May 18, 2004 Nick Kunesh Deputy Assistant Secretary of the Navy (Logistics) LEAN and the DoN Blocking & Tackling Fundamentals DoN 2004 Logistics Conference

2 Requirements DoN Total Obligation Authority (TOA) $115.1B

3 “We simply have to transform this place. It is every bit as important to the success of the global war on terrorism as the other things we're doing.” Donald B. Rumsfeld Secretary of Defense “…transforming the military. What is different today is this sense of urgency: The need to build this future force while fighting this present war. It is like overhauling a car engine while you are going 80 miles an hour.” George W. Bush President of the United States “Now a few words about transforming business practices. First of all, efficiency equals effectiveness. They go together. We should be constantly searching for improved effectiveness through improved efficiency.” Gordon R. England Secretary of the Navy It’s not a destination… it’s a journey! The Need to Transform What Are Our Leaders Saying? “As we look to the future, we must transform to retain the advantage against innovative and determined enemies.” ADM Vern Clark Chief of Naval Operations

4 Secretary of the Navy’s Near Term Priorities Combat Capability –Win the War on Terrorism People –Ensure quality of service Technologies –Recapitalize our Forces Improving Business Practices –Transform the Business of Defense Process characteristics needed to support SECNAV’s priorities: Speed Agility Flexibility Sustainment (TAV, ITV)

5 Efficiency Methodologies and Tools for Continuous Improvement Enablers for speed, agility, flexibility & sustainment in an affordable manner. –Efficiency Methodologies Theory of Constraints (TOC) Lean Six Sigma Others : ISO 9000, Malcolm Baldridge Award, CMMI – Information Technology Navy Enterprise Resource Planning (ERP) Global Combat Support System (GCSS) –Marine Corps –Automatic Identification Technologies (AIT) Unique Identification (UID) Radio Frequency Identification (RFID) All provide an environment for lead time reduction in the Value Chain.

6 Lean is... A set of principles, concepts and techniques designed for a relentless pursuit in the elimination of waste. Producing an efficient just-in-time production system, that will deliver to our customers…  exactly what they need  when they need it  in the quantity they need  in the right sequence  without defects  and at the lowest possible cost

7 Lean Improves Overall System Performance by Reducing Waste, Variability, Inflexibility Material Cost Feedback loop Waste Variability Inflexibility Performance Time Customer/shareholder requirement Gap = business problem Actual performance Information Delivery Business flows (inputs) People and process Performance indicators (outputs) System (inhibitors) Quality

8 12 DRAFT Quick Statistics: Physical Moves: 35 Building Moves: 25 Site Moves: 10 # of Nodes: 29 Intra-site Physical Flow Information Flow Inter-site Physical Flow Site Marker Building Marker VAW-120 Pilot VAW-120 Work Center VAW-120 Maintenance Control VAW-120 Supply VAW-120 QA SRS MDU SRS Contractor DCU (Supply) AMSU (AIMD) AIMD 62A Work Center AIMD 600 Production Control ATAC Norfolk CFS ATAC Norfolk Government CFS Houston ATAC North Island CFS Building 3304 DDDC FISC Instruments Shop Pre-stage Area Instruments Shop Planner Instruments Shop Production Control Instruments Shop Work Center Container Reclamation FISC Building 36 Pack and Preservation 472 Production Control 472 Work Center SRS Materiel NAVICP Item Manager Gyroscope Organization Space Although this gyroscope is a one- for-one exchange, the repairable sent to NADEP North Island may not be sent back to Norfolk Over 400 of this type of gyroscope are in inventory Lean Maps Lean Maps 35 Physical Moves 25 Building Moves 10 Sites Moves 52 IT Transactions 11 Info Systems 7 Logbooks C Current Environmental Landscape: E-2C Gyroscope Repair Example No End-to-End Management Lack of Visibility Long-Cycle Times Increased Inventory Levels Limited Ability to Forecast

9 Lean-Pathways/AirSpeed Accelerated Improvement Workshop Onboard USS Harry S. Truman (CVN-75) 2 April Division BRU-32 AIR Speed The Way Ahead

