
..
...
....
...
.....
....
....
....
.....
.............
........
..........
..
......
.....
...
...............
...
...
..
.........
..
........
..
...
..........
.....
.............
..
.....
..........
.......
..
.........................
......
..
...........
..
..........
......
...
.........
....
..
..........
........
....
...
.....
..
...
........
....
.......
.....
..
..
..
...........
......
.
$
.
$
.
-
$
.
.
.
.
'Calculations Set
1:.....
Proqrarn
Specific
Annual Cost of
or
....
.....
......
..
..............
............
-----------Probabilities
..........
.......................
'Per Million
...............................................................
Per 10DO
. .....................................
...................
......................
.................................
.................................
...................
1 Incorrect
Data
...................
- -.-------0.03 i47- 5 1
39274.75 .......
3917
.............
.............
2 ,Im m ediate Correction
0.029456072
29466.:OT
of IncorrectI.............
29.4W
..............................................................
EntrY .........
-.....................................................
.. ......
........
. .........
....
.................
-.......
...................
.......
.
...
...........................
.............
..........................................................
I :. Error
is insignificant
- Paperwork
chan
...................
...........
. . ........
..................................
U06283W
.......
.................................
6283.96
6.28:
v ......................................................
............
..
............
..........
.................
41 Error is sjgq!ks
..
..............
jrequiTs
..
...
........................
.
0-00117824
...........
1178.24
..
.....
-.....
..........
...........
............................
.............
.................................................................................
..................................
..............................................
.....
..........................
..............................................................
....
..
............
..
. .................
..
. .......................................................
..........
6 If Error is not detected and does NOT cause Material/Component/Product Loss
O 00176736;
176736
1.77:
.............................
......................
...................
...............
..............................
- ................
......................
................
.....................
..............
.................
..............
...............
.....................
............
..........
....................
.....................
..........................
-.........................
..........
..........................
...................
....................
.......................
:Annual Recurring Savin
Prouram A
7: Manual
Data.......................
Entries.....................................................
Per Year
..........................
................................................................................
................
........................
................
.....
.........................................
1
............
...............................
.........................
.........
.....................
...........................
..............
Per Year
Labor
Material
PerYea
Labor
Materia I
Incorrect
Data
...................
................................
..
.........
.......
..
............
.......
..
......
769.79!z
..................
--.....................
...................
.....
........................
....
....................
7
...........
*............
........................
.........................
............
.................................................................................
..........
......................
......................
........................
............
...........................
10: Error .........................
.........
.......
is insicinificant
....
...................................
- paperwork cha_
.........
..
..............
...... .....................
....
............
...
..........
!rt"
1
123. 1'
11, 589
1 !Error...................
is si(inificant
and
requires
rework
........................
. . ....................
..........................................................................................................................
23.09:
$
17,383
$
..................
..............................
.....................................
............
..........
..........................................
..................
...
.........
j !Error issignificant and results in MateriAlLi Ru
...... 21
8,691 ......
S...........................
_ pq ilt Loss
57,734
13.....
If Error is not..............................
detected and
does............................
NOT cause
Product ....................
Loss ...............................
.1........................................
........................
.64 ......................
..........
.............................
.............
............
....................
.......................
3
.....................
-----..................
........
.......................
I.................................
I............................................................................................
...................
.....................
- ...........
...
.....
........................
......
.........
.......
.....
.....
..
.........
*
..........
......
.
....
'147otal Savings Per Year
38.568 $
57,7341
w--n"--age------- --Attributed to Mis-Keying Serial Numbers
9.62W
...
.....................
......
.......
.....
.....
.......
..
.....
....................
- ....
...........
......
................
...........
...
..................
..........
...................
..............
.....................................
.................................
..................................
.........................
........................
Annual Recurring Savin
...........................
..
.....
.......
..........
F10gram C
7: .................
Manual
Data
Entnes
Per Year
...........
-...............
...,...................
..................................................
..............
...........
220i
....................
.............................
...........
................
...........
.....
..........
.... ..........
2
.........
......
E............
.............
..........................
... ..
............
..................
.....
..................
I...............
...............
I.....................
.........................................
- ......................................
...............
............................
....................................
..........
.............
...............
..............
8' Incorrect
Data
E ry
..............
......
............
...
7
------9'.........................
Immediate
Correction of Incorrect
Entry...................
--....................................................
&481 $....................................
..................................
10 ..$..........................
..........................................
.........................
....................
.................
......
.............................
.................
..............
................
......... 5
10. Error is insignificant - paperwork chanqe
1.38: $
130 S
1
111 Error
is significant
and -requires
rework ...................................
