IW Best Plants Profile - 1998

Lockheed Martin Corp. Ft. WorthBy John H. Sheridan For 56 years -- since the early days of World War II -- theyve been building military aircraft at the sprawling Ft. Worth facility now known as Lockheed Martins Tactical Aircraft Systems (LMTAS) operation. From the vintage B-24 bomber to the F-16 Fighting Falcon -- which currently accounts for some 70% of revenue -- the plant has recorded a litany of technical achievements. Despite the past successes, however, the 1990s has been a period of collective soul-searching as the plants management team and workforce faced the sobering business reality of the post-Cold War era. Business volume has declined sharply -- with the F-16 production rate plunging from 25 a month in the late 1980s to just four a month in 1997. In the last seven years, employment has been trimmed by more than 50%. And the military-aircraft market environment has changed dramatically during the last decade. The U.S. Air Force, which actually owns the Ft. Worth production facility and some of the equipment, is no longer the main source of revenue. Last year, 69% of its sales were to international customers. No fewer than 19 countries now fly the F-16. And, in a market that once seemed insensitive to price, affordability -- and, hence, cost reduction -- has become a major issue. But management and the 11,500 employees at LMTAS are meeting the new realities head-on. Theyve slashed unit manufacturing costs for the F-16 by 38% since 1992, despite a 75% decrease in volume. Meanwhile, theyve collapsed the order-to-delivery time span by 37% in the last three years, in part through the introduction of lean-manufacturing techniques. Along the way, theyve achieved 97.6% work in process (WIP) accuracy, increased value added per employee by 40%, and slashed overhead costs by 70%. But the business transformation to what Lockheed Martin executives envision as the "fighter enterprise of the future" is far from over. They are continuing to refine their business processes, adapt and develop new technologies, and foster a culture that thrives on meeting the challenge of change. "We are very much aware of the realities of the environment, coupled with the demands and expectations of customers that want things different than they were in the past," says Ralph Heath, vice president for business development. "So it is vitally important that we change -- and change as quickly as we can -- regardless of how good we are today." Many of the initiatives currently underway are geared toward enabling LMTAS to capture a significant share of the business when production contracts are awarded for the next major military-aircraft program -- the X-35 Joint Strike Fighter (JSF), a multipurpose "stealth" fighter with STOVL (short takeoff/vertical landing) capability. Suitable for both conventional and carrier-based use, the JSF will replace the F-16 and F-18 fighter planes. Early "demonstrator" versions of the JSF are expected to fly in the year 2000, with production deliveries beginning in 2007. Two years ago, Lockheed Martin was awarded a contract to develop and flight-test one of the proposed designs for this next-generation fighter. Long-term, the future of the plant hinges on the companys success in winning a JSF contract about three years from now. Meanwhile, the continuing viability of the business depends heavily on capturing new orders for the F-16. "Even though we are committed to restructuring how we do business in order to be a long-term survivor," Heath asserts, "we also need to continue to improve how we are doing things today, so we can continue to be successful in selling the F-16s. The way I like to describe it is that were walking and chewing bubble gum at the same time." In truth, the employees at the 700-acre complex, which was acquired by Lockheed from General Dynamics Corp. in 1993, have been doing much more than walking and chewing. For example, theyve:

• Implemented an "advanced affordability" initiative aimed at steadily reducing product costs. A major thrust is the adoption of such advanced technologies as high-speed machining cells, laser-guided manufacturing of metallic parts from metal powder (in a vacuum chamber), and laser ultrasonic systems for inspecting composite structures. In addition, design teams are exploring ways to use "unitized" structures, with fewer fasteners, to reduce the number of distinct parts that go into each product. (With 80,000 parts and subsystems, the current F-16 is an enormously complex piece of hardware.) Although the initiative is targeted primarily at future JSF designs and production methods, "the technology is being applied to production of the F-16 and other products," notes Ken Taylor, director of the affordability program.
• Introduced a variety of supply-chain-management initiatives, including centralized procurement for Lockheed Martins entire aeronautics sector -- to leverage the volume of purchased materials and reduce costs, while introducing longer-term purchase agreements. In addition, LMTAS has adopted a supplier product-and-process-improvement program that features joint brainstorming sessions at the suppliers sites. "We are after reductions in cycle time and [improvements in] quality, with an emphasis on reducing cost," explains Steve Wagner, manager of supplier continuous improvement. Working with suppliers in a "collaborative" fashion, the improvement ini-tiatives often target the elimination of non-value-added activity including excessive testing. In the case of one landing-gear supplier, past policy required that each unit be tested nine times "even though it had been years since any failure occurred after the second test," Wagner notes. Activities in supplier plants have included kaizen and kaikaku events -- the latter seeking breakthrough improvements, such as the conversion from batch to flow production. To date, some 200 different projects have been completed with 18 supplier firms, yielding an estimated $200 million in cumulative savings.
• Launched a "workforce-vitality" effort that focuses on improving the plant culture and creating an "engaging" workplace. "By an engaging workplace, we mean one where people are willing to give their discretionary effort," explains Karie Willyerd, director of people and organizational development. Begun two years ago, the early steps included plantwide employee surveys and focus-group sessions in which members of LMTAS President Dain Hancocks staff met with five to seven employees at a time. Workers were asked for their views on the ways management creates obstacles that inhibit employees from contributing to the success of the organization.

