Lockheed Martin was formed by the merger of Lockheed and Martin-Marietta (part of a long series of consolidations) in 1995, so on paper it is about seven years old. But ask the people who work there and they’ll tell you it feels even younger because, until about two years ago, most people were more strongly aligned with their parent organization; Lockheed Martin was more an amalgam of 18 different corporations than one cohesive unit.
What changed two years ago was the advent of “LM21 Operational Excellence,” Lockheed Martin’s initiative built around Lean Six Sigma. According to Mike Joyce, the Vice President of LM21, Lean Six Sigma is the enabler that’s given them a common thread to unite employees in working together to achieve shared business goals. Here’s how they’ve made it happen.
Lockheed Martin’s success is strictly dependent on invention, breakthroughs, and execution. This helps explain why such a large portion of its improvement work has been done in the service support areas: design, purchasing, engineering, lifetime support, hiring people, billing customers, legal, etc. Procurement is an example of a service application that has come to the fore, as approximately 50–60% of the cost of each product is purchased or subcontracted.
As Joyce says, “It would be absolutely ludicrous for us to think that we’re going to use a 1975 radar in a new fighter, yet we found it perfectly acceptable to use 1975 processes for operating our supply chain. We need to not only engineer the new radar, we need to engineer exactly how the business process is going to function as that radar comes together.”
Lockheed Martin describes its government contract work as the “programmatic invention business”—developing customized solutions for highly specific customer needs. As they describe it, “breakthrough technology is part of our daily routine.” To that end, about 50,000 of LM’s 125,000 employees are scientists and engineers.
The issue of legacies is a major factor at Lockheed Martin. The progenitors of Lockheed Martin include divisions from a wide range of premier companies—among them General Dynamics, GE, IBM, Goodyear, Westinghouse, Loral, and Ford—each with their own strong heritages. Bringing together 18 different companies meant there were at least 18 different computer systems, 18 different part numbering systems, 18 different ways of purchasing, 18 different ways of developing specifications, of hiring, of paying the bills.
Furthermore, all of these progenitors had a history with one or more of the incarnations of quality improvement: Quality circles, SPC, continuous-flow manufacturing, Six Sigma, TQM, Lean manufacturing. A major factor behind Lockheed Martin’s improvement strategies has therefore been the need to allow people to carry forward the pride in their corporate heritage, but still come together as one team.
Insights into Lockheed Martin’s use of Lean Six Sigma have come from Mike Joyce, Vice President of LM21 (Lockheed Martin’s operational excellence program), Manny Zulueta, Vice President of the SIBA Material Acquisition Center–Mid-Atlantic Region (MAC-MAR), James Isaac, the Director of Procurement Excellence, George Sanders, the Director of Sourcing (Northern Material Acquisition Center), and Myles Burke, a Certified Black Belt and Manager of Supply Chain Excellence.
Lockheed Martin has about 125,000 employees divided into four major business areas worldwide: aeronautical systems, space systems, systems integration, and technology services.
Progress towards this goal began in 1998, when Lockheed Martin’s management realized that there were pockets of excellence throughout this new enterprise. They created an initiative called “LM21 Best Practices” as a way to capitalize on that knowledge by spreading it throughout the company.
“LM21 encompasses all the enterprise functions. It permeates throughout the business, providing productivity targets and performance improvements.”
—Manny Zulueta, VP, Material Acquisition Center
Though sharing best practices was a good start, it had some limitations:
Therefore, two years into LM21, its focus was changed from Best Practices to Operating Excellence, with an overarching goal of Lean processes operating at Six Sigma capability.
“This encompasses Lockheed Martin’s entire operating system,” says Joyce, “everything that we do, from how we bill a customer or buy inventory, to how we design a product and hire people.” The new LM21 approach is based explicitly on the principles of Lean Six Sigma: taking a hard look at all work that is done, categorizing it as value-enhancing or as waste, eliminating the waste, and improving what remains. Most importantly, LM21 is not positioned as something extra or above the work of the organization. “It is a strategy for helping managers achieve ambitious annual goals and targets and putting in place processes that assure we can sustain business results over the long term,” says Joyce. “Getting the job done and improving how the job gets done is everybody’s task.”