0.26: .................................
$
......................
........................................
195
$
......
..........................
.........................
0
.............................
.............
............
...............................
................
...................
...............
12 iError is sjq.n
and results in Material/Component Loss
0.13: $
98 $
3,240
0
1131 If..............................
Error is not detected and does NOT cause Product Loss
$
......................
...............
...
.
.......
*..................
.....
...............
..
...
.....
..
...
...
...........
.....
.....
- .......
...
.....
..
..
...
.....
................
----------------...
.........
-........
..
.....
........
.........
..
...........
..
.....
.......
.............
......
.....
-------...........................................
...................................
............................................
-...............................
........................................
.................
...........
-...............
...........................
- .............
.......
...
....
...
...
..
....
............
.........
..........................
................................................
14' Total
Savings
Per
Year
...
....
...
..
.....
..
..............
.............
...................
........................
433
..............................................................
$ .............
3,240
...
--...............................................................
........
....
..............................
.......
... ..
...........
......................
...........
......
..
...........
.....
.........
115 Precentage
of
ProductLoss/Damage
Attributed to..................
Mis-Keying
Serial
Numbers
..........
I....................
...................
...........
..................................................................................
....................
5
.....
.................................
-...........
............2.16W
84
Mm" "M M1161" 1 4
Calculations Set 2: Program Specific Annual Cost of Labor for Data Entry
of Lab fo
for Manual Data Entry Per Year
2Cost of Laor For Scan Per Year
3 Difference
Program A
Program B
Program C
$
6,147 S
624 $
156
1$
4,610 $
4S8$
Calculations Set 3: Program Specific Annual Savings
SLabor
igs, r Entry
2 Labor Savings for Err-ors
3;Material Savings from Errors
4
Savings
1TotalPer Year
Program A
Program B
Program C
Program D
$
4,610
$
468 $
52
47
$
38,568
391
433$
394
$
67.734 $
35,135 $
3,240 $
2,356
$
100,912: $
39,515 $
_3,725 $
2,797
Calculations Set 4: One-Time Implementation Costs for Reading Stations
1 Cost of Readers
2 Cost of Software to support readers
3 Fixed Cost for database implementaion
STotal Cost
Program A
Program B
Program C
Program
14,000 $
7,000 S
1,7001$
S$00$
100
$
5,000 $
6,000 $
5,000 $
$
20,400 $
12,700 $
10500 $
1 Cost
Calculations Set 5: Implementation Costs (recurring and non recurring) for Marking + Compliance
Non-Recurring
Program A
Labor for UID update (assumes Legacy Item) - GOVT PAYS IF INCONTRACT
$
38,019$5
2iFixed Costs of Equipment per Program based on Revenue
$
6,446 $
3 Total
+
44,465 $
Recurring (annual)
4 Program Specdic Markins Costs (Labor + Materals) per Year
9,909
'
Program C
Program
28,514 $
28,614 $
5,679 $
3,407 $
34,193 $
31,922 $
545 $
595 $
RTN PBLS
RTN Repairs
RTN Ops & Repais
5
18,818 5
188,180 $
376,360
$
157,421 $
1,574,209 $
3,148,419
$
942,594 $
9,425,941 $ 18851882
$
1,118,833$ 11,188,330 1 $
22,376,660
Calculations Set 7: Extrapolation of Implementation Costs
ReadIng Usage Senarios - Non-Recurring
1 Cost of Readers
2 Labor for Installation
3 Fixed Sofware Costs
4Total
RTNPBLS
RTNRpaIrs
$
160,000 $
1,600,000
$
16,000 $
160,000
$
135,000$
1,350,900
$
311,000 $
3,110,000
Marking - Non-Recurring
Labor Costs Across Raytheon* - GOVT PAYS IF IN CONTRACT
6 Equipment Costs Across Raytheon
7Total
"'Assumes Legacy Program Drawing Changes, Only Highest Repairable Assembly
Marking - Recurring
Costs (Labor + Matenals) per Year
8Marking
RTN ps& Repenrs
$
3,200,000
$
320 000
$
2700000
$
6,220,000
RTN PBLS
RTNRepairs
RTN Ops &Repairs
$
962,356 $
9,623,559 $
9,623,669
$
567,900 $
5,679,000 $
5,679,000
$
Level Marking
PBLS
-RTN
$
RTN Repairs
59,454$
85
594,540
63
16
47
1T $
1$6537
62$5
Calculations Set 6: Extrapolation of Savings across Raytheon (annual)
Labor Savngs for Entry
2 Labor Savings for Errors
3 Material Savings from Errors
4 TotaIs
5
..........