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11 Elements Completed At Sea Elements Completed Inport Prior Event Program Kickoff And Carrier Familiarization Map Current State Event 2 Lean Training/ Plans for Workshop #1 Event 5 Improvement Workshop #3 Review Long Term Change & Strategy Update Event 4 Improvement Workshop #2 Roadmap Refinement & Implementation Tools Workshop #3 Plan Event 6 Capstone Event Event 3 Improvement Workshop #1 Roadmap Refinement & Implementation Tools Workshop #2 Plan HST Lean-Pathways/AirSpeed Event Roadmap † Event 1 Kickoff HST AIW Leader Training

12 BRU 32

13 BRU AIW Team Members: AE2 Kemper, IM2 AS1 Thomas, IM4 SK2 Bobnock, MSP AM1 Schulz, IM2 AT1 Halloran, IM3 AE1 Taylor, QA AO2 Travers, IM3 AE1 Hamilton, IM3 Team Leaders: LT Belmont LTJG Bast Process Owners: LT Dunn AOC Gilbert Facilitators: Ralph Day Rick Davidson Observers: LCDR Hunter AVCM Hawkins

14 Goals Reduce people and part travel by 50% Eliminate potential backlog Improve availability of consumable parts within the work center for BRU % Consumable Parts Availability (bit piece parts) Increase on-board repairable availability by 50% with a Stretch goal of 100% availability

15 Data Gathering Time Observation Sheets 190 steps

16 Data Gathering Process Flow Sheets 167 items

17 Sink Locker Computer Parts Locker Computer Locker Work Bench Tool Box Test Bench BRU Bench Pallet Computer Printer To GSE to Clean Parts To Hazmat Locker BRU 210 Day Inspection Cycle People distance: 3,232 feet Parts distance: 281 feet BRU 210 Day Inspection Cycle “As is” Work Bench

18 Future State VSM Current StateFuture State Value Added Time259 Non-value Added Time Non-value Added but Required Time 6449

19 Brainstorming

20 Ideas Daily Hazmat Run or Local Hazmat Locker Dedicated AZ for NALCOMIS Parallel Processing Dedicated tool boxes Rotable kits New Parts Washer New Bench Mounted Test Set Parts Shadow Board 5S Tabbed Pub, centrally located

21 Sink Locker Computer Parts Locker Computer Locker Work Bench Tool Box Parts Washer Pallet Computer Printer BRU 210 Day Inspection Cycle 1 st Stage Disassembly kanban 2 nd Stage Disassembly 2 nd Stage Re-assembly Final Assembly and Test BRU 210 Day Inspection Cycle “To Be” People distance: 85 feet (before LEAN 3,232 ft) Parts distance: 67 feet (before LEAN 281 ft)

22 Accomplishments Reduced people travel by 97% (Goal 50%) Reduced part travel by 76% (Goal 50%) Eliminate potential backlog Improve availability of consumable parts within the work center for BRU % Consumable Parts Availability (bit piece parts) Increase on-board repairable availability by 50% with a Stretch goal of 100% availability     ? 

23 External Supply Chain Lead-time Reduction Event F/A-18 E/F Nose Landing Gear

24 Nose Gear Supply Chain Structure Wyman Gordon (forgings) Cam-Tag (machined parts) S&L Aerospace (assembly and machining) Carpenter (specialty materials) Tecnickrome (surface treatment) Superior Plating (surface treatment) Messier-Dowty (assembly and machining) VacAero (heat treatment) Boeing (assembly)

25 Lead Time Reduction (sum) Projected sum of lead time for studied parts based on plans. Overall delivery time has reached 48 week goal (driven by critical path) Lead time reductions also lead to cost and quality improvements

26 F/A 18 E/F Nose Landing Gear Timeline View Parts shown common timeline Critical Path Obvious Typical batch size Long business process up front Long raw material procurement Long final assembly Candidate for improvement Value-added proportion Unmapped processes

27 Performance Improvement Results (average) 98% delivery improvement 18% Lead time reduction 6% quality improvement Kemco Tool Lean-Pathways Engaged Suppliers Goodrich-UPCO Harris Corp. Kemco Tool Kaman - Results from Pilot Program SLAM-ER Cycle Time by Part True Lead Time Reduction

