Across the enterprise Boeing is attacking waste and streamlining process. The goal? Cost competitiveness

BY MAUREEN JENKINS

These days, it isn't enough for a company merely to cut costs.

It needs to streamline processes while improving quality, becoming nimble while responding quickly to customer demand, and empowering employees while increasing profits.

Enter Lean, a concept that designs, manufactures, delivers and supports products more efficiently and at lower costs — while systematically identifying and eliminating waste — all the way through the product life cycle. It uses a "just-in-time" system that gives internal and external customers what they want, when they want it, and at the lowest possible cost.

At its root, Lean is about remaining competitive in a rapidly changing global marketplace. In order for Boeing to survive as an aerospace leader, continue winning new business across the enterprise, and create and sustain jobs, it constantly must find ways to make its products cost-competitive.

Take commercial airplanes, for example, and Boeing's ongoing competition with Europe-based Airbus.

"The marketplace is demanding lower prices for our products," said Ross Bogue, Commercial Airplanes vice president of manufacturing, "and costs need to be below price to run a healthy business. Airbus reduces price points to chase market share to provide jobs, technology, a tax base, and all the other values they are responding to in Europe."

But, said Bogue — who heads the company's Airplane Programs and Commercial Aviation Services — in order "to meet and beat them in the marketplace, Boeing must become more and more efficient each day. The way we've been able to demonstrate that is through Lean manufacturing."

While Lean production was first introduced by the automobile industry — thanks to Toyota's then-groundbreaking advances half a century ago — its principles have more recently spread across multiple industries.

James P. Womack, founder of the Lean Enterprise Institute and co-author of the influential 1990 book The Machine that Changed the World, uses inventory "turns" to gauge a company's — or industry's — Lean progress. Turns reflect annual sales divided by the amount of inventory on hand to support this level of sales. Lean Enterprise Institute found that from the business boom of 1992 to 2000, turns across U.S. manufacturing improved from about 7.5 to 9.0.

But not all sectors are equal. In the auto industry, inventory turns rose from 16 in 1992 to 24 in 1999 before falling in 2000 because of a deepening recession. During that same period, aerospace industry turns only rose from 2.5 to 3.0. As Womack admits, the automotive sector is high-volume compared with aerospace, and this volume leads to greater turns. Despite the aerospace industry's Lean advances during the '90s, it still has room for major improvement.

But aerospace companies are taking the lead "on launching into the non-shop floor arena" on Lean, said Deborah Nightingale, co-director of the Lean Aerospace Initiative, a consortium composed of corporations, government, labor unions and the Massachusetts Institute of Technology. Boeing, as well as its major military and space competitors, are Lean Aerospace Initiative members.

"We're finding you really need to look at the enterprise as an integrated system," she said. "This is where Boeing is really doing some great things." (See below.)

The principles now known as "Lean" have spread across the company, with Commercial Airplanes, Integrated Defense Systems, Phantom Works and Shared Services among the business units now embracing this value-adding concept.

"Lean is a race without a finish line," said Roy Graham III, Lean Implementation manager for Integrated Defense Systems in St. Louis. "Sometimes it's an all-out sprint; sometimes it's a marathon. But the goal has to be to positively affect the bottom line."

In fact, the second cross-Boeing Lean Enterprise Conference will take place Aug. 6-7 in Seal Beach, Calif., where about 150 employees and mid- to senior-level managers, who champion Lean improvement activities across the enterprise, and outside experts will share their accomplishments and discuss ways to accelerate their successes.

The implementation of Lean tactics across Boeing isn't merely a cost-cutting strategy, say company practitioners, but a philosophy of growth. And it's one that requires a seismic culture shift away from the old ways of designing and manufacturing products, executing business processes — and of managing and developing people.

The origins of Lean

The Lean philosophy dates back to the 1950s, when the Toyota Motor Company in Japan pioneered a revolutionary way of producing cars. Production executive Taiichi Ohno developed an integrated process that efficiently managed equipment, materials and its workforce throughout the production cycle. Shunning the mass auto-production techniques of Detroit, Toyota managed to deliver more reliable, higher-quality products faster — and at a lower cost — while responding nimbly to customer demand.

