Besides the massive cost reductions sequestration is bringing to government it is also impacting government contractors especially defense contractors like Boeing. Boeing is one of the best managed companies in the US so it becomes critical to its survival in how it deals with the sequestration threat.
Boeing will shrink its defense business by cutting $1.6 billion in its operations over the next three years.
Boeing has been a leader in implementing Lean Six Sigma in its operations even volunteering its Lean expertise to the state of Washington. But what Boeing missed is that it has not followed Toyota’s TPS (Toyota’s Production System) aka Enterprise Lean and used it to empower all of its employees to innovate and make continuous improvements to its functional systems.
Nearly all manufacturing companies manage their production and production support areas well and they have been doing this since Henry Ford introduced the automated assembly line. But few American manufactures have introduced Enterprise Lean into their office areas except Toyota and other oriental auto manufactures. Chrysler and General Motors are among the poorest managed even Ford doesn’t get it. They all are continuing to ignore Toyota’s practice of using Enterprise Lean throughout its manufacturing facilities including its office areas. I call the office areas found in American manufacturing their “Dead Zone” an area of considerable inefficiency that has been completely ignored by manufacturing management. This is the key to making American manufacturing competitive with the rest of the world. Now is the time for the DOD to bring Defense Contractors to the table and implement Enterprise Lean across the board.
Suggestion for Getting the highest Efficiency in all Manufacturing Companies
I propose that manufacturing companies can get the highest efficiency and effectiveness possible by implementing by General Reform Model.
The Steps of the General Reform Model
1. Formation of a Company Reform Committee to oversee the implementation of the reforms. See Article 259. Bringing Bureaucracy from the 19 Century to the 21 Century.
2. Implementation of Enterprise Lean, brings a cultural change by training all relevant employees in Lean Teams to use Lean tools and to innovate making continuous improvements to company systems. See Article 137. Role of Lean Facilitator and Budget Analyst, and Article 239. Applying Toyota’s TPS to Government.
3. Documentation of the Lean Team’s improved methods and the time to do each function. Done by Budget analysts with special training the data is used in the next step for right-sizing the organization. Download my example Lean Team Data documentation spreadsheet. Click on the link “Free Ebooks”.
4. The employee work force is Right-Sized to fit the workload (making sure each employee has a full time job). this step uses the Lean Team Data as Work Measurement to Right-size the organization. It is important that redundant employees must be removed from the work environment and retrained for new jobs or laid off.
5. Improving Efficiency in Office Workload Planning and Scheduling by first grouping functions by skill level and expertise. This is followed by developing a weekly Work Load Plan. As actual data is developed the plan is revised for continuous improvement. See Article 249. Office Workload Planning and Scheduling.
6. The bureaucratic organization is replaced with a Team Managed organization with even greater efficiency. See Article 241. Bureaucracy Versus Team Management.
The Process of Work Measurement and Right-Sizing
This phase of the general reform Model is not a part of Enterprise Lean but is necessary for getting the highest efficiency possible. Budget Analysts analyze the Lean Teams’ data method and determine the staffing and expenses required for each process in a function and then documents the function’s processes their staffing and costs in spread sheet. Reporting of work completions may be necessary to ensure a balanced work load. Staffing of variable functions does not require measurement to the level of detail that a Standard requires for productivity reporting in industry on an assembly line.
This effort is used to arrive at Right-Sizing with a bottoms-up budget. This simplifies the budgeting process based on real numbers rather than a top-down budget based on last years staffing and expenses.
This depends on the characteristics of the process and how it varies. Which may appear to be difficult but don’t throw up your hands too soon remember it does not have to be perfect. The staffing of a function can be an estimate because you cannot staff with less than a full person.
Article on How Boeing is Dealing with Sequestration
'Sequestration' Threat Hits Boeing Defense Nov. 7, 2012
Dominic Gates Source: 2012 The Seattle Times
Boeing said Wednesday it will continue to shrink its defense business by reducing the number of managers and facilities and consolidating business units to cut another $1.6 billion in costs in the next three years.
The shake-up in Boeing's defense division is an acceleration of a cost-cutting and restructuring process that has been going on for two years in response to reduced U.S. spending on new military and space programs.
Boeing's ongoing cost cuts must continue even if the threat of budget sequestration is averted by the new Congress, Boeing spokesman Todd Blecher said.
"No matter what happens to the defense budget, the trend line is flat to down," he said.
In a memo to defense-side employees Wednesday, Dennis Muilenburg, chief executive of the St. Louis-based Boeing Defense, Space & Security, or BDS, division, said the cost-cutting program has saved $2.2 billion over the past two years.
For the next $1.6 billion cost-reduction phase, the company is "putting everything in our business under a microscope," Muilenburg wrote.
He announced the amalgamation of various business units within BDS that will cut the number of executives by 10 percent - with a "sharp reduction in vice president and director-level positions."
The remaining executives will have expanded roles.
Overall, Muilenburg said in the memo, by the end of this year the number of executives will be 30 percent lower than it was in 2010.
He said BDS wants to reduce its management costs by a further 10 percent by the end of next year, reducing the ratio of managers to non-managers to 12.5 to 1, from 9.7 to 1 today.
Blecher said Boeing is "looking at management levels below the executive ranks" for the next round of reductions.
Rather than lose their jobs, some displaced BDS managers may transfer to the booming Commercial Airplanes side of the company, he said.
The company's defense operations in Washington state's Puget Sound region remain "very robust," particularly the P-8 anti-submarine plane and the Air Force KC-46 refueling tanker, Blecher said.
"Those two programs alone are huge growth drivers for the defense side of the business," he said.
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