NAVY INTERMEDIATE LEVEL MAINTENANCE LEAN FORUM

29 Independent Initiatives Basic TOC –AIMD/ASD NAS North Island –AIMD/ASD NAS Pt. Mugu –MALS-26 –MALS-29 –AIMD/ASD NAS Whidbey Island –AIMD/ASD NAS Oceana –NADEP Cherry Point TMS Team Gap Closure Efforts CVN-21 Lean Pathways Lean –AIMD Lemoore –AIMD Oceana –VFA-106 (phase shop) –MALS 11 –MALS 31 –NADEP Jax –NADEP North Island –AIMD Rota Six Sigma –AIMD Oceana –NADEP Jax

30 AIRSpeed Current Tools Theory of Constraints is based on the belief that any organization has at least one constraint and that any improvements on non-constraints may not yield as significant ROI as working on the constraint. LEAN focuses on the removal of waste-defined as anything not necessary (no value added) to produce the product or service. Six Sigma is based on the assumption that the outcome of the entire process will be improved by reducing the variation of multiple elements. AFAST is a Cost Analysis tool used to understand Consumption Variances and Production Cycles

31 Deployment Schedule Initially focused on Shore Based Activities Focus on Cost and Aircraft Ready for Tasking F/A-18 T/M/S first, followed by: –H-60 –CH-53/CH-46 –E-2C

32 AIRSpeed Deployment Schedule NAS Oceana 2004 MayJanJunJulAugDec Sep OctNovAprMarFeb MALS-11 MALS-31 NADEP NI NAS Lemoore MALS-12 NAS Whidbey Island NAS Point Mugu NAS Norfolk NS Mayport NAS Jacksonville MALS-26 MALS-29 AIMD North Island * B-TOC Complete * * * * * * *LeanB-TOCA-TOC

33 CDR CJ Jaynes’ journey begins …….. Officer-in-Charge of Aircraft Intermediate Maintenance Detachment (June 2000 – May 2003) –Performed maintenance on F/A-18 components, systems, engines, hydraulics, life support equipment, etc. –63 production work centers Total Workforce of 816 –11 officers, 751 enlisted personnel, 54 civilians Immediate Challenges –High maintenance backlog –Production inefficiencies –Low sailor and civilian morale –“we’ve always done it that way” attitudes Something had to be done quickly…..

34 NAS Lemoore Snapshot in time AIMD in June 2000 Manning at 70% Backlog (other than engines) at 1260 items EXREPS = 200 Engine 35 AWM Module 190 AWM No light at the end of the tunnel

35 Plan for Success Teamed with Boeing and the F/A-18 Program Office Trained a core team of military Lean facilitators Trained all E-5 and above in Lean concepts Developed a roadmap: Held two AIW’s every month – every work center was effected Make Lean a way of life – not just a program

36 AIMD Trends Results of Lean Decreasing Backlog with increasing customer base

37 Reduced Engine Turn Around Time 181 Engines 135 Engines 139 Engines Number of Maintenance Days 400 Division – Power Plants

38 AIMD Lemoore Power Plants BEFORE BEFORE

39 AIMD Lemoore Power Plants AFTER

40 What Does Lean Mean to the AIMD at NAS Lemoore? AIMD Sailors are now able to work 8 hour days instead of 12 hour days. Re-enlistment rates improved from less than 50% to over 76 % More parts on the shelf and less in the repair cycle More “up” aircraft on the ramp Better quality product to the fleet Established repeatable, consistent production processes

41 IT – End to End –Converged Navy ERP –GCSS – MC DoN eBusiness –IT applications EWSP –Gov’t management tool Lean Pathways –Lean, SPANS & IT Applications NAVRIIP “AIRSPEED” –TOC, Lean, Six Sigma One Shipyard -Lean, Six Sigma NSWC Crane -Lean LOG Modernization –TOC, Lean SHIPMAIN –Lead-time reduction Logistics Integrated WG –Logistical process improvements DoN Efficiency Tools, Methodologies, and Sponsors ASN(RD&A)/OPNAV, CMC (DC, I&L)/MCSC UNSECNAV, DoN CIO ASN(M&RA), NAVSEA ASN(RD&A)/ONR, MANTECH CNAF, NAVAIR NAVSEA CMC (DC, I&L), LOGCOM CFFC, NAVSEA OPNAV, CMC