Eventually, Toyota began exporting its production philosophy along with its cars. While Womack's book reports the term "lean production" was coined decades later by researcher John Krafcik, the concept of using "less" to manufacture goods caught the attention of U.S. industry in the 1980s and '90s.

In the early '90s, Boeing — facing a deregulated commercial airline industry that had begun to focus on profitability — realized it needed to become leaner in order to offer its customers airplanes at reduced costs and improved quality. Company executives traveled to Japan, where they studied concepts that would become known as Lean — just-in-time delivery, error-free production, and continuous flow. Boeing brought in consultants from Shingijutsu Co. to help guide the process. Shingijutsu's representatives were former Toyota executives and protégés of Ohno's Toyota Production System. They were firm believers that employee empowerment and buy-in are pillars of Lean.

"To make planes is to make and develop people," said Chihiro Nakao, the Shingijutsu founding consultant respectfully referred to as "Sensei," or "Teacher," by his Boeing clients. "We use the word 'kaizen' (continuous improvement), but all it's really about is training the people who make it happen."

Shingijutsu initially worked with Commercial Airplanes, but its guidance crossed business units and helped drive Lean improvements in the groups now comprising Integrated Defense Systems. And while Lean often is viewed as a factory floor concept, its philosophy stretches across the Boeing enterprise, touching everything from suppliers and procurement to engineering and design to manufacturing and delivery. Stunning results have been achieved even in the areas of aircraft modification and support. In fact, all these systems must be integrated and embrace Lean concepts in order for progress to occur across the value stream.

Boeing's mid-'90s shift to Lean is already reaping tangible dividends. Consider:

• The F/A-18E/F Super Hornet program aimed to reduce defects by 90 percent from 1998 to 2003, but reached this goal two years early. The program also continues to operate under budget, realizing a savings of 1.5 million labor hours while having delivered each of its 100 aircraft on or ahead of contract delivery dates.

• By incorporating Lean tactics throughout the design and construction phase, the Delta IV facility in Decatur, Ala., shrank from a planned 4 million square feet to 1.5 million square feet. Rather than building multiple rocket assembly lines, a Lean process helped create a single continuously moving line. Also, thanks to better space utilization, the facility was able to bring in Delta II fabrication and tank production work.

• Two of Phantom Works' technology thrusts specifically address Lean, funneling what they learn across the Boeing enterprise. The "Lean Support and Service Initiatives" thrust designed processes for streamlining the KC-135 facility in San Antonio, Texas, last year, as well as processes that helped IDS compete for the extension of the Payload Ground Operations Contract.
  
  The "Lean and Efficient Design Processes and Tools" thrust has provided preliminary design work to IDS' Space Launch Initiative and X-32 program, with the latter achieving large reductions in design, production and assembly time. "From a business standpoint, the ability to sell the correct concept [to the customer] up front is the foundation for acquiring new business," said Matthew Symmonds, thrust deputy director. "The more you do well up front, the less trouble you have downstream."

• Using a Lean-derived "kaizen" process, Shared Services Group tape librarians at a Boeing Data Center in Puget Sound reduced the footprint of the tape library used by the Enterprise Server by more than 90 percent while significantly shortening the tape handling cycle time.

• Since 1998, the AH-64D Apache multirole combat helicopter final assembly line in Mesa, Ariz., has used Lean tactics and tools to create a pulse moving line. The Apache program has realized a 54 percent reduction in build hours and 218 percent increase in its build rate.

• Workers in so-called "moonshine shops" team up to create right-sized production equipment that is more precise and requires less space and maintenance — and costs less — than monument-sized machines purchased by outside suppliers. Right-sized equipment is designed for a very specific purpose — usually for one task or set of tasks for one part or part family — whereas "monuments" tend to be multi-purpose and support a wide range of work statements. For example, workers replaced a $2 million three-axis router used in airplane stow bin production at Everett's Interior Responsibility Center with a "homemade" version for just $50,000. And that's what it used to cost annually just to repair the more expensive machine.

