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

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

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

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

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

The following content isprovided under a Creative Commons license. Your support will helpMIT OpenCourseWare continue to offer high qualityeducational resources for free. To make a donation orview additional materials from hundreds of MIT courses,visit MIT OpenCourseWare at ocw.mit.edu. [CLASSROOM CHATTER] ALLEN HAGGERTY: OK, it’s 0900. We’re going to get started. As a reminder, myname is Al Haggerty. And we’re going to tryto get you oriented here in what we call this, TheStart of Your Lean Journey. There we go. So by the time weget done, you’re going to be ableto differentiate between Lean and Six . And I know that oneof the attendees today mentioned thatthat’s why they came. We’re going to talkabout the 5S tool. That’s a derivative ofthe original Japanese Lean concepts. And we’re goingto able to define the difference betweenLean and a lean enterprise and stakeholders andrecognize why lean six principles are being implementedin aerospace, because it’s turned out to be a very,very, very valuable tool. And the fact that todayis day one of a journey, It’s not something that youjust do once and finish.And I was reviewing someof the latest changes, and my wife said, gee, you’vedone this a lot of times. What are you doing? I said, we’re on version six. And she said, what? You changed it six times? And I said, this iscontinuous improvement. So we’re going totalk about that. This is a excerpt from TheMachine That Changed the World. And some time, if you geta chance, get that book. And Womack and Jones, an ex-MITprofessor, he’s still alive, and he’s still kicking, andvery, very interesting guy– developed a whole bunch of data. But it started with theautomobile industry. The book TheMachine That Changed the World is about theautomobile industry. And in the late 1800s,cars were brand new, and they were assembled by hand. And then Henry Fordrevolutionized the production of cars. And the big thingthat he came up with was interchangeable parts. Because before that,we handmade parts. And he came up withthe concept, that if we could make all theparts the same, we could put themin an assembly line.And that startedthe mass production. Well, along came Toyota,after World War II. And Toyota made thishuge improvement in how we build cars. Part of it was the concept ofstatistical process control, in terms of how theyliterally made the parts. But they invented thewhole concept of lean. And as you may know, last year,2007, which just finished, the Toyota production nowexceeded General Motors production for the first time. And from marketcapitalization, numbers of shares times thevalue of the stock, they’re the largestautomobile manufacturers. And as you know, we’ve gonethrough a lot of problems with Chrysler, was partof the Daimler-Benz until just recently, whenCerberus just bought them back. But our automobileindustry is in trouble. I just read the other day thatGeneral Motors lost $36 billion last year. Part of that wasbuying back the rights of the displaced workers,the severance pay and that kind of stuff,and their health care, and so forth.But you can see the differencebetween, if you look at this, the auto productionin the US, these guys, and with the ups and downs. And every time youdo one of these, we get these giant layoffs. The nice, smoothJapanese production is as a function of Lean. They continue to improve, andthey have a stable workforce. Their products continueto be better and better. I do a lot ofjogging, and if you jog along the roadand all that, you take a look at the old cars. The old cars thatcome down the road– there are Hondas and Toyotas andthe Japanese-owned automobiles.The old Chevys andthe old Fords, I mean, you see some of them. But they don’t last as long. And a good reason is– the factis that these cars, I mean, I tell industry groups. I mean, you ask anycollege kid about driving a car after 200,000miles, and they’ll say, yeah, I got a Corolla,or I got a Camry. I’ve got a Honda. And there’s a reason for it. Because the fact isthat they have all the bells and whistles. And all the bells andwhistles keep working. So we just talked about that. In the post-world War IIperiod, General MacArthur wanted to rebuild theindustry as part of his– he was the Supreme AlliedCommander in Japan, and he tried to getthe industry going.And he brought Demingfrom MIT, basically, to help get the [INAUDIBLE]a bunch of experts. And he instituted a lot of thestatistical process control. And the Japanese took it forgranted– not for granted. They said they didit with a passion. Whereas, in the US, we didn’t. And therefore, theircars and their products have workedsignificantly better. So if you take a look atthe early craft concept that was used in the IndustrialRevolution in past, just think of ajeweler, a watchmaker.Each one of those littleparts was made by hand and filed by hand, put together. And if you wantedto become a jeweler, you became an apprentice. And then you becamea journeyman. And then you becamea master craftsman. And that was how, in fact,you made the kinds of parts. And if, in fact, you could thinkof a better way of doing it, the master craftsmenwould do it. But it was not spread anywhere. I mean, maybe he would teachhis apprentice, or so forth. But mass production, whichwe just talked about, Henry Ford, thatkind of concept, if we were goingto build years ago, if I was going tobuild 12 Apaches, we’d put 14 parts in theline, 14 sets of everything. Why 14, if we’regoing to build 12? Because we’re goingto scrap them.We don’t do that anymore. But that was typicalwhat we would do. And that’s pure waste. And the concept was massproduction, reduce the cost, get the efficiency up. And there’s no question