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© 2006 George Group Consulting, L.P.
Transforming the DoD Using Lean Six Sigma:The Next Big Return on Investment
Michael L. George
© 2006 George Group Consulting, L.P.
Where does Continuous Process Improvement (CPI) stand in the DoD today?
� Army, Navy and Air Force have launched enterprise wide CPI
Why will it succeed? Why different from TQM?
� Senior Leadership Engagement: Admirals, Generals and SES are being trained to use the process( 2 day class), many becoming Executive Green Belts (5 day class plus 2 projects)
� Critical Mass: Upwards of 1% of personnel are trained as Black Belts and assigned full time to CPI projects
� Sustained effort: Training and Coaching are being internalized creation of Master Black Belts who replace external consultants
� Results: Thousands of local projects have been completed with an average 4 times Return On Investment assuring support
© 2006 George Group Consulting, L.P.
Key Insight of CPI: Long Lead time = High Cost
� All processes within the DoD thus far studied contain approximately 50% cost of no value to the user
� Non value add cost causes long lead time in a process
� CPI has a set of tools (e.g. Lean & Six Sigma) to reduce lead time by >60%, increasing flexibility, reducing non value add cost
� Resulting in a reduction in total cost of > 20%
Typical Example: Foreign Military Sales* proposal lead time was reduced 63% and resulted in a 36% cost reduction as rework was cut from 91% to 8%
*Transforming Government using Lean Six Sigma, George, Price, et al , page 12
© 2006 George Group Consulting, L.P.
What is the next big Return on Investment?
� Present: Most current projects are locally selected within a “silo” and may reduce cost but not address warfighter needs. This phase was necessary to build capability and return.
� Future: A horizontal view across silos to the warfighter, operator, and threat, creating a “pull” signal and metric to:
� Identify a relevant gap or excessive infrastructure
� Focus CPI projects within the silo that is:
� Causing the performance gap, or
� Has excess cost and infrastructure capacity beyond “pull”
� Result: Projects with greater than 10 times Return on Investment, more effective defense at 20% less cost DoD wide
© 2006 George Group Consulting, L.P.
Why does the biggest return on investmentcome from a horizontal view to the operator/warfighter?
� “Improving a process that is irrelevant is a waste”Wally Massenburg, VADM, USN (ret.)
� Example of the Opportunity
� An aircraft system’s reliability increased nearly 10 fold due to improvement projects
� Demand for spare parts decreased 10 fold
� Organization which provided spares complained because obligation authority was based on parts per year transactions
� The “pull” demand from the user/warfighter must size the supporting infrastructure capacity and related cost. Lean Six Sigma cost reduction should then be applied.
� Goal must be to reduce cost and return funds, not spend TOA
© 2006 George Group Consulting, L.P.
What Are Prime Value Chains?
� Prime Value Chains (PVC) are interrelated value streams that –when combined – deliver war fighter capability
� They seek to clarify the relationship between:
� Strategy
� Mission
� Policy
� Processes
� Organizations
� They cut across functions, organizations and command structures to define “pull” demand metrics. AKA High Impact Core Value Streams (HICVS) and Enterprise Value Stream Maps (EVSM)
Developing a common understanding of the PVC provides the foundation for strategic transformation
© 2006 George Group Consulting, L.P.
Strategic Performance Gap Examples
� Inaccuracy of stockpile requirements process causes downstream planning and performance shortfalls in acquisition and logistics processes
� Failure to provide smoke grenades to Army and Marines, precision weapons to Naval aviation
� Failure to match munitions outload capacity to COCOMs’ 16 week war scenario
� Failure to deliver a specific ACAT-I weapon systems on-time & within budget
� Lack of an integrated Depot/Network strategy forces workload and positioning decisions to be highly reactive and suboptimal
© 2006 George Group Consulting, L.P.