1,530,256
$15,302,559
$15,302,559
Program D
69 i
RTN Ops & Repairs
$
594,540
D
1,000
6,000
6100
D
47,624
26,209
73,732
495
Appendix D: Selected Error Analysis: Program A Calculations
and Extrapolation across all PBLs
ProgrmA
Project Specific Givens
1,Number of Repairs Per Year
2 Number of Entries of Data Stung Per Repar(Workstatons)
3Cost of Labor (2006 Fabrication MFG with Fringe, Overhead, and G&A)
4 Cost of Labor(200fiEngineenng with Fringe, Ovrhead, and G&A)
5 Average Data Strig Length Entered at each station
6STotal Materal/Conmponent Damage due to Rework Per Year
7 Total MaterattComponent Los Per Year (any cause)
8 Annual Program Budget
9 Approximate Coat of Repanable Unit
10
Diferent Types of Repairable Units (requiring marking)
Assumption Set 1: Chance of Error
1 Percentage of Keystrokes that are incorrect
1400
14
9409
126.73
12
300,000 S
-
75%
75%
75%
80%
paperwork change
pon
Costs
283333E-07
0.9375
0.5626
0.9375
0.5626
0.9376
1
0.625
-3.76E+04
-3.75E+04
,41E+09
.41E+09
0.26
-1.70E+06
-6-00E+03
-5.00E-01
2.90E+12
2<50E+07
2.50E41
0.25
0,16
0.26
0.25
-2-50E-04
-250E-08
6.25E-08
6 62E-16
0.16
0.15
-9,38E02
-938E-02
-9,38E-02
.79E-03
0.25
8179E-03
0.26
8-79E43
0.25
0.25
0.25
0,25
0.1876
0.0625
0.1125
0.0375
(.6
-1.00E-0
-1.88E-02
-625E-03
1.00E02
3.2E-04
90%
10%
0_945
0.125
0.855
0.075
-2.25E-02
-1.25E-02
5.06E-04
1 56E-04
0.05
0.0167
1
0 020825
125
10
10
0.012495
4.34E-06
025
156E-02
1.00E+00
0.25
0-25
$5,000
12
3
6,26
8
8
impleme ntaron
Set 4:Caculations for Marking
3833333E-07
Program A
7 Duration of Mineal Data Ey
8 Duration of Scanned Data Enty_
3,Fixed Cost for database
226,000
5%
15%
21Tine Lost from insigndicant Error
3 Thne Lost from Signcicrit Error + Rework
4 Time Lost from MatenalComponent Loss
5 Average Reparable Component Cost
5 PBL's within Raytheon
37,000$
Standard.I) Yanance.Hg
1190 -1,05E+02 1-10E+04
0.15
10-5 -175E+00 3.06E+00 0.25
79-9766 -7.06E+00 4,9E+01 0.15
107,7205 -9.60E+00 9,03E+01
0.16
10.2 -9.00E-01
8.10E-01
0.15
0.003833333 0.002833333
Error is signicant and requires rework
Error is signdicant and results in Matena/Component Loss
5 I Error is not detected
Error does not Cause Failure or Loss
Error does cause Partial Product Loss
Assumption Set 3: Cost of Adding Scanning Stations
1 Cost of Reader
2 Labor Associated with Instaflation
low
Program A
0.33%
000003%
Assumption Set 2: Cost of Error
1,Time Lost from immediate Discovery of Error
1610
17.6
108.2035
145-7395
13.8
$ 376,000 5 225,000
$ 26,105,000 $ 19,295,000
S
50,000 $
30,000
$
5 $
3
Discovered immedrately, no reprecussions
Disovered by Work Station, Subsequent Workstation, or Prod Control
Error Not Found
4 Once Error is Discovered
is insignilcant-
i
A
$ 300,000
$ 22,700,000
$
40,000
4
2 Percentage of UID scans that are incorrect
3 After incorrect wary is created
Error
r
Hftgh
Program A
$ 1,000-00
5 100 00
$ 5,000.00
27
13.8
3.45
1150
115
6250
31-06
-2.08E-03
0.75 -1256E-01
6 -1.00E+00
6 -1.00E+00
3750 -626E+02
10,2 -900E41
2.55 -2.25E-01
860
3.91E-05
1.00E+00
3.91E+05
8.10E-01
5..06E42
0.25
026
0.25
0.16
0.16
-7.50E+01
-7.50E+00
5.63E+03
5.63E+01
3750 4.25E+02
3.91E+05
0.15
0.25
22.95
-2.03E+00
4.10E+00
0.15
86.25
0,575
0.125
63.75 -5.63E+00
0,426 -3.75E-02
0.075 -1,25E-02
3.16E+01
141E03
1,56E-04
0.15
0.15
0.25
7098750
23
4259250 -7,10E+05
17 -1,50E+00
7500 -125E+03
5.04E+11
2.25E+00
1,56E+06
0.25
0.15
0.25
100E+08
025
85
0.15
Progrm A_
Recurring Costs
1 Labor for Legacy Item
3 Incremental Cost Per Mark
4 Incremental Labor increase per mark
Mon-RecurrIng Coats
5Equipment Costs Across Raytheon To
6 Raytheon Annual Revenue (Billions)
75
0.5
0.1
Support UID
5
5 6,679,000
20
10,000
7IMax Popilatio
Assumption Set S: Extrapolation to other PBL's, Repairs, and Operations
1Annual Manual Data entries across Ryatheon for all PBLs
2 Annual Manual Data entries across Ry1theon for all ReparsPBL Repairs
3 Annual Manual Data entries across Raytheon for MFG operations / Repairs
4,Manual Data Entry Statons across Raytheon for all PBL's
SManual Data Entry Stations across Raytheon for all Repss/PBL RepaIrs
6:Manual Data Entry Stations across Raytheon for MFG operat1,s/ Repais
7Average Repairable Component Cost
8 Total Population of Repairable units for PBL's