thatthis was a lot more productive than the master build it oneat a time kind of a thing, of a craft person. But here’s a big difference. Inspection was a second stage. We would build it andinspect it, build the part and inspect it. Today, in Lean thinking, webuild the quality process into the production of the part. And we’re going to show youlater on that inspection does not catch all the errors,does not catch all the errors. In fact, I guess thepoker chips that we just saw before was a gooddemonstration of that. And anothersignificant improvement is that the master, the mastercarpenter, the master furniture builder, the masterbricklayer, any innovation was driven by the guythat was doing the work. Here, we had industrialengineers and manufacturing engineers, expert periodicimprovements to the process. Under the Lean concept, we wantevery worker to contribute, every worker to contributein terms of being able– there’s no question, thatthe real experts in the job, are the people thatdo it every day.And trying to gleanthat information is part of the valueof Lean thinking. And the biggest thing is reallythe focus on the customer. See here the craft– the jeweler was focused on thetask of building that watch. The mass productionfocused on automobiles. Well, we still wantto build automobiles. But the focus wason the product. Here, on the Leanthinking, we’re trying to delivervalue to the customer. And we’ll talk moreabout that later on– but trying to deliver value. Want to deliver a Mach 1.6,supercruise high payload, vertical– or short– takeoffand vertical landing aircraft, called an F-35, tothe war fighter. That’s the value. And we want to be able to doit for $35 million apiece. That is the valueto the Air Force, which is the macro customer. The pilot and the mechanicare the detail customers of how we think– so big, big difference in theway we approach the concept. Now, we talked about Six . Six Sigma was developedby Motorola in the ’80s.Now, not too many peoplewear pagers anymore. But when I was ayoung engineer, I remember that it was sortof like a status symbol to have a pager. I never got one ofthe darn things. But pagers were a big deal. And Motorola pioneeredthat business. And they had 80% market share. Until, once again, the Japaneseand the Koreans came along, and they added a whole bunchof features to those things, where they could tell you– when the buzzer went off,they could tell you who it was and where they were comingfrom and what time it was, and a whole bunch of features.And they delivered it tothe United States cheaper. And all of a sudden, Motorola’sbusiness went in the tank. And they tried to analyzewhat was going on. And they decided that– they did a Pareto analysis. And we’ll teach youabout Pareto charts here. But they basicallymade a ranking of what the issues were. And one of the biggestissues was the fact is that they had to scrap andrework a bunch of these pagers. And their quality was notas good as the Japanese, and they didn’t last as long.The pagers didn’t last aslong, for quality reasons. And so they said,how can we fix this? And basically started to applythe Deming statistical process control to the various designprocesses, manufacturing processes, and so forth,to improve their quality. And they regainedtheir market share. They regained theirmarket share on the pager. So anyway, Motorola,in the ’80s– in fact, I live in Scottsdale,Arizona, now. And the Motorola facility wasthe one there that did that. But it was improving qualityby eliminating defects. And the concept isreduce variation. We’re going to talka lot about that. But under Lean, we’retrying to remove waste. And waste is notthe fact that people come to work everyday to waste things. It turns out thatwaste is– the fact is, if this is theperfect way of doing it, and we’re doing it now, thedifference between what we’re doing now and how good it couldbe is a definition of waste. The Six Sigma is focused onthose issues, a variation that, in fact, causing aproblem, we focus on the flow. And you’re going to hear theterm pull, versus push, and so forth, as we go through this. And we’re trying toget rid of the waste to improve thebusiness performance. And it’s a lot ofsmall improvements, many of them comingfrom the workers who do the job every day.And I had to work in a– Boeing sent me to Japan. And I worked in a Japanesefactory for a week and after two daysof training, had to improve the productivityof a Japanese worker, who was making largeindustrial air conditioners. And that guy was 55 years old. And he was moving so fast. And my job was to improvehis productivity by 30%. And I thought to myself,there is no worker in the United States that’sworking as hard and as fast as this guy.And he was doing all these jobs. And I had to figure out thatliterally, it was a repetitive job and try to improve. But it was a combination. I did it, but it was acombination of a whole bunch of small things. And that’s whatwe’re trying to do. So we’re going to learn a lotabout variation and the fact that variation causesproblem and the fact– we’re going to talk about flowand how to get the waste out of the process.AUDIENCE: Question. ALLEN HAGGERTY: Yes, sir? AUDIENCE: A simple [INAUDIBLE]. Where does the nameSix Sigma come from? ALLEN HAGGERTY: Statistics. AUDIENCE: OK. ALLEN HAGGERTY: Yeah. There’s a chart we’regoing to show you later on, the day aftertomorrow, that will actually explain that. But basically, in statistics,sigma, in terms of variation– so one sigma is 30% of the part,two sigma is 66%, three sigma, so forth. Six Sigma is 99.99999%perfect kind of stuff. AUDIENCE: [INAUDIBLE]standard deviation. ALLEN HAGGERTY: Standarddeviation in statistics. I just came fromBoeing helicopters. I was on there fora week last week, helping them on the[? root end ?] fatigue problem on the Apache Attack helicopteradvanced composite rotor blade program. And there’s a[? root end ?] problem, and I was there to fix