The 7 Step PVC Approachto Generate Strategically Important Results
1.1.Define the perspective (e.g. AMMO supply chain, Army Force Generation, Navy Weapons Procurement System)
2.2.Create the PVCs to align leadership on a common view
3.3. Identify strategic metrics, gaps & priorities
4.4.Align leadership on strategic gap metrics and order of attack
5.5.Perform deep-dive PVC assessments on the “vital few”
6.6.Translate & deploy assessment recommendations, implement Strategic, Organizational, Policy, Lean Six Sigma, and strategicprojects
7.7.Design & deploy metrics that monitor performance vs. strategy at various levels/organizations
Deep-diveassessment
Translate& deploy
Monitor performance
3Define perspective ID strategic gaps
Align on common view Align on gaps & order2
1
4
5 6 7
© 2006 George Group Consulting, L.P.
Prime Value Chains Bring Clarityand Focus to Enable Strategic Transformation
TRANSCOM
ArmyG3
G8JMCPEO
TRADOCFORSCOM
AMCOM
CO
CO
Ms
Non-JMCinstallations
JMC
AMCG4G3G8
Army G3 TRA PEO AMMOJoint Munitions
Command (JMC)
ArmyPEO
AMMO
AMCOMARDECTACOM
G8G3
JMC
Pro
du
ction
Base
S-1
S-2
S-3
S-4
S-5
CO
CO
Ms
CO
CO
Ms
JMC
/G4
/T
RA
NS
CO
M
B-$ B-$ B-$ B-$ B-$
S-1
S-2
S-3
S-4
S-5
B-$ B-$ B-$ B-$ B-$
S-1
S-2
S-3
S-4
S-5
B-$ B-$ B-$ B-$ B-$
S-1
S-2
S-3
S-4
S-5
B-$ B-$ B-$ B-$ B-$
In the PVC approach, the anchor organization actively works with
stakeholders across the PVC to develop an integrated strategy and transformation roadmap
Production/ stockpile
Army G3Stockpile
Req.
AMCOM
CO
CO
Ms
AirForce
Navy
Marines
Outload(time phased)
Non-JMCinstallations
JMC Integrated Logistics Strategy
• Capability, production/stockpile, and COCOM time-phased outload requirements
Integrated Supply Chain Strategy
AllClass V
JRO
C/JC
IDS
Arm
yU
SA
FO
PN
AV
US
MC
Requirements
Capability
• Development and sourcing of assets to meet capability and stockpile requirements
Technology/ Development
Production
Acquisition
ARDEC
AMCOM
AirForce
Navy
Marines
COCO
GOCO
GOGO
Acquisition
Logistics(CONUS)
Stockpile management
Outload(distribution)
Stockpile management
Outload(distribution)
Power Projection(into theater)
• Receipt, storage, maint., dist., and demil of assets
• Movement of all assets OCONUS (training, current operations, pre-positioning, contingency)
SMCAitems
Air Force(service unique)
Navy(service unique)
Marines(service unique)
COCO
= Completed projects
= Other potential focus areas
= Dependencies
= JM&L LCMC
Joint Service Munitions High Impact Core value Stream
The historical approach to improvement was to focus project activities within individual command and/or process boundaries…the typical outcome was sub-optimization of results
10© 2006 George Group Consulting, L.P.
RRMC
LEMC
HWAD
ANMC
TEAD
BGAD
CAAA
MCAAP
Not on-hand
Unserviceable
Wrong location
Right location
Outload requirement
by depot
Current state
of stockpile
765K tons 765K tons
0
20
40
60
80
100%
Stockpile
Note: WARS weight information augmented by weight file obtained from Jim HumphreySource: Outloading requirement – “Depot-Week Summary” file (Kurt Wheat); Current stockpile from WARS, March 30 (Lana Coleman)
• ~70% Bombs and Missiles (?)
• Spread over 260 DODICs
• Actual On hand quantities 3x of requirement for these DODICs
• Only includes CC’s A-C
Example: Joint Munitions Command Unable to Meetthe COCOM 16-Week Time-Phased Out-Loading Quantity and Variety Requirement
11© 2006 George Group Consulting, L.P.
Value Stream Mapping the Process Showed That a Cross-function, Cross-Command Solution Was Necessary: Drove Many Black Belt Projects Focused on a Few High Lever Points Such as Schedule Demand Discrepancy Between JMC/COCOM
StocksOn Hand
Reqt's Notin Synch
ProductionIssues
Reqt'sUnfunded
Total Req't
400K
?
