Lean Manufacturing Topic of the Day: Lean Manufacturing and Government Contracts

Lean Manufacturing Topic of the Day: Lean Manufacturing and Government Contracts

Unique Lean Challenges and Opportunities for Government Contractors

Being a supplier to the government and/or aerospace industries is not without its challenges, most of which involve extensive administrative, accounting, and tracking requirements.  Dealing with “difficult” bureaucracies, multiple regulations and agencies, and occasionally contradictory requirements offers its own set of trials.  Luckily, there is another side to the aerospace coin:

A government contract delivery schedule will often allow for a gradual ramp up, a long flat linear delivery portion, and a gradual phase out.  It is also typical for the aerospace industry to allow a more generous lead time for first delivery than is normal in the commercial sectors.

aerospace contract delivery schedule

Government contracts, therefore, can have these significant advantages not generally available to the private sector:

Delivery schedules are typically known far into the future.  Needless to say, this can provide some major strategic planning and operating advantages.

The long lead times can provide time for adequate engineering design, prototyping, and testing, as well as sufficient time to find and/or qualify procurement sources and get long-lead items on order.

The ramp up delivery schedule allows us to minimize risks by producing smaller quantities in the early stages of the program while the design is still fluid.

The long sustained flat delivery schedule, typical of many such contracts, allows us to truly utilize the “takt time” concept of lean manufacturing and optimally design our production capabilities to produce at this rate.

However, …

All too often these tremendous advantages are lost if our company does NOT utilize a lean philosophy and practices.

Let’s begin with the “padded lead time” syndrome.

When an aerospace contract is signed, there is a given finite amount of time between “now” and the agreed upon first delivery date.

With reasonably “lean” lead times for all of the various build levels, and a flattened bill of material, more than adequate lead time will still remain for the design and procurement processes.

In traditional non-lean government contractor organizations, however, this is NOT the case.

Lead times are padded:  These include a just-in-case offset from the promise date “to help assure our timely delivery” and fat lead times for test, final assembly, sub-assembly build and test, and fabrication.

Well, if the overall lead time is already locked in, and you pad the manufacturing and test portions, what does that do to the front end tasks?

You’ve got it!  It squeezes the front end processes, typically design and procurement.  Parts are fabricated and long lead items are placed on order based on preliminary designs which often change.

This issue is further exasperated by overly complex, too deep, bills of material.

Let’s look at an example.  The following “Erector Set” bulldozer takes about 20 minutes for a single, unskilled, operator to completely assemble from scratch.

erector set bulldozer

Yet, when a group of production planning and design folks were asked to structure the BOM for this simple twenty minute assembly, here’s what they came up with.

impact of deep bills of material


Twelve items to schedule.  Twelve SKU’s requiring configuration control.  Five structural levels, each with their own lead times.  And, in most traditional operations, this means twelve pick lists, twelve kitting operations, twelve closes back into stock, twenty-four stock transactions, etc.  Note that none of these activities are value adding.

Hang on.  It gets worse!

Traditional non-lean aerospace companies will also attempt to “optimize” their individual operations.   This generally takes the form of increasing lot sizes on the lower level structures: machining, fabrication and sub-assembly, so as to minimize set up costs.

Lot sizing makes a larger quantity of the item due on the schedule date of the first requirement.  In other words, lot sizing pushes the bulk of the work load to the left in time.  The results of these endeavors are shown below.

impact of lot sizes and padded lead times on government contract production

One large aerospace contractor had a completely unworkable overload in the machining and fabrication shops, due to these practices.  To compound these problems, shop travelers had been cut and issued to the shops far in excess of their capability to produce.

How did the shop floor handle the situation?  Machine operators would pick and choose the jobs THEY wanted to run.  They’d pick a past due job, a current job, and a future job for the same part and combine them to save a set-up!

The consequences were hardly surprising.  Schedule adherence was essentially zero.  Huge inventories of parts accumulated, yet no assemblies could be built (they didn’t have ALL of the parts).  And many of the “economically produced” machined parts had to be reworked or scrapped when the engineering inevitably changed!

In addition to this disastrous front loading impact, lot sizing completely negates the ramp up and linearity advantages of that nice smooth delivery schedule we discussed above.

We worked with another aerospace supplier that was having huge issues with scheduling.  Their MRP produced un-buildable schedules that had no credibility.

It took us over an hour of discussions to finally get their management team to understand that they could simply build all levels of the product at the contract delivery rate!  Once this was incorporated, production completely smoothed out, costs dropped dramatically, quality shot up, and their delivery performance hit, and stayed, at 100%!

Traditional manufacturing practices generate all manner of complexity, and complexity costs a fortune!

The Solution, Lean Manufacturing:

Utilizing the philosophy and the applicable techniques of lean manufacturing allows a government contractor to capitalize on the advantages that are unique to your industry.

Take the pad out of all levels of production.  Allowing a week to build a product with 1-2 hours of work content is NOT OK!  Challenge, and minimize, every lead time at the initial planning phase of the contract.  Make everyone aware of the fact that an extra week at assembly takes a week away from design and/or procurement.

Flatten the bills of material.  If you require a sub-assembly for future spares requirements, use “phantom,” “blow through,” or “MAPO” (Made As Part Of) product structures.  These allow the identification of a sub-assembly level, without the need to actually separate it from the production of the next higher level unit.

Cut all lot sizes.  In most instances, the hidden costs of complexity far exceed the direct cost of an additional set-up.  Cut set-up times where possible.   Aggressively attack all lot sizes greater than lot-for-lot.

Note that this same philosophy is equally applicable to procurement.  Buying “economic” quantities early in a program is generally a high risk practice.  Requirements change often in this environment as the customer, and/or engineering, makes changes to the product structure.   Even if you’re on a cost plus contract, we’re all still tax payers!

Make only what you need, only when you need it.  I.e. build at the contractual delivery rate.  Pull systems with kanban controls work quite well in this environment.  Even if your customer only wants one delivery per month, it still may provide some internal benefits to build linearly and accumulate for the monthly delivery.

Needless to say, there is a long list of additional lean techniques that can and should be applied in an aerospace environment:  Sequential inspection and failsafe, cellular production, 5S, one piece flow, SMED, TPM, cross training, visual factory, …   (For a comprehensive listing of Lean tools, and their definitions, take a look at the article “Lean Manufacturing Tool Kit”)

In a lean environment, schedule adherence is critical.  It all begins with a simple philosophy:  Say what you’ll do, and do what you say.   Establish daily rates and implement a standard operating practice “The day ends when the schedule is complete, NOT the other way around.”

Another easy rule that will force credibility is “We NEVER come in on a Monday with anything past due.”   This rule says that if we fall behind during the week, we will use the weekend to catch up.  It is NOT OK to miss any completion date, at any level.

If you lie to the system, the system will lie right back to you.  Padded lead times, large lot sizes, complex bill of material structures, and a lack of discipline to force adherence to the schedule will cost you, and the tax payer, in a myriad of ways.

Product quality is obviously another critical factor in the government contract / aerospace industries.  Take a moment and peruse the article “Total Quality Lean” .  It explains, in more detail, the close linkage between lean manufacturing and world class levels of product quality.

Good luck on your lean journey.

If have a specific question or if we can be of additional assistance, feel free to write or call.  You will not be disappointed.  We guarantee it!

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