it.But we literallytake six specimens. It has nothing todo with Six Sigma, per se, but six specimens, andthen run out the fatigue test and determine what the highconfidence 99.999% stress level is that we can guaranteethe life of the part. And so it’s used a lot. We talk about the fact that Leanoptimizers flow and eliminates waste. Six Sigma stresses quality forthe elimination of variation. And certain companies have putall their focus on Six Sigma. And other companieshave adopted Lean. And over the last10 or 15 years, we’ve seen a convergenceof companies that use both, and the idea being is, that ifthe basic quality problem is something that we can apply SixSigma methods, it makes sense. But quite often,in the big picture, the flow is all mixed up. And therefore,we’re concentrating on eliminating thewaste in the flow. So there’s a lot ofcompanies that, in fact, instead of having a Six Sigma– General Electric, for example– and instead of a pureLean, have, in fact, merged those two. And so you can seehere, Rockwell Collins calls it LeanElectronics, Textron– Six Sigma.The Air Force newsystem is AFSO21. Boeing now calls it Lean +. And that’s a change justin the last two years. So all of these thingshave merged together. So we’re going to talk aboutthe fundamental concepts that underscore both of those. We were talking aboutsomeone mentioned, early in the icebreaker, and whythey were going to come here, they wanted to learn the terms. There’s a bunch of terms thatwe’re going to expose you to over the next three days. And these terms arethe language of Lean. And we’ll go through those. And believe it or not, whenyou take your value test at the end, you’ll be alot more knowledgeable and to be able to explainreally what those are. So that’s good. And I won’t go throughthose at this point. So we talked about the 5S.There are literallyfive terms in Japanese that began with the S word. And I can’t pronounce them. But they have beentranslated into English to mean Sort, Straighten,Scrub, Standardize, and Sustain. And I’m not sureyou can see this, but this is a typical factorysorting area, receiving inspection, wherethe parts come in, and they get sortedand inspected. And this is before. And if you can seethat right now, there’s a place for everything,and everything’s in its place. And that has a hugeimpact on the ability to get the job done efficiently.Let me just relate thatto your father’s tool box, your father’s toolboxon his workbench, or the plumber that you see,or the mechanic on your car. And they’re in a toolbox. I know that ratchet wrenchis in here somewhere. What our job is to do,as the converse of that in terms of sortingand straightening, is to be able to say,I want our mechanic on the line to haveall the tools so that he can be like a surgeon. He can be a surgeon– scalpel, right. And it’s all right there, andhe knows exactly where it is. And we want togive him the parts and the paper and the tools– OK, the parts thatI need right here, the tools that I need to dothe job, and instructions, so that he knows what to donext, if it’s, in fact, he’s building multiple products.So we want to be more efficient. And we’ll findout that actually, straightening out and sortingout is a big improvement. So we’re going todo an exercise. Everybody go into yournotebook, into your R notebook. And there’s a pieceof paper that says, 5-S Exercise, 5-S exercise. It looks like this. Now, what we’regoing to do is we’re going to do a 5S exercise. And we’re going tomeasure our improvement. We’re going to putmetrics on this. And we’re going to, in fact,put you in shifts of 30 seconds.And what a good job to do– when I tell you to turnthe page, I’ll time you. You’ve got 30 seconds. And what we want you to do–you’ll see a bunch of numbers. Don’t look, abunch your numbers. And what we want you to dois to find the number one, cross it out, thenfind number two, cross it out, numberthree, up to 49. You have to do it in order– 1, 2, 3, 4, 5, 6, 7, 8, 9, 10. Find the number. Cross it out. Find the number. Cross it out. And then stop whenI tell you to stop. Ready? Set? Go. OK. AUDIENCE: 8. AUDIENCE: 4. AUDIENCE: 9. ALLEN HAGGERTY: 9. AUDIENCE: I didn’t get any. ALLEN HAGGERTY: OK. [LAUGHTER] AUDIENCE: 3. ALLEN HAGGERTY: So roundone, the highest was 11. The average– the averagemight have been 5 or 6, something like that. So I’m just going tosay, OK, that’s cool. OK, so now what we’re doing isthat we’re talking about 5S’s.The second S is we’regoing to sort these. We’re going to sort these. And what we’vedone is that we’ve removed some wasteout of the system, and we’ve removed thenumbers between 50 and 90. And for our product,we don’t need those. So what you’re going todo is the same thing. We’re going to go in order. Find the 1, Cross it out.Find the 2. Cross it out. Find the 3. OK? And on your mark, get set, go. Stop. OK. [CHUCKLING] It’sa killer, right? How many? AUDIENCE: 10. AUDIENCE: 10 AUDIENCE: 11. AUDIENCE: 13. ALLEN HAGGERTY: 13. AUDIENCE: 19. ALLEN HAGGERTY: 19. AUDIENCE: 32 ALLEN HAGGERTY: 32? AUDIENCE: [INAUDIBLE]. ALLEN HAGGERTY: 22. AUDIENCE: 15 ALLEN HAGGERTY:Highest number was 22. And the average is about11, roughly, around 2. OK. We’ve had a productivityenhancement. We’ve gone from 11 up to 22. Now we’re going to dowhat we call set in order, or straighten. And just think about a factory. We install the rack systemto help locate the numbers. And the numbers go from thebottom to the top and from left to right. OK, that sort ofmakes sense, right? Bottom to the top,left to right. And that’ll help you. So start over on the left,and then go up, and then go to the right side. And we’ll talk about it. OK. Stand by. On your mark, get set, go. Good. OK, so round three,39 was our top.Now, the average is certainly,like, approximately 30. Good. OK. Now you see thatstraightening paid off. The third S is whatwe call scrubbing. It’s tough to scruba piece of paper. I mean, so butbasically, cleaning the