The rollout of LM21 at Lockheed Martin embodies the essential elements of a Six Sigma infrastructure. For example:
1) There is highly visible top management involvement and support
Lockheed Martin’s CEO, Vance Coffman, has explicitly stated his commitment to LM21.
2) Top management has been trained in Lean Six Sigma concepts and application
Coffman and his executive committee all received four-and-a-half days of training (two-and-a-half in the classroom and two days of practice fixing a process), which covered…
Lockheed Martin’s 5 Principles of Excellence*
Mike Joyce says it was important for Lockheed Martin to define principles of excellence up front because they are essential criteria for deciding how work gets done. Elements of both Lean and Six Sigma are incorporated in these principles:
*Based on work done by James Womack, author of such books as The Machine that Changed the World and Lean Thinking.
There are two other important aspects of this leadership training:
3) The basic training has reached all levels of management
Once the executive team was trained, Lockheed Martin made the requirement that anybody who has incentive compensation has to go through the basic class, which in their organization meant anyone with the title of director or above. They ran these five-day Lean Leadership training sessions at the sites, in groups of 50, until they got through all 5000 managers. (Now the program has expanded to include customers and supplier executives for quick-hit projects.)
4) Implementation began with value stream mapping
The starting point strategically for Lockheed Martin is doing a value stream map at the program level because the optimization of flow across functions has to occur at that level (a program is a set of processes used to provide one or more products or services to a specific customer). A value stream map captures the current reality, what is going on right now in the workplace. Value stream maps provide a way to start evaluating operations against the principles of excellence: Are you providing value as the customer defines it? What are your gaps? What can you do to close those gaps?
5) They continue to develop a strong infrastructure
All employees are reached by involving them in improvement projects and providing just-in-time training. Projects run under the LM21 banner depend on an internal cadre of Black Belts, Green Belts, sponsors, and what Lockheed Martin calls “subject matter experts” (SMEs).
6) Their methods meld Lean and Six Sigma
LM’s training curriculum and improvement methods combine all the basic tools and principles of both Lean and Six Sigma, such as the DMAIC process, identifying the seven forms of waste (a Lean concept), mapping processes, working towards shorter cycle times, and so on.
7) As soon as was feasible, they began reaching out to suppliers
“Like most manufacturers, we used to do a lot of inspection to make sure incoming materials met our specifications and engineering drawings,” says Manny Zulueta, the VP of Lockheed Martin’s Material Acquisition Center. “Then we started five or six different initiatives where we work with our critical suppliers in incorporating Lean and Six Sigma at their plants, which makes them better suppliers… and we get near-perfect material coming in. Now, when we receive material, we just do a count to make sure the quantity is right and a quick check of condition, then put it into our stockroom.”
The supplier partnerships have ranged from having Lockheed Martin staff train and coach suppliers’ employees on Lean Six Sigma, to hosting symposia where suppliers can learn from each other.
There is a practical limitation, however. With thousands of suppliers, Lockheed Martin simply can’t work with all of them. “So we basically did a process where we set out factors that would indicate whether a supplier was important or not, weighted them, scored them,” explains Zulueta. “The factors included things like how well they’re doing compared to our requirements, whether they have critical technology, their potential to impact production, and so on. Now we’ve got a list of about 200 key suppliers that we all agree are the ones we want to work with.”
The secret to supplier partnerships, says Zulueta, is connecting with the suppliers’ leadership. “This only works if we engage their senior management, because we want them to work on substantive process improvement,” says Zulueta. “And we work with them for months at a time. We need senior leadership buy-in for that. If their president or CEO or general manager isn’t interested, we have a high probability of failure.”