9 Average Production Duration/ 2
10 Aeerage Reparable High Level Assembly per program
86
12600
80,000
100000
60000
10
12.5
125
200
12.5
7.5
0.76
120
7.5
0.75
1
160
10
1
2,000
60,000
10
375
125
2500
75000
12.6
4,6875
15000
45000
7.5
2.8125
-1.00E+04
-1.25E+00
-1.25E-41
-2.00E+01
-1.2E+00
-1,25E-01
-2.50E403
-7.6SE+03
-1.26E+00
469E-01
1,56E+00
1,56E42
4.00E+02
1.56E+00
1_56E-02
6.25E+06
5.63E+07
1.56E+00
2-20E-01
0.25
0.25
0.25
0.25
0.25
0,25
0.25
0.25
0,25
.....
. ........
..
.............................
- .........
......
'
-
...................................
........................
__ ...............................
..............
.................. .......
...
.. ......
............
i 'Calculations Set 1: Program Specific Annual
Cost of Effor
I ......................................
..............
..........................................................................
........................................
............................
............
'Probabilities
...............................................................................................................................................
'Per
1000
...........................
...............
.I..............
VIncarrect
Data ----------Entrv
............
11-1-1-1-1
D.039274M
39274.75 1
391
'Immediate
Correction
of
Incorrect
Entrv.............
...........................
..........
......................................
I............................
0. 02945W7:
....................................................................
29456.07:
...........
..........
29.4j
............
..................................
................................
3.Error is insignificant
- paperwork ch
......
. .....
......
..........
56485:
23564.851 -------- ----23.51
-------4 Effor ..............
is significant
and requires
rework
.....................
......................
I..................................................................................................
..
004418411 .............
..................
4418.41:
.................
................
......
.......................................
..
...
...
......... 4.4
5 Errar is signitcant and results in Material/Component
Loss
0.00"1841:
---- ------------ --------------------4418.4i
...........
.......
.......
44'
------ ....
...
.........
--------....
Error"is"n'ot
deiected'and
doe's'NOT"cause
Matefial/ComponentIP.Tod:uct'i
..............
I......................
...
I......................
ss 1--f.,02651046;
I................
...............................................
26510A6f
...............
......................
..........
..........................................
5.......
..
............
I.................................................
.......................................
............................................
..........
................
-
$
-
...................
'Annual.............
Recurr!nQ Savinas
.................
7:Ma.n:ual
Data
Entries Per Year
............
.............................
..............................................
-......................
.......................................
19600'
..................................................................
............................
....................................
...
.. ... .......
...
.Material
...
....
..........
....
Per Year
......
Labor .......
............
....
.
---------------8! Incorrect
Data
Entry
..
...
...
..
...
.....
7 -.................................................................
.......
........................
..................
.......................
..............
......................
....................
.
.
.......
..............................
............................
'Immediate Coffection of Incorrect Entry
.34:
905
i lGiEffor
is ...........
insi
nt
..............
.............
..e.....
461.87!
S.....................................
43,457 ...............................
................
...............
I...........
.........
...
...........
.
.......
11 ETTRr.i. ..s.......
..
significant
...
..
and..reqt
........
...
...................................
...
..........................
....
..
....
......
........
.60: $ .....
...............
65,1861$...........
....
..........