factory, if you thinkof an electronics factory, if you had a dirtyelectronics factory, and somebody put a chipdown, you’d ruin the chip. I mean, that’s a simple example. But there’s lots of processes. We make composite– I justsaid I was in a [? root end ?] factory, making rotor blades. Composites have tobe absolutely clean. So having a factory thatis clean helps product.But I can’t dosomething on that one, so we’re just goingto skip that next one. OK, the next one is whatwe call standardize. And we’ve created a systemof ordering the numbers from the lowest to thehighest, from the left to the right, and top to bottom. We’ve put onenumber in each box, OK, make it easyto get our tools. And we know where our plans are. So we now know wherethe screwdriver is.We now know where the wrenchis, and that kind of stuff. OK. Stand by. Ready, set, go. OK. AUDIENCE: 49. ALLEN HAGGERTY:[INAUDIBLE] whoa. [LAUGHTER] AUDIENCE: 49. AUDIENCE: 49. AUDIENCE: 49. ALLEN HAGGERTY: Youcan see, on round four, we basically did it. We significantlyimproved the average. Why don’t you review that. AUDIENCE: [INAUDIBLE]roughly, looking at the range andthe eyeball, mean, we started out real low, kindof consistent, consistently bad, right? As we went through sortof intermediate steps, notice the variationactually got bigger. Some people took to theimprovements quickly. Other people didn’t. There was actuallymore variation. In fact, at thislast step, we had a weird bimodal distribution. I have a lot of 30s anda lot of teens, right? Some people got thatsystem, some didn’t. But the really good system,with some odd exceptions, brought both that ourperformance went up and very important,got our variation down. There was actually just acouple of outliers here. Almost everybody was on track. ALLEN HAGGERTY: Now, basically,let me translate that to an aircraft example. Years ago– I mean, I startedin this business in 1962– they would give a worker ajob ticket, a job ticket, and said– the supervisor would gettogether at 7 o’clock in the morning andsay, OK, you’re going to build thehorizontal stabilizer today.You’ve done that before. We know how to do it. Here’s the job ticket. Clock in on the job. You’d go clock in on the job. And it would tell youthat, in fact, you had to go to the blueprint crib. And you’d pull out theblueprints for that, and you’d spread them out. And then it would tell youthat you had a part kit. And you’d go tothe parts control, and you’d get that kit. And then it says,whoop, I need this tool.And you’d go to the toolcrib and get the tools. And now, we start at 7 o’clock. It’s about 7:30, andyou’ve been trying to get your stuff together. Today, we don’t do it that way. Today, you get your partsand your instructions. In fact, F-18, Apache,and those kind of things, are paperless, paperless. So you have a computerthat right now and tells you a illustratedway of getting the job done. And it’s right in front of you. And the parts are right there. The tools aredelivered with the job, or they’re at yourworkplace all the time. And you can see, you cansee, from 5 to 6 to 49, how this is important interms of being able to sort, straighten, and standardize.OK? So now you know what 5S is. Now, the fifth S is sustain. And what that really meansis that clean factory we saw, the fact is, that atthe end of the day, you want to be able to putthe tools back in the rack where you found them, so thatyou know exactly tomorrow morning, when we start,exactly where they are. We want to continue tohave a clean factory, so that if we drop a chip,or something like that, we’re not running anything.So it’s tough. This is like clean your bedroom. Yes, Mother. Right? I’ve cleaned it. I want it clean next week, too. Right? Keep it clean. And as they say here,it’s hard to achieve. I used to do a walk-throughand created the Golden Broom Award, the golden broom. And we literally hada hardware store broom that we sprayed with gold paint. And we’d walk thefactory to make sure that the folks that had thecleanest shop, the sheet metal shop, the machine shop, wewant them to keep it clean. Aerospace is the largestexporter in the United States. When we talk about thebalance of payments, the aerospaceindustry always leads in terms of number of exports. It’s a [? flagshop ?] industry. Obviously, today,everything is air-shipped. You’ve got FedEx andUPS. And UPS, there’s a very large fleet. It’s not just brown trucks. They’ve got a largenumber of cargo travels. But we get products– it usedto be only high-value products. Now we get a lot of things. Sushi is flown indaily; fresh iced tuna flown in from Taiwan every day. It’s hard to believe– flies right into San Francisco. So we move people and goods withour global positioning system, and so forth, andour satellites. We’ve got wonderfulinformation now that we never hadfrom our satellites. Obviously, national securityand the concept of, hopefully, going back to the moon andMars, and the innovation that that technologyprovides, made aerospace an exciting place to work. But some terrific workthat was done here at MIT in terms of studyingthe evolution of products and innovation– this is in green color– I guess that’s sort of green– the number of major typewritercompanies in the world.And you can see it goesup and down like that. And at the peak,at the peak, there were 75 companiesmaking typewriters. Now, my mother was a secretary. And her favorite typewriterwas a Smith Corona. Well, Smith was atypewriter company, and Corona was atypewriter company. And they merged, and theymade good typewriters. Ultimately, Remingtonmade typewriters. And then IBM made typewriters. And when I was ayoung engineer– and some of you mayhave seen these, but you can’t even find themanymore– the typewriter that had a ball onthem, the IBM Selectric. And instead of havingkeys that went like this, the little ball would just flipto the right position and type.And the really good typistcould type much faster on