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A Change Process . . . That Changes . . .

"Change processes" are under way in many manufacturing corporations that compete worldwide. By focusing on continuous improvement in manufacturing throughout the full new product realization cycle (especially during the phases of concept formulation and early design) and by using modern manufacturing management techniques and technologies, these large corporations have been able to achieve major improvements in cost, time to market, and quality of their products. It can be done.

The parallels are striking between the challenges facing the Department of Defense (DoD) and demands in the commercial sector to reduce cost, speed development, and improve product attractiveness and quality. Companies that have successfully responded to cost and product development competition from abroad provide a model for DoD's approach and expectations, albeit an inexact and, relative to DoD, simple model.

Companies that have reached world-class performance in strongly competitive commercial manufacturing fields such as electronics, automobiles, and aircraft exemplify the benefits of establishing a new culture within the company and its community of suppliers and customers. Firms such as Milliken, Xerox, General Electric, Motorola, and Ford Motor Company have committed themselves to reexamination of product development, production, and supplier relations. Concepts such as "lean production" and "total quality management" understate the depth and breadth of the change in these corporations. Each, in its own way, is undergoing the same kind of cultural change that the committee now proposes for the DoD.

The results have been impressive:



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Breaking the Mold: Forging a Common Defense Manufacturing Vision 2 A Change Process . . . That Changes . . . "Change processes" are under way in many manufacturing corporations that compete worldwide. By focusing on continuous improvement in manufacturing throughout the full new product realization cycle (especially during the phases of concept formulation and early design) and by using modern manufacturing management techniques and technologies, these large corporations have been able to achieve major improvements in cost, time to market, and quality of their products. It can be done. The parallels are striking between the challenges facing the Department of Defense (DoD) and demands in the commercial sector to reduce cost, speed development, and improve product attractiveness and quality. Companies that have successfully responded to cost and product development competition from abroad provide a model for DoD's approach and expectations, albeit an inexact and, relative to DoD, simple model. Companies that have reached world-class performance in strongly competitive commercial manufacturing fields such as electronics, automobiles, and aircraft exemplify the benefits of establishing a new culture within the company and its community of suppliers and customers. Firms such as Milliken, Xerox, General Electric, Motorola, and Ford Motor Company have committed themselves to reexamination of product development, production, and supplier relations. Concepts such as "lean production" and "total quality management" understate the depth and breadth of the change in these corporations. Each, in its own way, is undergoing the same kind of cultural change that the committee now proposes for the DoD. The results have been impressive:

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Breaking the Mold: Forging a Common Defense Manufacturing Vision At General Electric, changes in manufacturing methods have more than doubled the annual rate of manufacturing productivity improvement, from 2 percent to 5.5 percent over the past five years, at a time when the annual rate of overall U.S. manufacturing productivity growth remained roughly constant. Motorola's change of corporate culture has helped the company achieve 60 percent sales growth, from $6.7 billion to $10.9 billion, between 1986 and 1990, while the number of employees has increased only 8 percent. At the same time, Motorola reports substantial improvements in product quality, design lead-time, and supplier relations. Xerox's transformation, based on benchmarking comparable external activities, has enabled it to regain product design and manufacturing leadership in office copier products after Japanese competitors gained major market share a decade ago. Ford Motor Company's financial problems in the late 1970s led to many changes within the company, including company downsizing, remodeling the product design process, and improving supplier relations. The success of the Ford products designed and produced under the revised procedures has been a major improvement over past performance, resulting in substantial gains in North American market share. Milliken has been able to cut its delivery lead times in half, improve its on time deliveries from 75 to 90 percent, and cut its defective products by 50 percent, all while tightening its definitions of "on time" and "acceptable quality." As one result, it has been able to cut the total cost of off-quality production (rework, returns, etc.) by 57 percent for the company as a whole. And, of course, a number of Japanese companies have practiced variants of continuous improvement for years. Each of these examples indicates that sustained, overall improvement is possible within large product design and manufacturing organizations through a commitment to a new vision of company operations. Their results prove that it is possible for the DoD to make the same sort of transformation. Already within the uniformed services, and within defense contractors, there are small units that are well advanced in application of these new techniques and are very successful. For instance: The Air Force Logistics Command received the President's Award for Quality and Productivity in 1991 as a result of the operational improvements from its total quality initiative. The Naval Weapons Center at China Lake, California installed an alternative personnel system, allowing management to reward individual performance in order to compete more effectively in the market for highly skilled, high-quality personnel. Increased retention of engineers and scien

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Breaking the Mold: Forging a Common Defense Manufacturing Vision Case of Cultural Change: Rockwell International's Tactical Systems Division The Tactical Systems Division (TSD) of Rockwell International is a Department of Defense contractor designing and integrating weapon systems. It has two major products currently in production: the HELLFIRE laser-guided anti-armor missile and the AGM-130 Standoff Weapon System "smart bombs." HELLFIRE missiles have been in production since 1985 and are currently produced at a rate of 22 per day. AGM-130 is just beginning low-rate production replacing its predecessor, the GBU-15 Guided Weapon System. At the current time, HELLFIRE contributes over 75 percent of the production base for the division. TSD experienced several "significant emotional events" in the mid-1980s which precipitated a real need for change. These included serious contract delinquencies and significant financial losses resulting in unhappy customers, both external and corporate. For one, HELLFIRE production was experiencing problems with suppliers, production yields, scrap and rework, and resulting delivery and profit margins. The AGM-130 development program experienced early flight test problems which caused government cancellation of the program, with TSD electing to complete the flight test program with its own funds. The major barriers experienced in implementing change were the lack of a defined change process and getting management to lead the efforts towards continuous improvement. In TSD's pursuit to make improvements, there was significant confusion due to the abundance of apparently disjointed "programs" available, such as Just-In-Time, Statistical Process Control (SPC), Design of Experiments (DOE), Quality Function Deployment (QFD), and Gainsharing. Adding to the confusion were external customers and corporate executives willing to "help" by promoting their favorite Improvement process as the silver bullet. TSD recognized merit in many of the programs, but they had to be integrated in a cohesive manner. While reviewing the numerous initiatives having been implemented or considered, it was observed that they fell into three general categories: (1) change processes, (2) tracking and measurement processes, and (3) incentive and reward processes. CHANGE PROCESSES In order to implement change effectively, there must be processes. TSD has developed two fundamental change processes. One process addresses change in the organizational system. This change process is strategic in nature inasmuch as it addresses division-wide change and is typically addressed by management teams. The second process affects day-to-day methods and involves virtually every employee working in ad hoc value improvement teams.

