12.1--lean enterprise value (cutcher-gershenfeld) · · 2017-12-28lean enterprise alignment...

Lean Enterprise Alignment Module 12.1

i

Presentation for:

Summer 2004

These materials were developed as part of MIT's ESD.60 course on "Lean/Six Sigma Systems." In some cases, the materials were produced by the lead instructor, Joel Cutcher-Gershenfeld, and in some cases by student teams

working with LFM alumni/ae. Where the materials were developed by student teams, additional nputs from the faculty and from the technical instructor, Chris Musso, are reflected in some of the text or in an appendix

Joel Cutcher-Gershenfeld Senior Research Scientist, MIT Sloan School of Management and

Executive Director, MIT Engineering Systems Learning Center

ESD.60 – Lean/Six Sigma Systems MIT Leaders for Manufacturing Program (LFM)

Jamie Flinchbaugh – one of the founders of the Lean Learning Center - lean consulting

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Redefining “lean” Definition:

“Becoming ‘lean’ is a process of eliminating waste with the goal of creating value.”

Note:

cost cutting – i

i iJoel l i

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9/04 --© Joe Cutcher-Gershenfe d and Chr s Musso – ESD.60 Lean/Six Sigma Systems, LFM, MIT

This stands in contrast to definitions of lean that only focus on eliminating waste, which is too often interpreted as

ndependent of its impact on value delivery

Source: Lean Enterpr se Value: Ins ghts from MIT’s Lean Aerospace Initiative by Earll Murman, Thomas Allen, Kirkor Bozdogan, Cutcher-Gershenfe d, Hugh McManus, Deborah N ghtingale, Eric Rebentisch, Tom Shields, Fred Stahl, Myles Walton,

Joyce Warmkessel, Stanley Weiss, She la W dnall, (Pa grave, 2002

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“Islands of Success” from Lean Enterprise Value: Insights from

MIT’s Lean Aerospace Initiative C-130J production

¾ Throughput of extrusion shop from 12 days to 3 minutes

Automatic code generation ¾ 40% reduction in time ¾ 80% improvement in quality

Military electronic modules from

¾ 73% cost reduction F-16 Build-to-Print Center

¾ 75% cycle time reduction

777 floor beam ¾ 47% assembly time reduction

P & W General Machining Center ¾ 67% reduction in lead time

Delta IV launch vehicle ¾ 63% reduction in floor space

¾ 100% on time deliveries Joint Direct Attack Munition

¾ 63% reduction in unit cost

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commercial lines at TRW GE Lynn aircraft engine facility

(JDAM)



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Initial Evidence at the Enterprise Level ¾ F-16 maintained sales price and decreased order-to-

delivery time by up to 42% while production ratedecreased 75%

¾ C-17 unit priced decreased from $260M to $178 M forfinal 80 aircraft of 120 aircraft buy.

¾ Northrop Grumman ISS lean enterpriseimplementation reduced throughput times for majorsystems by 21 to 42%.

¾ F/A18-E/F EMD completed on time, within budget(without rebaseline) while meeting or exceedingperformance requirements.

¾ Raytheon realized $300M FY 2000 bottom linebenefits from its enterprise wide Six Sigma program

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Value Creation and Value Streams

Value Proposition

Value Identification

Value Delivery

Adaptation

Value Creation Process

Program/Product Value Stream


Concept … Design … Develop … Manufacture … Sales … Service … Recycle

Dynamic and iterative

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Value Creation and Levels of Enterprise

Proposition Delivery

Value Phases

Program/ Platform

Government

National International

Enterprises

and practices have been focused here

Opportunities

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Value Value

Corporate

Most lean principles



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Additional Detail on Lean Enterprise Value

Aim: Establish flexible, robustAim: Establish overall systemAim: ities toNational

Entreprise

Aim: systems to enable lean

streams — isystems, financial systems, human resource systems, and others

Aim: t and

programs

Aim:

includi

and others

Enterprise

Aim: les and

Figure 6.50)

Aim:

t

Aim:Program Enterprise

III. Value Delivery

II. Value Proposition

I. Value Identification

Enterprise Levels

Again, the focus of

initiatives

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institutional infrastructure oriented around ensuring current and future capability

incentives to simultaneously ensure stability and foster innovation for the national enterprise