To date, LM21 has encompassed more than 5000 projects, with more than 1000 of those in transactional areas (management, financial management, closings, purchasing, etc.). Their initial target was to take out $3.7 billion in cost over a four-year period—they’re actually on track to achieve around $4 billion of documented savings. As Mike Joyce points out, in an organization the size of Lockheed Martin, it’s impossible to say that all of that is the result of LM21, but the focus on excellence certainly has been a major contributor. Other business metrics are also improving: orders are at a record level; debt is down considerably from the post-acquisition levels; they are generating a billion dollars in cash every year. As noted in Chapter 1, these changes (many in the service aspects of its business) have allowed Lockheed Martin to deliver its next-generation cruise missile with the same mission capability of other products but at half the cost and a third of the cycle time. At the department and project level, Lean indicators are up across the board. Many processes operate with far fewer handoffs then before (which improves cycle time and customer satisfaction).
LSS Experience Leads to Advancement
James Isaac is an example of how LM21 is being used as for executive development. He is currently the Director of Procurement Excellence at MAC-MAR, a job he’s only had since the spring of 2002. Before that, he spent two years as a Subject Matter Expert. ”We received a lot of coaching and mentoring,” says Isaac, “as well as personal training on management skills around successfully managing projects and improving productivity.”
Isaac had only indirect experience in supply management before he took his current position. “I spent 18 years with Lockheed as a systems engineer before becoming an SME,” he says. “It’s interesting being on the other side of the equation, looking at design from the supply side. I have a newfound respect for what happens with the designs I used to create.”
Similar results are visible in many non-core-manufacturing areas throughout Lockheed Martin. The Naval Electronics and Surveillance Systems group, for example, is providing products, services, and the integration of advanced naval shipboard electronic weapons and communications suites in battle fleets around the world, with comparable gains in speed and cuts in cost. Results are also evident in Lockheed Martin’s ability to capture new business. Recently, for example, they were selected as one of the key contractors on Deepwater, the largest and most ambitious U.S. Coast Guard program ever undertaken.
Growing your business
According to Mike Joyce, it’s important that management not equate “eliminating waste” with “eliminating people.”
“We use LM21 not for the purpose of firing people once the waste is eliminated, but to help us improve the work we do, and to make sure that our people are deployed to value-enhancing tasks, not consumed by waste,” he says. “If we can eliminate the waste, we can provide customers with a better deal and grow our business.”
As with any business, Lockheed Martin acknowledges they cannot guarantee lifetime employment. But their LM21 efforts are contributing to their ability to win major new contracts. And those employees who participate in LM21 training and projects are becoming equipped with the skills to better serve customers and increase their lifetime employability. “With customers, come jobs,” says Joyce. “Therefore sustained employment is everybody’s end goal.”
Lockheed Martin will be the prime integrator on this multi-billion dollar program to rebuild the fleet infrastructure. The LM21 Lean Six Sigma tool set has already been used extensively to define customer value, develop critical-to-customer requirements, apply Design for Six Sigma, and establish new supplier partnerships in the initial efforts of this 20-year program.
Think about how you get 125,000 people thinking and working in a new way and you’ll begin to appreciate Lockheed Martin’s challenges. Its goal is to get 60% of the employee population—about 70,000 people—through either a one-week Green Belt training or a one-week project by 2004. In the meantime, they are well on their way to value-stream mapping all 2000 of its programs. Other challenges include:
“I know that by using Lean Six Sigma tools.my team has done its homework, has the facts, and I can then approach our internal Lockheed Martin customers to initiate joint Kaizen evens to realize breakthrough performance.”
—George Sanders, Director of Sourcing (Northern Material Acquisition Center), Lockheed Martin
Part I - Using Lean Six Sigma for Strategic Advantage in Service
Part II - Deploying Lean Six Sigma in Service Organizations
Part III - Improving Services