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Breaking the Mold: Forging a Common Defense Manufacturing Vision TRACKING AND MEASUREMENT PROCESSES In order to assure that all changes are directed at business objectives, it was necessary to develop a planning, tracking, and measurement system. This system, Functional Support Planning, is designed to focus all major change activities on the business objectives. It ties the strategic planning and the annual planning to the lowest levels in the organization, creating ownership and assuring constancy of purpose throughout all disciplines. INCENTIVE AND REWARD PROCESSES Change processes and tracking and measurement are two critical elements for assuring continuous improvement. However, in order to reinforce their application, a third element is necessary. That is the organization's incentive and reward process. Incentives and rewards must reinforce the organization's total quality commitment. The mainstay of this process is TSD's gainsharing program which equally involves all employees in all disciplines. This program is designed to share back with the employees a significant portion of monetary gains made as a result of EXCEEDING the division's operating plan. Many of these processes could not be effectively integrated into the organization without a change in its culture. Included in the cultural changes were the concepts of everyone's responsibility for quality and productivity, understanding the customer's needs and expectations, management's leadership role and its responsibility to be coach and counselor, and the empowerment of the people working in the system—those most knowledgeable about the systems and processes. Also included was a detailed training program that initially targeted the management team. Management was required to understand concepts of waste and scientific tools and problem-solving methods toward improving the System and reducing/eliminating waste. Once management gained an appreciation of these modern methods, the rest of the organization was given the same training. Almost all of the staff has been trained in TQM improvement techniques (including SPC). In 1992, each employee received an average of 28 hours of training in these and other skills, including team training. The total process was enhanced because the top executive was committed to and involved in the changes. Change at TSD has led to a team-based organization providing for the application of concurrent product development and self-managed work groups in production and white collar disciplines. As a defense contractor, TSD, in concert with the Army Missile Command (MICOM), the Defense Contracts Management Command (DCMC), and the Defense Audit Agency (DCAA), has plowed considerable new ground in applying many innovative principles to the weapons business. Two government initiatives were piloted by TSD and have provided a good opportunity

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Breaking the Mold: Forging a Common Defense Manufacturing Vision to develop a win-win relationship where the relationship had been historically adversarial. These two initiatives are the Defense Logistics Agency's (DLA) In-Plant Quality Evaluation (IOUE) program and the DCAA's Contractor Risk Assessment Guide (CRAG) program. These two programs are the agencies' application of TQM principles. Without the excellent customer relations TSD has been able to build, and a commitment mutually to prove the viability of the Total Quality Management approach, the significant and continuing improvements in productivity and quality by TSD, and the subsequent lower cost to the government, would not have been possible. TSD and DLA were invited jointly to brief the Defense Science Board to describe and emphasize the synergy of government/contractor relations in a total quality environment. TSD's Total Quality System, a systems approach to total quality, has proven to be a very effective model for change. The results are shown in the division metrics: Sales per employee up 13 percent Scrap and rework down 74 percent Manufacturing hours per unit down 40 percent Test yields up over 200 percent Manufacturing cycle time down 50 percent 149 successive production test launches without a failure. For TSD, there have been three crowning achievements that are attributed to a quest for excellence: first, the award of 100 percent of the HELLFIRE production in a winner-take-all competition; second, the resurrection of the AGM-130 program; third, the award of the Army's Contractor Performance Certification Program (Cp)2 which recognizes exemplary Total Quality Management practices and continuous quality achievement. tists improved supervisor-employee relations, and dramatic reductions in personnel-related paperwork have resulted.1 Rockwell Tactical Systems Division in Duluth, Georgia is one example of a defense contractor that has aggressively pursued total quality with impressive results: scrap and rework reduced by 74 percent, test yields raised by 200 percent, and manufacturing cycle time reduced by 50 percent. (See pages 15–17.) Unfortunately, such examples remain too isolated and are not as effective as they could be because they are so inconsistent with the surrounding web of procedures and requirements. The committee recognizes that the change process unfolding in many commercial manufacturers is not strictly analogous to the process needed in DoD. While learning as many lessons as possible from commercial suc-

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Breaking the Mold: Forging a Common Defense Manufacturing Vision cesses and failures, and spreading the lessons from existing defense successes, DoD must invent its own unique change process. It is a daunting challenge that will require: a common manufacturing vision among the DoD, the Congress, and the defense manufacturing community; commitment and a willingness to invest among the powerful participants in the process; an orderly process for achieving change, agreed upon early; investment in training people to work to solve problems rather than to enforce regulations; and consistency of purpose over several administrations. At the core of this change process is the active participation of the wide spectrum of powerful interests in defense manufacturing. Representatives from the Congress, the White House, the military services, DoD management, and the industrial base must all participate in development of a vision, goals and objectives, and specific actions. NOTE 1.   Office of Technology Assessment, Holding the Edge: Maintaining the Defense Technology Base, (Washington, DC: Government Printing Office, 1989), pp. 67–72.