.. ....
....
..........
.....................
..........
...................
12:E:rror is signilicant
and results...................
in Material/ComponentLoss
..............................................
........................
.............
65,186 $
433 004
...............
............................
...
-......................
134 Error
detected
and...........
does
NOT cause Product.............
Loss ...........
...........
-is not
.................
..
.....
.............
...............................................................
$
......
........
......
.....
I......................
....................
.............................
...........
.............
. ..............
....
......
.............
-...................................................
..................
.............................
-.............................................
--.................
...........
......................
..................
...........
-..........
................................
14: Total Savings
Per
Year
.............
..
.........
----..................................................................................................
-.......................
...............................
$ ..............
1 T4,735
i $ ..............
433,004
--..............
...........
..............
...................
.......
15 iPrecentaae of Product
Loss/Damage
Attributed to--Mis-Keying
Serial Numbers
..........
--..................................
72-17%1
I............................................
- --- -............................
-...............
87
1
0 ft ""lot
..........
......................
I.................. ........................
....................
I......................................
_ _ ..............
I...................................
......................
.
'Calculations Set 2. Pro-tram Specific Annual Cost of Labor for bat' a-tnir v* P-ra* ....
....
...
Cost
Gf Labor for Manual DatajEntr
ear
..................................
................................
........
_y
Y.............
....................................
..................................
...................
.............
.....................
6 1,14 T
.
$
$
$
$
$
$
$
.
$
$
$
.
$
$
.
2 .............
CostI...........
of Labor
For Scan
Per Year
. . ......................
.............................................................
$
...................................
1,537 S
...................................
..................
.....................
3. Difference
4,610
--------------------.........
.....
...
......
.....
..
.........
..
..
......
.....
.....
....
..
..
..
..
...
...............
..
...............
...............
..
...
........
......
.........................
...................
I...........................
'Calculations Set 3:
Program AI iLabor ...............
SwAn4s for En ..y ......................
......................
....................
................
$ ..................
4,610
...............
_ _ .....................................
...................
.............
................
2, Labor Savi gs for Errors
174,735 S
..
..........
..
.............
*...........
..
.......
**...
.
.....
...
...
.....
... ......
............
........
.* ............
------4: Total
Savinos
Per Year.............
........................
...
...........
.....................
..........
$
612,349
...................
SE
............
..............
....................
...................
................................
...........
......
...
..
......
................
Calculations Set
4: .One
Time
Implementation
Costs.............
for ..
Read
...
..
.....
..
....
........
.....
..
0 rts- F'ro-tram
.....
...
..
...............
.......................
.......................
..
............
g.............
--A
.............
I ..............................................................................
Cost of Readers
--......................
.................
$ .........
........................................................
14,000 S
............
.........................................................
............
......
Z Cost of Software to support
readers
......................
........
.............
..........
1,400 S
----------------------- ---........
----------- --------3: ............
Gst for database implementajon
....................................................................
.................................................
$ -...................................
................
....................
5,000 S
....................
-.................
.....................
.........
.........
5 Total
Cost
..........
............
$
20,4001$
............
I.............
........................................
........................................
.............
..................
..........
I........
... ...............
..............
-- ............
..............
i
Set 5: Implementation
Costs.......................................
for Marking
.Calculatio
..
Compliance
..
.....
..
...
....
..
....
nl ...............................
...................................................
- _-...............
.....
.........
.................................
................
.........
.....
..............
", ................
.......
.
-- ----1: ...............
LaborI................................
fbr U D update
Legacy
Item)...
-..................................
GOVT PAYS
IF IN CONTRACT .......................
.......
-- (assumes
..............
.....................
S
...........
38,016'
...........
......
.........................................................................
21 Fixed Costs
of E ipm
on.............
Revenue
......................
......
P!p q! !T based
............
I..........
6,.......
1-1-1- ...............
I....................
...........
...........
........................
..........
3: total
.......................
.......................
-.....................
..............................................................
44,465
I..........
.......
...........
..............
-........................
-.$1...
..........
....
...................
!R e c u rring n n ua l) ............................................................
.....
......
..........
....................
- .14,
................
......
...................................................
.......
........
............
..........
...
..
................
..
41 ProQram Specific Madring Costs (Labor + Materials) per Year
$
9,909
.....
........
..
...........
............
..
...
...
.............
..
..
......
.........
...
..................
..
.....
...
...........
..
........
.........
--...........
iCalculations
Set 6: Extrapolation
of Savings
across
Raytheon
..........................
(annual]
..............................................
........
..................
................
EM
-..........
.......................
...................
...............
1 Labor
---- -----18.818
.........