those things. And it was a status symbolfor the secretaries, if you get an IBMSelectric typewriter. But what happened is thatthe advent of the computer later on– I mean, you can’t evenfind typewriters today. I mean, they’re in museums. What the researchhas indicated is that, when a invention happened,a whole bunch of people jump into the industry. And then as the productstabilizes, where innovation, they’ve gotten about all thegadgets into it that make it better, the process, notthe product innovation, but the process innovation–who can make the typewriter more efficiently, and deliver itto the customer at lower cost, and there’s some consolidation– Smith and Corona get togetherand become one company. And they, in fact, thenumbers of companies reduce. Automobile industry–I mean, I can– and Earl and I, we canremember Hudson automobiles, when we were kids, Hudsonautomobiles and Studebaker and Nash.You folks probably have never–you might have heard of them. But the Studebaker companystarted in the world in making Conestogawagons to go out West. And then they wind upmaking early automobiles. And in the late ’40s,after World War II, they had a very unique company. The automobileindustry has gone down from cars, enclosedsteel body cars– look at all this. There were a whole bunch ofcompanies in that industry. And now we have threein the United States. And then, a couple ofyears ago, Chrysler was not really a US company. It was Daimler-Benz.So the same product phenomenonhappened in automobiles. And here we are here. There’s a chart that I sent[? Analisa ?] the other day. We had 54 aerospacecompanies in 1940. And that has consolidateddown to where you’ve got, in thecommercial airplanes, you’ve got Boeing and Airbus. Then you’ve got somebig Embraer and Cessna and some of the folksthat make business jets. But the number of companies isreally dramatically reduced.And the same phenomenon wouldhave been predicted down here, except during the Cold War, itwas important to keep companies alive and keeping what we calla warm base or a hot base, in order to be ableto produce them. But the question is, ashappened here and here, as the efficiency improved,only those companies that had a better business modelreally stayed in the business.And so the question is, arewe in trouble in aerospace? We hope not. But the point is, thevery fact that we’re doing Lean, Lean Six Sigma,and transforming ourselves into very, veryefficient companies, hopefully that will, infact, sustain the industry. So that’s somethingto keep in mind. Because we used to say,in Pentagon budgeting, that only the healthytigers survive. The weak ones get eliminated. And so the name of thegame is to keep going. So the question is, the industrythat came of age in a court order cannot survive with anobsolete business strategy.And so we’re going totalk about that strategy. Now, for many, many years,starting with World War II, the name of the game was highpriority, develop the aircraft. This is even pre-missiles. And the way we got the pricewas, what was the cost? The government wouldaudit the cost, and then you’d put 10% or15% profit on top of that. And that determinedwhat the price was. Over the last 10 or15 years, the customer has gotten a lot smarter. And it said, youknow, look, this is what we’re willingto pay, and this is what we think is reasonable profit– same as this, 10% or 15%. And if we’re goingto buy it from you, you better get your cost down. Otherwise, A, you don’tget the business, or B, you don’t make any money. So the customerdetermines the price. And we in industry have to lowerthe cost to achieve the profit. So when we go througha design process, our design has to come upwith the fact is that we’ve got to meet the range– you guys are aeroengineers– range and payload and reliabilityand maintainability, and so forth, allof those specs.But one of the keyspecifications– we’re going to talk more aboutthis when we talk about cost– one of the key specificationsnow is achieving the cost. So we talk about designto cost, design to cost. And we keep iterating the designuntil we achieve that cost. And those companies thatdon’t iterate the design to achieve the costat the beginning wind up not makingmoney, not making money– so big issue. So we use Lean tohelp us achieve and to make sure thatwe’re efficient in all of our processes. So here’s some basic data. Now, this is the returnon invested capital. And here, this is the averageof the capital goods companies.These are the big companiesin the United States that manufacture. These are notservice industries. These are big capital–make big equipment. And you can see that basically,almost 8% margin, net margin. And you can see over here,that the return on the invested capital is 11% or 12%. And you hear some of theaerospace companies– In fact, it’sinteresting, as we’ve taught this course, how many ofthese companies were down here. Boeing and Lockheed,and so forth– we were all down hereabout five years ago.And we’ve, in fact,become more efficient. OK, this is 2007. So actually, it’s funnyto watch those things. We’re becoming moreand more– and Rockwell used to be down here, andthey’ve gone way up here. And actually, ClayJones is the CEO. I met him back in 2002. And he came to seeMcDonnell Douglas, because we were doing Lean. And he wanted tolearn how to do it. And he went back. And now they haveLean Electronics. And they’ve done very,very well, done very well. So the point of the story isthat the aerospace industry has been moving up intowhat we call the green zone.So we have red, yellow, greenand a lot of the military charts and a lot ofindustry charts now as a way of communicating–red, yellow, green, just like a stoplight chart– not so hot, caution, great. And the aerospace industry,as it’s become Lean, is moving in that direction. And it’s a gratifyingphenomenon. We typically have underperformedcapital goods manufacturers. But Lean is driving usto the right-hand corner, which