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We live in a volatile world

We live in a volatile world. Chuck Gray. Vice President & COO ChuckG@fescorp.com. DoD Operating & Support Costs vs. Investment . Lowest investment share since the Korean War. 1950 – 2010 Average: 36%. Tension between O&S and investment will reach historic proportions.

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We live in a volatile world

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  1. We live in a volatile world Chuck Gray Vice President & COO ChuckG@fescorp.com

  2. DoD Operating & Support Costs vs. Investment Lowest investment share since the Korean War 1950 – 2010 Average: 36% Tension between O&S and investment will reach historic proportions O&S (MILPERS plus O&M) % of DoD BA (Includes OCO) Investment (RDT&E plus Procurement)

  3. BALANCING QUALITY, SAFETY, RISK AND COST IN Volatile SPACE AND DEFENSE MARKETS

  4. Program risks associated with an “up & down” business scenario

  5. Hurry up, you are behind schedule • DESIGN PROGRAMS • Shortcut requirements analysis: DESIGN RE-SPINS • Compromise reliability / maintainability / availability analysis: REDUCED SUPPORTABILITY • Reduce scope & content of Systems / Hardware / Software Peer Reviews: MORE RE-SPINS • Shortest lead time becomes principal parts selection criteria: INCREASED OBSOLESCENCE & COUNTERFEIT PARTS RISKS • Hardware – Software trade-off studies scope reduced: PRODUCT DESIGN COMPROMISED • Reduced emphasis on Design for Manufacturing & Test: PRODUCTION/TEST REWORK • PRODUCTION PROGRAMS • Shortcut work instruction preparation time: INCREASED “DO OVERS” • Compromise production training: INCREASED SCRAP & REWORK • Reduce rigor of first article / first build reviews: JEOPARDIZE PRODUCT INTEGRITY/SCRAP/REWORK • Focus on delivery VS first time quality: MISSION FAILURE, INCREASED CUSTOMER REJECTIONS ACROSS THE BOARD RISK TO SYNERGY “CORNERS”

  6. SLOW DOWN --- THE PROGRAM IS SLIPPING • Design a ROLEX VS the TIMEX that the customer ordered: costs, lead times, producibility impacted • Utilize science experiments to solve a problem requiring simple analysis • Retain people on the program where ROI is low • Introduce production changes that actually reduce producibility & testability ANOTHER DAY ON THE PROGRAM IS ANOTHER DAY OF COST!

  7. Subcontractors caught in the middle • Subcontract reduction/terminations/extension • Delayed customer awards = Compressed Subcontractor Cycle Time • Extended material/parts lead times • Increased parts materials/cost: Building to ORDERVS Building to STOCK “SUBCONTRACTOR”

  8. QUALITY SAFETY DELIVERY COST CULTURE, ROBUST PROCESSES, LEADERSHIP

  9. A SMALL BUSINESS PERSPECTIVE 29Years of Customer-Focused Excellence in Electronics Engineering Design and Manufacturing Stillwater 86,500 Sq FT Facility Brenda Rolls High Reliability Manufacturing A Native American, Woman-Owned Small Business President & CEO

  10. Engineering Design & production focus Space and Missile Programs Aircraft Programs Radar Switchboards SB-4229 SB-4229A(V)/SP UAS Programs Maritime Programs

  11. Product Assurance Network • FES-QSP- • FES-QSM-1 • FES Quality Manual 8.1-2 8.5-2-1 • FES-QP-1 • FES Quality Plan 8.3-2 • FES-QSP -7.2-2 7.2-1 • FES-QSP- 8.1-5 • FES-QSP- 8.5-2-1 5.6-1 5.6-1 7.1-1 7.4-1 5.6-1 5.6-1 8.5-1 7.2-2 5.6-7 7.1-1 8.5-2-1 7.2-1 • 7.1-1 8.5-2-1 • FES-QSM-1 • FES Quality Manual • 7.4-1 8.2-1 8.2-1 7.4-3

  12. CORE PROCESSES • Design • Material Acquisition • Manufacturing • Product Support

  13. Processes withoutleadership commitment& cultural buy-in are a house of cards ready to Fall

  14. Developing a corporate culture of commitment & process optimization • Leadership INTEGRITY and Organizational / Employee ETHICS & COMMITMENT Beyond Reproach • Foster TRANSPARENT COMMUNICATIONS & Mutual Respect Throughout the Company • Welcome New Ideas • Specific Goals and ACCOUNTABILITY Established • Resources Allocated to Achieve Quality Goals in Company Operating Plan • Timely and Accurate PERFORMANCE FEEDBACK • Fruits of Success “fairly” Shared with Contributors • LESSONS Learned are Captured & RE-DEPLOYED

  15. Key Quality Metrics • LINE of BALANCE • CUSTOMER SATISFACTION • ON-TIME DELIVERIES • QUALITY ACCEPTANCE • WARRANTY RETURNS • NONCONFORMANCE • CUSTOMER COMPLAINTS • SUPPLIER CORRECTIVE ACTIONS • SCRAP • REWORK • SUPPLIER PERFORMANCE • RISK

  16. Customer Satisfaction Warranty Return Rate • .810 + .988 --- .002 =89.90 % • 2 • Proposals Won = 86 • Proposals Lost = 20 • Total Proposals = 106 • Wins ÷ Total Proposals Submitted • = Proposal Win Rate Proposal Win Rate: 81.0 % • FES Computed Delivery Rate: 98.8 % • Warranty Returns = 4 • Units Shipped = 2035 • Warranty Returns ÷ Units Shipped : 4/2035 X 100 = .2% • x 100 (Proposal Win Rate + FES Delivery Rate) /2 = SCORE

  17. Supplier Ratings

  18. A journey of continuous improvement Northrop Grumman World Class Team Awards DoD Nunn-Perry Awards Boeing Supplier of Year Awards NGST Gold USN BMP Audit ERP MILQ 9858 Lean Journey Begins AS9100 Supply Chain Mgt System MILI 45208 ISO 9001-1994 ISO 9001-2000 1989 1994 1999 2000 2001 2005 2006 2008 2009

  19. challenge • Forced re-design of the F-18 E/F Engine Fuel Display due to LCD supplier Bankruptcy • Hardware / Software • No break in production • Required 75% reduction in re-design time • Focus on 1st Time Quality to Reduce Production Cost

  20. Reduce Order to First Delivery Cycle Time Supply Chain LEAN Deployment FES Critical Path All material received FES 25 wks All Sub material received 30 wks PO Award to Sub 8 wks Sub 1st Delivery 56 wks FES 1st Delivery 76 wks PO Award Initial State 4 wks 18 wks 20 wks 41 wks 48 wks CurrentState Sub Critical Path FES & Sub Critical Path

  21. Result Engine Fuel Display Multi-Purpose Color Display F/A-18E/F Engine Fuel Display Redesign Achievements: DESIGN Time Cut -75% MTBF Improved +33% PRICE Reduced-48% Customer Recognition: Boeing’s Avionics Supplier of the Year 2001 New Up-Front Control/Display F

  22. Assembly PCB

  23. Roadblocks to watch for Diverging goals and objectives Poor Communication Inadequate Training Backsliding Too Much Too Early Dirty fingernail gang looses clout No Incentive No Link to Company Objectives Leadership Buy-In

  24. A Closing Thought PRICE Profitability If the rate of change outside your business exceeds the rate of change inside your business, the end is in sight. -Jack Welch

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