......
.....
2' ....................................
Labor Savinas
for Errors
................
...........
...........................
..............................
.....................
...........................................................................
.....................
.......
..........
..
.............
.....
3' Material &7 4nqsft
E!Ti
7,069,456
..
........
...
....
$ 1
..
......
....
._ ...........
._ _ .....................
...
.....
.........
... _ .............
1-1$..........
..................
4jotals..........
..........
-...............................
.......................
SI...............
7,801,4771
$1
................
...........................................
..................
....
................
. ..
..
.....
...........
-....................
..........
............
I......................................................
...............
...............
I...........
...............
.................
................
...................
talculations Set 7:.........
Extrapolation
of
Implementation
-- ---------- --------------------------- . ......
----------Costs
------------1Reading
Usage
Senarlos - Non-Recurripq
...........
. ..
.....
.......
.....
..
....................
................
RTN
PBLS
....
.................
................
............................................................................
__ ......
...........
.............
.........
...............................
1 Cost of Readers
.............
..
.......
160,000
.........
.....
....
.....
..
..
........
-- ................
-.................
.....
.. -........,.....
..... ..............
..............
..........
...........
2 I Labor
Installation
.....
..
...for
..
..........
..
.....
.....
..
$
......
..
.......
..
16,000
.................
........
.... ...........
--...............
....................
- ..
........
.................
3 ...................................
Fixed SofWare
Costs
$
135
............
.....................................................................
..............................
..........................
..........
...............
_ _ -.......................
.....
......
4:Total
311,000
..........
....................
...........................................................
.............................
..........................................................
..........
...................
.......................
'Marking
- Non-Recurrinq
..............
..........................................
RTN
..........
PBLS.
............................
........................
.........................
-..................
.................
...............
...
--....................
5:................
Labor
Costs Across Ravtheon*
GOVT
PAYS
IF
IN
CONTRACT
I............................................................
..................................
$
962,356
...............................................................
...........
......
...........................
..............
..............................
................
9i m
ent C osts
Acrossj
........
...
...........
.........
....
.......
...
........
......
...
.....
........
................
.....................
....
................................
$ --.......................
567,900
.................
7: .
Total
.....
.........
1,530,256
Legacy
Program
Drawing_ _Changes
........
...............
....................................
&
..............
...............
sernb,
....
........
...................................
I"
:..M
W " .Pr!ly.........
...............
..............
........
......................................
-.1...................................
.....................................
..............
..........
..............
-...........
---- ...................
.............
...............
I Marklqq
Recurring
..
.........
.. ..-................................
- - -.........
...
...........................
...............
I..........
.......................
I-- ...........
.............
.....
........................
...... RTN PBLS
. ........
......
81 ....................
Marking Costs
(Labor + Materials)
Year --....................................................................................................
...........................................
4541$
I......................
- per
............................
88
..........
...
.................
...
...............................................................................
-.........................
...............
..........
I.................................
..........
............
..........
-.....................
..
...
..
.......
......
..
...
....
1) Program A - Full Burden
with Error Analysis
.
$
-
$
.
$
.
$
.
.
(
)
.
$
.
Initial
)Lear
yew
Yew
"r
Year
Yew
Y!E
2
es
:CASHFLOWIMPACT
4
CashFlow
lnvwt~t
..............................................................
.........................
.........................................................
............................................
....................................
..............
...................
.....................
.................................
...........
.............
...................................
......................................
...................................
...................................
...........
.......................
i
Equiprnent
kircleseg (&,nume p
)
6 ,446
I ........
........
...
.....
...
...
........
......
I......................................................
.................
...............
..
......
6
.....
..............
.......
........
.............
......
...
...................
....
.....
.....
.........
.................
......
:-, .............
i s
" stme nt
Total k........
(6,446)
S
PV of
Total
bweabnent
..................................................
$
(6,446
......................
............................
..............
..................
.................................
............................
.............
... .................
............
.........................
........................................
....................
..........
.....................
....
............................
................................
...........................................................
.................................................................
..........................
..........................................
.........................
....................
.......................
............
......................
..............
..
. ......
.....
.....
........
..............
...............................
............................
...........................
...
.... ...........
...............
.......
.........
..........
..........
...........
................
... ............
...........
...........
..........
. ...
..
..........
..............
....
..........
..............
..........
...
----------Depreciation of Equipment Purchases
645::$
645::$
645
1
S
645:
$
645
$
64
6
$
CA
..
...
..
.....
..........
. ...
........
..
...
...
..
.....
....
..
.......
........................
...........
...............
..
...................................
.....
...........
......
...
...............
.................
.....
.............................