is great. We’re talking about enterprises. And that’s a key word in Lean. And there’s lots of differentkinds of enterprises– Programs– Joint Strike Fighteror the Boeing 787 Dreamliner, the Global Positioning System.Then you have amulti-program enterprise, for example, Raytheon. I have Raytheon marineelectronics on my big sailboat. And we’ll showyou that later on. The United Technologies isSikorsky, Pratt & Whitney, Carrier air conditioning,the Otis elevator company– lots of products,lots of programs. And then we’ve got the nationaland international enterprises, the aerospace enterprise,our whole aerospace industry, military andcommercial; the European Airbus and the othercompanies, the EADS. So we can have enterprises thatoverlap each other, intersect. And we’ll show you how theycan, in fact, be connected. So what is an enterprise? And it says, one ormore organizations will have related activities,a unified operation, and a common business purpose. So here we are herewith the end user. And Lean, we focuson the end user. And remember, justa new concept– is the end user theairline that buys a 787? Or is it the pilot andthe maintenance mechanic, because those arethe real end users, and we want to make iteasier for the pilots and easier for the maintainers? And then ’s job is toconceive a product design that achieves the value that we wantto deliver to the end user.And then manufacturingoperations and our supplier network addthe value to create the product. And there’s a bunch ofsupporting organizations– finance, that keeps thebooks; the human resources people, that acquirethe personnel and provide the benefits, andso forth, and do the training; legal, obviously; andthen product support. In a militaryenvironment, one-third, roughly, one-third ofthe total life cycle cost is the acquisition. How much do we pay for thedevelopment and the production? But 2/3 are the operationsand support costs.And it turns out, that ifyou put the product out in the field, and we’vegot a good customer here, the maintenance cost,the training cost– think about training pilots. 50 years ago, it cost$100,000 to train a pilot. Today it’s in the millions. But the amount ofmoney for spare parts and repair and overhaul– so2/3 of the lifecycle costs are in the product support area. So all of these arepart of an enterprise.And you can see theintersections of– the product development guyssend specs to the suppliers to build the parts. They also send specsdown to manufacturing with the blueprints todo it, and so forth. So you can see thoseintersections there. So if you basicallyhave a headquarters– this could be theheadquarters of what used to be McDonnellDouglas in St. Louis. And then you’ve gota factory there. And it turns out that we,in fact, have suppliers. And we, in fact, go out toour second and third-tier suppliers. What’s a second andthird-tier supplier? We buy titanium fromoutfits like RMI. We’re buying titaniumfrom Russia today. They have a hugesource of titanium. We get Alcoa–obviously, aluminum. And so those arefirst-tier suppliers. But we also then go down belowthat to our machine shops.That Hicksville machineshop on Long Island makes big machine parts for us. And we have to make surethat that whole chain is, in fact,synchronized and working. Boeing is having troubleright now on the 787s, because of the fact thatthe chain was a major new innovation, the waythey were going to, in fact, build this airplane. Because they gavedesign responsibility to major subcontractors, whoflowed that down to sublevels. And some of thoseparts didn’t flow up on the same very, veryaggressive schedule that they put inplace for the 787. So chain isa key part of it, and they’re all partof the Lean enterprise. So here’s a multi-programbusiness unit. You’ve got the end user. OK, let’s say that an airline– but the end user is likea pilot and a mechanic. And you’ve got employeeson the F/A team. Boeing was the prime. Northrop Grummanmade the aft section.On that Joint Strike Fighter,the F-35, Lockheed is prime. Northrop Grumman ismaking the aft section. British Aerospace ismaking the Ford cockpit. So those are partners. You’ve got detailsuppliers that make actuators and thatmake alternators, and that kind of stuff. You’ve got theunions, the IAM, which is the machinist union in St.Louis, the United Auto Space Workers, in Boeing,Philadelphia. Society and Congress arestakeholders in this thing, because the fact is thatCongress is paying for it, and society is dependingon these products, A, for transportation,and for defense, and so forth, corporatelyto shareholders. So all of theseare stakeholders, because they’ve got apiece of the action. If we shut down a plant,if we shut down a plant– we shut down a plantin Columbus, Ohio, and there’s a wholebunch of people that aren’t working there anymore.There’s a responsibility tothe shareholders to get value. But on the other hand,part of the stakeholders, in terms of society, is,for example, the communities that we serve. And so all corporations today–most of the big corporations– try to be good communityneighbors and in fact, try to do thingsthat don’t hurt. But I mean, I was ona consulting contract last February, in Detroit,when Ford said they’re going to cut 30,000 people. Whoa, boy, talkabout sad people.So here, what we’retrying to do is have value for all of the stakeholders. Obviously, the value–we want the best value delivered to the customer. We’ve promised performance. We’ve promised price. We’ve promised reliabilityto the end users. Our employees, we’re sayingto you, make good products. We’ll sell a lot. You’ll have jobsfor your families. The unions– it’sthe same situation. The shareholders’return on investment– you buy a share stock, andyou want to get dividends, and you want to seethe stock price go up.The partners– NorthropGrumman and Lockheed are working together. The suppliers–and this is Eaton, that makes electrical stuff. And it’s [INAUDIBLE] thatmakes