IW Best Plants Profile - 2002

A Partnership In Excellence Boeing Co.'s success in Long Beach celebrates a commitment to employee involvement and lean manufacturing. By John Teresko Boeing C-17 Production Complex, Long Beach, Calif. At a Glance

  • Plant size: 990,000 square feet
  • Start-up date: 1988
  • Special Achievements
    • Winner of the Malcolm Baldrige National Quality Award in 1998.
    • An employee satisfaction index superior to both Boeing and industry averages.
The Boeing C-17 Production Complex in Long Beach, Calif., is a place of record achievement both in terms of the product and the process. First, consider the product: an intercontinental four-engined behemoth that can transport 170,000-pound loads on military and humanitarian missions around the globe. Weighing 290 tons fully loaded, it has more than twice the payload of its predecessor, the C-124 Globemaster II. The C-17 has become the focus of a continuous improvement culture that reflects the collaborative ingenuity of the 1,982 production employees who toil three shifts, seven days a week under government contract. Employee involvement programs and empowered teams are key to the plant's progress in lean manufacturing techniques. Quality achievements come from a strategy of extending quality-control responsibility to production employees, says Stephen M. Jugan, general manager, quality. "The strategy is to replace part inspection with process surveillance." All the production employees are among the 2,927 members of the United Aerospace Workers of America (UAW) at the site. In addition to representing "touch" labor, UAW membership also includes allied categories such as expediters, tool makers and planners. Together with five other unions, the UAW collaborates with management to maintain and upgrade product excellence. The common goal is to sustain and grow the business through additional domestic multi-year orders, more international business and eventually by offering commercial versions of the transport, says Bill Schultz, president of UAW Local 148. David M. Bowman, vice president and C-17 program manager, says commercial versions could solve delivery problems for distributors of large agricultural and construction equipment, for instance. As a $3 billion business, the facility is a major financial contributor to Boeing's fortunes, says Howard E. Chambers, vice president and general manager. Often cited as the most versatile plane in the history of airlift, the C-17 sustains that reputation through ongoing innovation of the design and production teams. For example, the 100th C-17, scheduled for completion in October, includes increased fuel capacity, resulting in about a 25% greater range. Other design improvements include a terrain-avoidance warning system and a LCD cockpit multi-function display. The plant serves as a locus for parts coming from 1,669 U.S. companies as well as suppliers in France, the UK and Israel. Like other large aircraft, the C-17 is built in major subassemblies, which come together at Long Beach to form the complete airframe. As the aircraft moves down the production line, workers complete and test the hydraulic, electrical, environmental and propulsion systems. The 100th C-17, which was started last November, was fitted in August with its four F117-PW-100 Pratt & Whitney engines. Today, Boeing's C-17 complex is benchmarked as an example of the process excellence possible via employee involvement and lean manufacturing. An early indicator of the facility's direction with process excellence was its winning of the Malcolm Baldrige National Quality Award in 1998. Other positive indicators since then include a 40% increase in aircraft deliveries while reducing hours per aircraft by 31% and headcount by 10%. Jim Walden, team leader for performance excellence also cites the reduction of defects by 53%, rework and repair by 48%, and the costs associated with rework, repair and scrap by 44%. Properly appreciating those achievements -- even the continuing existence of Boeing's C-17 program -- requires a historical perspective. When the C-17 complex first opened in 1988, Long Beach was part of McDonnell Douglas Corp. and struggling to come to terms with its outdated "command and control" management techniques, explains Chambers. "They got pushed into a situation where performance fell far short of customer expectations. The customer's ultimatum in effect was 'shape up or we won't buy any more airplanes from you.' Threatened with cancellation of the C-17 program, McDonnell Douglas began the process overhaul." By 1996 evidence of a turnaround was enough to convince the U.S. government to award a $14.2 billion agreement to deliver 80 C-17s. The C-17 facility had successfully initiated an ongoing strategy to tackle technical problems, cost overruns and late deliveries. Chambers says "the new focus emphasized employee involvement while becoming process-oriented and customer-driven. That continued unabated through the Aug. 1, 1997, merger, and sustains us today. "We've learned to be very conscious of the customer, what he wants, and how much he is willing to pay for it. Our success is being built and maintained on the ability to put a process together to satisfy that customer. Since we've progressed beyond the initial product-development phase, we're able to put our total focus on product quality and process