For some 20 years, 1993 Best Plants award winner Northrop Grumman's Naval Systems (NS) in Cleveland had little competition as a supplier of torpedoes and related undersea weapon systems to the U.S. Navy. But competition heated up in the mid-1980s. Prices for torpedoes were reduced. As the Cold War cooled, the bottom all but dropped out of the market.
The company began a complete restructuring. NS adopted the Westinghouse (its former parent) corporate total-quality model based on 12 "Conditions of Excellence." NS also began benchmarking other world-class operations. It learned, for example, about kit carts for better material handling from Texas Instruments, and about training from Ford.
In 1990-91 NS changed from a traditional functional organization to a product-oriented organization with cellular manufacturing driven largely by self-directed work teams. The effects reduced work-in- process (WIP) 80 percent, process steps by 60 percent, cycle time by 75 percent, and distance traveled by 88 percent.
Then the Navy dropped a bombshell. "In the first quarter of 1992 we learned that torpedo purchases would soon end," recalls general manager Wayne Snodgrass.
Brainstorming employees came up with some 400 new-product ideas, which were boiled down to a top 40 by the summer of 1992. The result: nine new product and service segments that are expected to represent 60 percent of NS sales within three years.
The new businesses exploit selected technologies developed in the torpedo business "dual-use" technologies in NS jargon. Says Snodgrass, "Now that we have a competitive factory, we can compete with anyone."