actuators and Honeywell that does flight controls. And then society–we’re trying to, in fact, have the benefitsof being able to fly and go see your grandkidskind of thing. So what is a Lean enterprise? And a good definition–and in fact, he just came back in the room. But Professor Murman,Professor Murman pulled together a bunch ofprofessors here from MIT about five or six years agoand wrote this book, The Lean Enterprise Value– Insights From MIT’S LeanAerospace Initiative. And it says, “A lean enterpriseis an integrated entity that efficiently creates valuefor the multiple stakeholders by employing leanprinciples and practices.” And you remember, theseare all of the elements that it takes tocreate an enterprise.And what we’re tryingto do is to create value for all people in thetotal supply chain and in the enterprise. Let me take it theother way around. We have an army officer here. The Air Force spent 20years developing the F-22. It was called theAdvanced Tactical Fighter. The Air Force wanted thatfor $35 million apiece. it took 20 years to develop, andyou can add inflation on that, and whatever. But the point is, today’sF-22 costs $180 million, $180 million. The Air Force wanted to buy750 of them, 750 of them. And what happened isthat Congress said, we can’t afford $180 millionaircraft and buy 750 them. And what happened is overtime, now the Air Force can only buy 183, 183.And they wanted 750. Now, there’s a lotof pressure right now to try to keep the line going. And whether thathappens or not, I mean, the chances are we’ll never getto what the customer wanted. And the issue herewas the fact is that the value that the customerwanted, the end customer, was not delivered. Because from a strategicand tactical standpoint, having greater numbersgives you an advantage. The problem is we’renot going to be able to get that advantage,because we’re buying less.So delivering valueis a big deal. My favorite example–and I’ll probably talk about it tomorrow–is that, if I told you that I have a wonderful FordFocus outside on the curb, and if you sign righthere, it will only cost you $60,000 for the FordFocus, and you say, Al, I don’t think I want that, right? The point is that intuitively,we know what value is. And $60,000 for a Ford Focusdoesn’t intuitively compute. And so the name of the gameis the market people tell us what is it thatthe customers want. And it could be a Mach 1.6 $35million Joint Strike Fighter kind of a thing. Or it can be a $220million large 747. Or it can be a laptopcomputer for $900. But we all know intuitively whatthe features and the attributes that we’re looking for andwhat we sort of want to pay. And if, in fact, wecan conceive the design and iterate the designand get the waste out of it, so that we can deliverthat value to the customer, we’ll be able to sell them.And the enterprise will thrive. And all those stakeholders,all the stakeholders have a piece of the action. And we’ve got happy employeesand happy communities and happy shareholders. So we talked about businessacquisition, market research, , definethe requirements, iterating the productdesign, and coming up with robust processesto make repeatably, to get the variation outof them at high quality, managing the supplychain down through the second and thirdtiers and [INAUDIBLE],, efficiently producing these. And then, obviously, we have todeliver them to the customers and then support themfor the life cycle. And so those are thosebig lifecycle processes. But then there’s a bunch ofsupporting infrastructure– finance, information technology,human resources, and so forth. And Lean applies to these, too. Every one of these processescan be more efficient. I used to do Leanlectures at Boeing, in addition to my job as vicepresident of . And I had a contractsadministration person, who’s actually a lawyer. And all of a sudden,he says, Al, I got it. I can see why we want to beable to get on contract sooner.Because we have a whole bunchof people trying to wait for the contract go ahead. And these guys arestill fooling around, trying to get theterms and conditions. And so they were trying to getthe contracts administration folks even leaner. So that’s the book. And I heartily recommendthat you get it, Jim Womack and Dan Jones and Dan Bruce. And The Story ofLean Production– How Japan’s Secret Weaponin the Global Auto Wars Will Revolutionize WesternIndustry– and it has spread from theautomobile industry in Japan to the aerospace industry. And now, hopefully, Detroit’sgoing to get the message. But a three-stargeneral in the Air Force said, “Can the conceptsand principles and practice of the ToyotaProduction System be applied to the militaryaircraft industry?” And they gave a contract,a sturdy contract to MIT. And in the early ’90s, theanswer was a resounding yes. And if we focus leanon enterprise valuation and creation– and Professor Murmanfor more than 10 years led this whole effort andwas very, very successful in developing a body ofknowledge, a body of knowledge that really works.All the major aerospacecompanies are using it. It does produce value. In fact, now we’retrying to spread it to the health care industryand other organizations. But Lean does pay off. And in fact, the AirForce said, you’ve got this greatbody of knowledge. And we now knowthat it does work. How do we spreadthat and diffuse it, so that it’s beingtaught in colleges? And the Lean Academy, ofwhich this is a piece, was created about fiveyears ago to disseminate this whole body of knowledgeby conducting courses like you’re in right now. So here’s some examples. This was GeneralDynamics and then Lockheed on the Atlas program. You can actually see thaton the initial development, it used to take48 and 1/2 months. And they actually gotit down to 36 months and down at 27months, ultimately got it down to 18 months,going through a series of major changes and goingthrough the Lean processes to, in fact, achievewhat they wanted. The F-18, Super