efficiency. We want [the plane's] dispatch and mission reliability to be very high so that the Air Force can effectively use the C-17s anywhere in the world every day and depend on it." Chambers says the operation's success with process transformation has yielded a significant by-product, a cultural attitude that embraces change. It's an attitude that continues to be tested, sometimes in unusually difficult ways. "For example in the last two years we almost doubled our annual production of C-17s while performing a major platform update. [But] the really tough part was doing all that while being forced to replace half of our workforce," says Chambers. The C-17 employees were "bumped" on the basis of seniority by fellow union members being laid off from Boeing's near-by commercial facility. While Boeing was increasing the annual production rate from eight to 15 planes, its concurrent challenge was to carry out the most comprehensive C-17 revision yet. It included new software, radio and flight systems, and adding fuel capacity. "So if you look at the numbers, we replaced 50% of our [production] people, yet improved the capability and quality of our product." Traditionally if you had a 'hiccup' in your workforce, it would be natural to expect problems with training, quality, morale and cost. That didn't happen, insists Chambers. One interesting metric is the historical decline in what the Air Force pays per plane. Boeing says $438 million was paid for the first C-17 that was delivered on May 18, 1992. Today, the customer pays $175 million. Despite layoffs, employee surveys show morale problems have been minimized. Periodic measurements show the satisfaction index exceeds both Boeing and industry averages. That undoubtedly received a boost on Aug. 15, 2002, when the C-17 complex received formal U.S. government authorization for 60 more planes, enough to extend production through mid-2008.
Web-Exclusive Best Practices
By John Teresko Benchmarking contact: Maureen Greenwood-Hamilton, [email protected], 562/593-3148 Leveraging Employment Involvement Employee involvement (EI) is a pervasive mantra underlying all process improvement at Boeing's C-17 complex. Howard Chambers, vice president and general manager, says its role is to galvanize an organization to be team-based and to accomplish more with less effort. "Through EI, people are empowered, coached and trained to work as a team toward a common goal. Each task becomes more efficient and more rewarding and everyone becomes part of the solution." EI, as a philosophy and a program, was formally adopted in 1995 as a way to help speed the departure from a command-and-control environment, says Ed Schaniel, director of employee involvement. He considers it as an investment in the organization's future. Four team initiatives make up EI's integrated system of cooperation and common goal: High Performance Work/Leadership Teams, Relationship by Objective/Doing Something Right, Creative Edge Suggestion Program and Gainsharing. More than 400 High Performance Work/Leadership Teams are supported by the EI organization. The EI focus: assuring appropriate education and recognition. The second EI initiative has two parts. One is a team approach to quality of work/life issues. The second -- Doing Something Right -- gives employees an opportunity to recognize and praise the efforts of subordinates, peers and supervisors for their hard work and interpersonal skills. The Creative Edge Review Team ensures an efficient evaluation/approval process is in place from the moment a suggestion is received to the moment a payout occurs. The team evaluates three levels of awards, with the third based on fiscal savings exceeding $25,000 in the first year of implementation. The Gainshare plan is an agreement between the United Aerospace Workers (UAW) and Boeing that is based on unit cost reductions made by UAW members on the shop floor. If union members as a group perform better than planned, they share monetarily in the improved performance. In the 2001 EI annual report -- yes it looks like an annual report -- Schaniel relates EI to a quote from Jack Welch of General Electric Corp. fame: "The only thing that creates a satisfied customer is a satisfied employee." Process-Based Management Process-Based Management (PBM) is the C-17 facility's seven-step methodology for managing and improving processes. At the heart of PBM is interaction between process owners and process customers in defining, managing and improving the process together. Boeing says PBM has contributed heavily to significant improvements in quality, including reductions in the cost of rework, repair and scrap. In 2001 the facility was able to reduce the cost of rework, repair and scrap per 1000 earned standard hours by 25%. Those reductions total 36% since 1999. In addition, cost of quality as a percent of sales (based on Aerospace Industry Association Criteria) was only 1.1% as of December 2001. PBM is being leveraged to meet the company's goal of reducing the C-17 flyaway price, now $175 million, by 25% by 2004. The baseline is 1999. In 1992, the first C-17 delivered to the U.S. Air Force carried a price tag of $432 million. Boeing looks at customer satisfaction as a process that emphasizes two major components--operational performance and relationship management.
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