• The 757 program's field processes have transferred to Final Assembly, saving one day of flow time. Also, Systems Installation has moved into Final Assembly, housing all assembly and integration processes under one roof.

• To date, the 737 program has shaved its flow time by 30 percent, reduced its crane moves by 39 percent, lowered its inventory levels by 42 percent, and reduced its needed floor space by 216,000 square feet.

Analyst Howard Rubel of Goldman Sachs noted Commercial Airplanes' Lean improvements in a June 20 report, following his visit to the 737 and 757 production lines in Renton, Wash.

"Boeing's plan to change the way it manufacturers jetliners appears to be delivering results," he wrote. "We believe that productivity initiatives adopted through the introduction of lean manufacturing processes have reshaped the company's learning curve and enabled it to enjoy far less disruptions than planned, especially as it reduces production to match the current market environment. We believe that the company is ahead of its long-term operating plan and that the reduced costs can flow into profits."

As Bogue of Commercial Airplanes said, "There's no downside to having the ability to continually reduce your cost structure. Successful businesses reduce theirs year after year.

"What we're trying to do is what you love when you buy a new [videocassette recorder]. You get more functionality for less money [today] than you did a month ago. That's what we need to be able to do with airplanes."

Leading the way

While Lean is being embraced across the Boeing enterprise, some of the most visible strides have occurred in manufacturing. Commercial Airplanes' final assembly moving lines represent some of Lean's greatest advances.

The 737 moving line in Renton moves at just two inches per minute, but the time is perfectly calibrated to allow employee teams — groups with colorful names like "Power Plants" and "Dog Pound" — to complete their tasks with parts, equipment and tool kits delivered at the point of use. Feeder lines contain temporary inventory, such as the seats that are loaded onto airplanes using an automated hay baler — a creative 757 employee-proposed solution.

Should problems arise, line workers call for aid, as yellow lights flash on the factory floor. Support teams — which are alerted by pop tunes such as the Beatles' "Help!" and Aretha Franklin's "Rescue Me" — rush out onto the floor when their theme songs are played. In the meantime, a colorful, detailed overhead "Pacer System" board monitors the line's schedule, while pitch marks on the floor (5:30, 6:00, etc.) remind workers of the progress they should be making during their three shifts.

Parts and interiors produced using Lean principles arrive from the Fabrication Division in Auburn, Wash. and the Interior Responsibility Center in Everett, Wash. Among them: 40-inch stow bins produced on a mixed-model 737/757 moving line. Flow time used to be 140 days; it now takes just four. With reduced factory inventory and production rates that flex to meet demand, the line's more efficient than ever.

Many factory floor solutions are born in "right-sized equipment" rooms, or "moonshine shops," as they're commonly known. A group of employees — with each member chosen for his or her think-out-of-the-box ability — brainstorms and then creates ways to replace mammoth pieces of machinery with those that are more space-, time-, and cost-efficient.

Moonshine shop workers tend to be those who in their spare time "take a Harley [-Davidson motorcycle] that's been totaled and put it back together, or rebuild Swiss clocks," said Mike Herscher, Commercial Airplanes Lean Enterprise Office leader. "They're absolutely craftspeople."

But some programs, such as IDS' space-related ones, are implementing Lean processes in a non-manufacturing realm, as the business unit's focus continues to shift toward system-of-systems integration. That hasn't always been simple, said Jan Martinson, IDS Lean Enterprise director in Seal Beach, Calif., as most Lean experts draw their knowledge from factory floor examples. Her team works closely with researchers from the Lean Aerospace Initiative in defining Lean product development.

"When we're talking about these developmental processes [that are] non-hardware-related," Martinson said, "it's a challenge getting people to see the same improvement processes at work. A process doesn't have to be bending metal. And when you're changing a process, there always are places waste can be eliminated."