Hornet– huge change in requirements– more payload, threetimes greater ordnance bringback when theyland on the carriers, 40% increase in unrefueledrange, five times more survivable,designed for growth, big change in reduced supportcosts, and multi-mission.And they did it within budget,did it on schedule– well, actually, ahead of schedule– 1,000 pounds underweight. And there’s a high correlationbetween those program management practicesand our Lean enterprise. And that’s all theway from trying to do all of these variousmissions, as you can see here. It’s one of the big successstories of industry. And Rockwell Electronics– wementioned Clay Jones before– 25% improvement in productivity,46% reduction in inventory, cycle timereduction– big deal– 75%. And it also works in theoffice, on technical manuals, on paper-processing, accounting,publishing cycle time– 72% reduction,work-in-process reduction– 70%, 38% productivityimprovement. So it does apply everywhere. And we’re going to give you someexercises that talk about it. Kanban is a Japanese word. And it’s a Lean toolthat we use a lot. We use it in the office interms of processing drawings, and we use itin out in the factory. And there’s severalways of making it apply to the movementof material and parts in the factory orinformation, information like in drawings and theparts cards, and so forth. And sometimes it’sactually done with a card.And we’re going to go throughsome Kanban exercises here. But basically, whatit says is that– you remember, Itold you originally, if we were going tobuild 12 Apaches, that I’d put 14 parts out there. And you’d give all 14forgings to a machinist and say, here’s a job card. Go do it. Now we give him one. And we, in fact, when hefinishes machining that, he looks over here. And there’s a card that sayshe can go get his next piece. And then he puts a card in. And we move it. We do single piece flow. Because if he makes a mistake on12 forgings in machining them, we’ve got 12 reworkparts and 12 scrap parts. So empty part– one way ofdoing it is an empty parts bin.So in fact, hesees an empty one. The parts guy fills it up. An open space on theproduction floor– we paint yellowboxes on the floor. And so if the part isthere, I grab that part. And when it’s empty, theproduction control guy says, oop, givehim another part. So that’s anotherway of doing it. It reduces inventory. It reduces scrap and rework. And then we do the samething with engineering. You can have racks on thewall for them to do that.So it took 30 yearsfor Toyota to develop all aspects of this system. And you can see that theydid their early experiments with Kanban in the ’50s. it took them 10 years, andthey put it company-wide. And then they droveit all the way down to their first, and second,third-tier suppliers. And they’re continuing todevelop what we call the Toyota Production System. Boeing now, forexample, calls that the BPS, the Boeing ProductionSystem, which is basically the Toyota Production System. And they’re very,very proud of that. So how long do you think itmight take a large aerospace company to implementLean thinking across their enterprise,starting with the knowledge now available? So in your folders, you’vegot some cards, colored cards.I think they’re 3 by 5 cards. They’re colored cards. OK. How long do youthink it would take? There’s a blue card for 20years, a red card for 10, green for 5, and yellow. How long do you think itwould take a large aerospace company to implement Leanacross their enterprise? Just hold up the card at– blue card? OK, you can hold them up. Wow, I see a bunch of redcards, yup, red and blue. You’re right. It takes a long time. I mentioned to you, thatwas in addition to being vice president ofengineering, I was the head of Lean for BoeingIntegrated Defense Systems. And when you think aboutthe Apache and the C-17 and the F-15 and the F-18 andthe Chinook and the Apache– and I had all of those– it takes a long time to getall the organizations up to speed and to drive allthese principles down. And it’s just a lot of work,and it’s a continuous journey.So welcome. You’ve taken step one. And the takeaways onthis is that Six Sigma started with the Japaneseautomobile industry, and then the electronicsindustries, and now into the aerospace industries. And I mentioned to you now thatthe hospitals and the health care people are interested. And if you watch, next time yougo to the hospital or your mom and dad go to thehospital, and all that, and you see the billfor an operation, or something like that, you knowhow very, very expensive it is. My daughter– my sister just hadboth knees replaced– $70,000. Can you believe that? And Medicare paidfor that, because she was having trouble walking. But I mean, $70,000 is alifetime of [INAUDIBLE].. But our medical business couldstand some Lean thinking. And enterprise has a coreand extended boundary– and the extendedboundary– the employees, and the suppliers,and the communities, and the stockholders. And certainly, today isstep one of learning this. And you can continue to bring itback and keep thinking about it in almost anything you do.So just on a card, onone of those white cards, just write down,for example, for your particular department– I guess we’re alittle late here. But anyway, writedown just quickly who are the stakeholders. If you’ve had aninternship in industry, an internship in industry,just write down– you don’t have toput your name on it– write down who the stakeholderswere for that function. If you were inengineering design, who was the stakeholders? Put it down. OK? .

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

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

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

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

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

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

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