Implementation
Costs
for Reading
St5fiDns
Js
20,40D .......................................
..................................
.......................
............................
I.............................................................
........................................
.....................................
S
............. ...................................
.............
.....................
.................
Labor for UID update t&ss .....
mes,
e
pq
.......
....
.........................
..........
...............................
.............
.......
.......
.....
............
.. ....................................
.........
......................
...
.......
...............
...........
......
........
...........
...
........
MarkN Costs (Labor Materials)
9,9N -i ------S
10,206 3
10,512,$
10,828: $
11,153 $
11,487
1
11,832 i $
12,187 $
12,552
Project Management
...
........
.....
....
....
....
..
. . ....
......
....
....
...
..............
...............
...........................
............
...............................
......................................
.
......
......
..
..
Total Expenses
12,476 ..................................
S
12,831 ?................
13,197 ................................
3
!......
3
13,574 . $ 178,460
11 ..........
157.J.
$.... .11,472
i .............................
$ 11,797. ...
3 ..
12,132
.............
68,973 S
10,851 $
..
...................
.....
.........
............
...........
..........
...........
...............
..................................
..........................
.......... .......................................
..
..
..
..
..
..
............
..................
.
......
..
.....
........
....
.. ....
....
.........
......
..............
...............
....
..
.......
....
......
...........
....
...........
...
.
----------....
.......
...----------- ----- ----- - ------------------------............................
Cost
of Labor for--..........................................
Entry
3
..................................
4,610..: 3...........
4,749 .............
S
..........................................
4,891
..........................
5,038 $ ................
5,169 ...................................
.................
$
.......
5,345 :. .__
..........
.......................
..........................
................................
............
................
..........
Cost of Labor from Data Entry Errors
3
115W 3
39,725: $
40,917
? 144 S.........................................................................................
43,40.9 S
44,711 $
4 I.........
.....
I............
.......
...............................
I
................
.............................
Cost of Parts.................................................
from Data Entry Errors
3
57,734
3
59,466
S
61,2501
S
..............
63,087
S
64,9W
I...............
$
66,9n
................................................................
$
6
...........
...............
.................
...........
...........
.........
............
.......
.......
................
...................
...
.........
..
..
..
..... ..............
.......
...............
;i .....
..
Total Projected Savings
s
100,912 S
103,940 S
107,05B I s
110,270 $ 113,578 i $ 116,985 i $
1
..........
.............
.......................
............
................
..........................
...........
.....................................
...........
..........
...........
............
- .......................
.... ................
.............
....................
...........
........
...........................
....
Net Savings
and Expense
s .......
31,90
S
93
...........
s ......
. . ...................
--- ............
95,901 3 ..............
.....................
--................................................
98,797
..............
..............
.....
.........
104,8S31t .....................................
S
1
................................
.........
.....
..........
.....
...........
.................
..................................
......................
...........
..................................
$
40,123 .....................
1
41,333 3 342,436
Income ITax
S.................................
11,179...
..................
$ ....
..................................
...................
32 '1 s.......
..........................
I..................
33,565
I
..............
3
.................................
579
3
.......
3S,623
....
.
....
j
1 ...........
... ...............
36,69911
-....
.........
..............................
3
.........
............
....
............
..........
......
Add back Depreciation
z
......................................
....................
................
-...........................................
.
3
645 $
W :3
645 S
6 45 S
64S S
M; S
6
OperatioAd Cash Flow After Tax
is
21,405 $
61 152 S
62,980 $
64,663 $
66,802 S
68,799 S
7
----- -------
Total Cash flow
PV TaW Cash Flow
. ....
...
..
..
..
..
....
....
................
......................................................................
................................
.......... .............................
............
-.1- ..........
....................
.............
...........
I............
I.............................
(6.446),S
21,405 S
61,152 S
62,980
64,W3 S
66,802 i S
68,7991$
70, M $
72,975 S
75,158 5
77,4os s 635,9sz
3
(6,446)IS
19,424 S
50,356:
S
47,061
: .............
S ..
43,981
41,104
38,414
S...........
35,901
$ ..............
33,552
3 ......29,306
i 3...............................
364,012
....
..................................
..
..
.....................
..........
............................
..
...............
......
.............
...
...
.....
..............
...............
....
..
...........
...
..........
.....
........ ........
................
..........
...........
..
..
..
....................
Cumulative
Cash Flow
WW$
14,%G
T6,112
139,092 3
203,
270,757 ..
i
440,413
................................
483,388 S SSBW 1 S 635,.952 13 635,M
--.............
........
......
I ..................
............
................................................................
..
...........
..........
............
..........