Suppliers, procurement key

Boeing suppliers are integral parts of the value stream, from both cost and logistics standpoints. Across the company, Lean practitioners are sharing their knowledge with suppliers, helping them streamline their operations and thus become better partners to Boeing. The Supplier Management Process Council, which predates the Boeing merger and acquisitions of the late '90s, oversees this process. It's about leading by example, says Council chairman Bill Stowers.

"A lot of suppliers, when we started the Lean training, were willing to go along with it but weren't sure it would help them," said Kim Michel, Joint Direct Attack Munition program manager. But "we've done a really good job of walking the talk."

Woven Electronics supplies wiring harnesses for the JDAM program, and the Simpsonville, S.C.–based firm embraced the chance to learn Lean. Woven has been part of the U.S. Air Force–sponsored Small/Medium Enterprise Initiative, designed to help small- and medium-sized firms improve their manufacturing technology practices. Since starting Lean activities on its first harnesses in January 2000, Woven has improved its inventory turns from seven turns a year to its current 26 turns.

"We're very close to a one-piece flow, which means you don't have all this work-in-progress inventory," said Tom Lappin, Woven's quality assurance manager and "Lean Champion." "Your cycle time is reduced from weeks down to hours, almost. For us, being able to reduce the cycle time and reduce inventory keeps costs in line." The company has gone from producing 30 cables each week to 90 cables per day to keep up with JDAM's ramped-up production.

Boeing's Lean experts "don't come with an attitude of 'This is what you have to do,'" said Lappin. "It's more of a coaching type thing with a lot of ideas. They don't impose their ideas on you, but bring the ideas out of the people."

In fact, says Lean Aerospace Initiative's Deborah Nightingale, supplier costs are one of the more variable within a Lean supply chain. That's why Supplier Management organizations within Boeing business units actively help suppliers implement Lean practices such as value stream mapping and Accelerated Improvement Workshops that will, in turn, reduce costs passed along to Boeing.

But the company isn't just focusing on manufacturing suppliers. Even Boeing Library Services recently introduced its own Lean ordering process, turning the ordering of all books — except those not available through Boeing-approved supplier Barnes & Noble — over to each organization or group. The goal: to remove the library as a middleman. Eliminating this step lowers the end price to the ultimate Boeing customer, as overhead Finance costs are no longer added to the price of publications.

Inevitable culture shift

Change — even when inevitably for a company's good — is never easy. But engaging employees in the process — from conception to development and delivery — is critical to Lean's success at Boeing and beyond."

It has been a challenge to convince folks," said Seal Beach's Martinson. "We communicate that we're not improving processes to eliminate jobs, but to improve our competitiveness and therefore create more jobs."

While some shop floor workers used to refer to Lean scornfully as "Less Employees Are Needed," many who implement its concepts every day have become believers.

"As long as we're making the numbers we're supposed to be making — which Lean is supposed to do — it'll help us get new business in here," said Jerry Tannehill, a third-shift JDAM munitions mechanic and High Performance Work Organization leader. "With the Lean process, that'll make it more appealing to the government [customer], so that we can get more contracts."

Morale is high, he says, because the team makes at least 60 percent of shop floor decisions collectively.

"When you think that the employer really not only wants you to be able to drill and fill aluminum well," said Bogue, "but also bring your soul and who you are and your spirit to work — and you're allowed to use it — it changes the level of employee engagement with the employer."

And this engagement is evident, he says, in workers' expressions, in their eyes.

To maintain the free flow of ideas, says Commercial Airplanes' Mike Herscher, the company may soon host a "competition" between moonshine shops to reward the most creative approaches to factory floor problems.

"Everywhere we go," said Bogue, "people who have the 'Lean spirit' are now viewing the world with the eyes of a child and the eyes of a student.

"If we've all learned one thing, it's how much opportunity there is. There's a lot of runway left, and it's really fun when it works well."