The workforce-vitality campaign, which has the backing of leaders of the plants five unions, has already produced some short-term successes including an "Ask the President" program in which Hancock and his vice presidents respond to written or e-mailed questions. "Dain personally reviews or edits all of the answers," Willyerd notes. Answers to questions of broad interest are published on a company Web site. In addition, "learning resource centers" have been established in the plant, offering intranet- or Web-based training courses to support employee learning plans. (Each employee is required to develop an individualized learning plan that must be approved by a supervisor.) Among the many proposals now being considered under the umbrella of workforce vitality are facilities improvements (including ergonomic chairs) and adoption of a 9/80 "flex-time" schedule in which employees would work 80 hours in nine days over a two-week span, getting every other Friday off. Although it would take a telephone-book-sized report to detail all of the improvement activities undertaken at the plant in the last eight years, one of the most impressive bottom-line results has been LMTAS success in cost management. The 38% reduction in manufacturing costs on the F-16 is the cumulative result of an estimated 90,000 employee initiatives, notes Mick Stenftenagel, director of industrial engineering. An important step in getting costs under control, he says, was an effort -- begun in the early 1990s -- to "translate" traditional accounting jargon "into something that we and our supervisors all the way down can understand. . . . Basically, we broke an airplane down into component parts that each manager and supervisor could manage." For each component or factory unit, costs were charted by type: touch labor, support labor, materials and equipment, perishable tools and supplies, and so on. Each element was assigned a color code for the purpose of creating high-visibility charts that are posted in various areas of the mile-long production facility. "What that allowed us to do was to concentrate on those elements of cost that we had some control over," Stenftenagel notes. "Previously, the supervisor on the floor had no earthly idea [of the various cost elements]. He didnt know direct from indirect dollars. But we gave him something to manage. "When we started this, we baselined the organization and every department managers piece of it," he recalls. "And we said, You have to have three cost initiatives underway at all times. We asked them to focus on the top three things that would impact costs in their area. The managers developed forecasts on how much they thought they could save. And we tracked it. . . . When they finished one thing, theyd start on another. That is where a lot of the 90,000 initiatives came from -- directly out of the departments themselves." Plantwide, the heaviest impact has been on support-labor costs -- a major component of overhead -- which was slashed nearly 70% from $3.1 million in 1992 to $940,000 last year. Providing a day-to-day overview of the cost-control effort is a networked computer application known as the Integrated Cost & Schedule/Earned Value Management System that gives management clear visibility on the status of major programs to guard against surprises in cost and schedule performance. "We dont wait until tomorrow for someone to tell us how we did today," says Jack Hackney, cost specialist for the composites manufacturing center. Contributing to cost reduction, as well as improvement in quality, has been a huge reduction in "out of station" hours -- the amount of time spent completing work on a portion of the aircraft after it has moved from the area where that work should have been done. If, for example, a radar system has to be installed at a later-than-normal stage because a supplier was late on delivery, the people who end up doing the installation may not be those who normally handle that work. "It is more costly, and it has a direct relationship to quality," says Robert Rearden Jr., vice president for production operations. "There is a greater opportunity for quality problems when the work is done out of station." The plant once had 4,000 out-of-station hours each month, but that figure has been slashed to just 26 hours, notes Robert Brewer, director of quality assurance. Emphasizing the integrity of data in the plant computer system was another important thrust, Rearden says. "We said, If your data is wrong, you dont work outside the system. You go fix the data. It took a couple of years to get a culture in place where people appreciated valid data -- so that when a worker moves something from one location to another, he makes the transaction to record the fact that it has been moved. "Focusing on the accuracy of the data that we use to manage the business was a tremendous help," Rearden adds, "because there was a hidden infrastructure to rework the data." At A Glance

• A 38% reduction in manufacturing costs, despite reduced volume.
• A 50% reduction in total inventory over the last three years.
• Achieving 99.5% inventory accuracy and 97.6% WIP accuracy.
• Contractor end-item acceptance audits showing just 3.4 defects per plane -- on a complex product composed of 80,000 different parts.
• A reduction in order-to-delivery span time from 42 months to 21.5 months.
• A 99.7% on-time delivery record for support products; 100% on-time delivery of complete aircraft.
• A 69.7% reduction in support labor costs since 1992.