........
......................
............ ...............
......
......
..............
. .....
.................
PV Cumulative Cash Flow
(6,446.)1'$
12,979 .......
63,334: S
.....
110,395 S
154,377 j 3
233,WS 1
269,796 i S 303,348 1 S 334,706 S 364,012
............................................................................................
..........
.......................................
...........
........
......................
..... ............... ... ...
......
..............
....
. ............
..........
.........
............
.............. .....
Assuming 95% confbence
.
.
Tax
Rate
35.0%
.......................................
..........................
..............................
..
........
................
..............
....................
.................. ......... .... .- ...... . .................................... .... ............
...........
..................
.........
.......... ..........................
Discount
Rate ..
10.2% ...................................... ..........................
..
.......
.............
......................
.....
.......
....
...
..........
..........................
................
............................
................................................
.........................
............. ................
.................. .............................. ..............................
Increasing
Cost of.........................................................................
Labor and parts
100%
..........
....................
..........
............................
..........................
-....
.........
Error Ana"is
High
LOW
Standard D Valiance High %
Low
Final StatistROI w/o inflation and MaoDw,4
3,06
1,39
0,42 0,1743035-11
0,376
1376
..............................
.............
........
............
.....................................
.....
Net
Cash
Flow - Life of Project (after tax)
3635.952 ROi w/ discatint
2.46
118
0,12 0.0139697t3
OM65
0 1065
.......................................
..
..
....
..................................................................................................................................................
Net Presad Valite, (after tax)
364,(M2 Rol WhriflatiDn
2.29
2.15
0,04 0.001297196
0,0324
0= 4
........................................................................................................................................................
..........
.....
..............
ROI
2.2 ROI - Friel
3,09
1.35
0.44 0-IM7046 0,392214477 O 392214477
89
From Calculations Section
0.36711
savings UNC
R04W UNC
0.21021
E" UNC,
022W
0.43W
Matt UNC
Labior UNC
012787
Discount UNC
OZ
In Won UNC
0.2
Bibliography
Primary Sources
Alien Technology - RFID Tags. Alien Technology. August 16 th 2005,
<http://www.alientechnology.com/products/rfid-tags.php>.
Cognex: In-Sight Fixed-Mount ID Readers. Cognex Corporation. November 22"d 2005,
<http://www.cognex.com/products/ID/InSight-IDReaders.as>.
Ellison, Michelle. "McKinney RFID Project." August
1 0 th
2005.
Finkenzeller, Klaus. "RFID Handbook." 1st edition,: John Wiley& Son, Ltd. 1999.
Office of the Under Secretary of Defense Acquisition, Technology and Logistics.
"Government Personal and Real Property In the Possession of the Contractor
(PIPIC) - Guidance for Industry Transition from the DD Form 1662 in Support of
Defense Federal Acquisition Regulation Supplement." August 18 2005.
Office of the Under Secretary of Defense for Acquisition Technology and Logistics.
"Cost Benefit Analysis of Unique Identification (UID)." March 2005.
Office of the Under Secretary of Defense Materiel Readiness and Maintenance Policy.
"Department of Defense Unique Identification Implementation plan for
Maintenance Depots." May 2005.
Office of the Under Secretary of Defense. "Guidelines for the Virtual Unique Item
Identifier." December 29, 2004.
Office of the Under Secretary of Defense, "Policy for Unique Identification (UID) of
Tangible Items - New Equipment, Major Modifications, and Reprocurements of
Equipment and Spares." July, 29th 2003.
&
"Pratt and Whitney Parts Marking/UID." Pratt and Whitney 2D Part Marking
Traceability Initiative. December 2003.
Rattray, Mike. "Radio Frequency Identification Asset Management for Electronic
Warfare Systems in Goleta, CA." April 12, 2005.
Raytheon Company: About Us. Raytheon Company. September 25th 2005,
<http://www.raytheon.com (Home>About Us)>.
TalTech: Resources. TalTech Incorporated. November 2 2nd, 2005,
<http://www.taltech.com/TALtech web/resources/intro to bc/bcsymbol.htm>.
90
Taylor, John. An Introduction to Error Analysis. Sausalito: University Science Books,
1982.
What is a Contact Memory Button? MacSema Incorporated. November 22nd, 2005
<http://www.macsema.com/buttonmemory.htm>.
Secondary Sources
Navas, Deb. "Inside the DoD Mandate." Supply Chain Manufacturing and Logistics.
November 2 3 rd 2004.
"Technifor: Success Stories," Technifor Corporation. November, 22nd, 2005,
<http://www.technifor.com/htm/success/autoOI.htm>.
91