Identifying incremental and breakthrough opportunadvance the four core missions for the national aerospace enterprise

Align enterprise support

implementation across multiple value ncluding information

Construct mutual gains agreements to develop currenfuture capabilities across the enterprise; Align enterprise incentives to prevent sub-optimization across

Identify value-add synergies across programs; Assess implications for internal and external stakeholders — ng strategic partners, the financial community,

Multi-program

Implement lean princippractices across the value stream — including product development, manufacture and sustainment (termed ‘Lifecycle Processes’ in

Construct a mutual gains agreement on value to be delivered among program acquirer, contractor, suppliers and o hers; Align incentives to focus on stakeholder value

Identify value-add opportunities for customer and end users; Assess implications for other key program stakeholders

most lean



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Key Principles Principle 1 ¾ and by doing the right

job.

Principle 2 ¾

constructing robust value propositions.

Principle 3 ¾ Fully realize lean value only by adopting an enterprise

Principle 4 ¾

increase lean value.

Principle 5 ¾

Note: guidi

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Create lean value by doing the job right

Deliver value only after identifying stakeholder value and

perspective.

Address the interdependencies across enterprise levels to

People, not just processes, effectuate lean value. These are very simple statements – think of them as first principles – use these as a constant “touch stone”

ng implementation specifics



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Enterprise Stakeholders

Note:

Retail Distributors Customers

Strategic Partners

Suppliers

Shareholders

Workforce

Unions/ Associations Society

Proposition Delivery

Value Phases

i iJoel l i

i i l ) 9/04 --© Joe Cutcher-Gershenfe d and Chr s Musso – ESD.60 Lean/Six Sigma Systems, LFM, MIT

“Customer Acquirers” in Aerospace would be comparable to “Dealers” in the Auto Industry

Acquirers/ End Users/


Value Value



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Enterprise Example: JSF Program

JSF Team

NG ACS

ESYSTEMS

JSFPO

MajorCritical

Suppliers

LMIS

Training

Mis

sion

Sy

stem

s

Vehicl

e

System

s

AirframeSupport

Team

Centralized Control

Decentralized Execution

Glance Metrics

Rapid Decision Making

Flexible Repositioning


LM Aero

BA

World Class Status at a

Source: Tom Burbage, Lockheed Martin Aeronautics

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Applying Course Principles Across the Enterprise

Launch & Production

Physical Systems &

Flow &

Pull Physical Systems &

Flow &

Pull

Launch & Production

Physical Systems &

Flow &

Pull


Social Systems Social Systems Social Systems

Conception...Design...Production...Distribution…Sales...Sustainment

6/9/04 -- 12© Joel Cutcher-Gershenfeld and Chris Musso – ESD.60 Lean/Six Sigma Systems, LFM, MIT

Inventory Profile Across UK Auto Supply Chain (average, min and max stock levels across six manufacturers)

Source: Matthais Holweg and Frits Pil, "The Second Century: Reconnecting Customer and Value Chain through Build-to-Order," MIT Press, 2004 (re-drawn from original)

13.1 11.6 5.7 6.2

1.9 4.5 1 3 1.5 0.9 2

64

00

20

40

60

80

100

120

RawMate

rial

Bought-In P

arts

In-House P

arts

Pre-Ass

embly

WIP

Assembly

WIP

Finished Part

s Inbou

nd Tran

sit

On-Site P

arts

Assembly

WIP

Loading/D

ispatch

Outbound Transit

Dist

ributio

n Customer

(Source: M at t hais Holweg and Frit s Pil, " The Second Century: Reconnect ing Cust omer and Value Chain through Build-t o-Order," M IT Press, 2004)

Day

s of

Inve

ntor

y Minimum Average

Maximum

First-Tier Supplier Vehicle Manufacturer Distribution

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Remember Dr. Deming’s Lesson: “Don’t blame the people, fix the system”

Physical Systems & Social Systems

Flow & Pull


12.1--lean enterprise value (cutcher-gershenfeld) · · 2017-12-28lean enterprise alignment...

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