?
? 765K
Not on-hand
Unserv iceable
Wrong location
R ight location
Current s tate of stockpile
765,000
0
20
40
60
80
100%
Addressing the requirements issues should decrease the readiness gap at lower cost
Readiness gap exists – approximately 50% of stocks of the outload requirement are on-hand and serviceable
COCOM/ stockpile synch-up
SourcingStrategy
If consistently under funded, maybe decrease requirements
Note: This project will bring JMC into alignment with COCOM requirements. It does not address sudden changes in COCOM requirements which is another project.
© 2006 George Group Consulting, L.P.
The Munitions PVC Strategic Priority AssessmentLed to a Mix of Lean Six Sigma and Strategic Projects
Input variability
Feedback loops
Org R&R alignment
Focused strategies
2Establish common requirements & prioritization definitions Execute 1 X X 2 mos G3 G3
12Further integrate Critical Requirements and DA G3 priorities into acquisition & programming process Kaizen 2 X 3 mos G3 G3
8Improve execution of ammo management responsibilities in Units Execute 3 X X 9 mos G3 CASCOM
23 Improve DODIC integration planning Execute 4 X X 5 mos G3 G3
13Define QWARRM add-ons and revalidate add-on combat loads QH 5 X X 2 mos G3 CAA
24Establish a process to capture, coordinate and track New Equipment Training (NET) requirements LSS 5 X 9 mos TRADOC TRADOC
14 Improve identification of Industrial Base requirements Execute 7 X 4 mos G3ASAALT (PEOs)
36Develop process to alert G3 of significant production problems potentially impacting Army readiness Kaizen 8 X 5 mos G3 JMC
39Develop Ammo Enterprise strategy deployment process Strategy 9 X 6 mos G3 G3
42Develop simple focused strategies to account for demand uncertainty & supply chain risk Strategy 9 X 6 mos G3 AMC (JMC)
7Develop the Ammo Value Chain performance scorecard structure & process Strategy 10 X 6 mos G3 G3
31 Improve database integration PISW 10 X 9 mos G3ASAALT
(PEO Ammo)
41Improve CL accuracy & applicability to QWARRM process & theatre planning Execute 10 X X 9 mos G3 G3
43Reduce the number of DODIC's with low mission alignment & high total risk adj. cost Strategy 10 X 9 mos G3 G3
22 Enable early notification of operational changes Execute Complete X 5 mos G3/G4 G43 Develop the stockage objective setting process Kaizen Underway X 6 mos G4 G4
11 Improve POI requirements accuracy LSS Underway X 6 mos G3 G3
19 Enable range availability database use for forecasting LSS Underway X X 6 mos G3 TRS G3 TRS21 Validate STRAC requirements LSS Underway X X 6 mos G3 G3
Est. duration
Proposed sponsor
Proposed lead
Project focusProject
Project type
Name Priority
Assessment projects span the continuum from “execute” to strategic and address the key stockpile requirements strategic levers
Deep-diveassessment
Translate& deploy
Monitor performance
Define perspective ID strategic gaps
Align on common view Align on gaps & order
3
2
1
4
5 6 7
© 2006 George Group Consulting, L.P.
Priorities and Interactions: PVC analysis identifies the “vital few” Organizational and Lean Six Sigma projects that will close the strategic performance gap
Planning Units Reset/Trained Units Made ReadyUnits Made Available
Determine what and how many resources are needed over time
Develop unit capability level by reconstituting personnel, re-equipping and retraining them.
Army Force Generation Prime Value Chain – Draft Only
Assess units and make ready for missions, including collective training with other operational headquarters.
Keep units ready for action and source against operational or contingency requirements.
Prepare Initial Outfitting Conduct Core Training
Ho
me S
tation
Ind
ividu
al & C
ollective
Trainin
g E
qu
ipm
ent (T
emp
orary
Eq
uip
men
t for C
ollective T
rainin
g)
Conduct Mission Training
Dep
loym
ent E
qu
ipm
ent S
et
AC/RC HQ, BCT
& Support Brigade:
Core Training
Manning & Training
Equipping
Evaluate Strategic Direction
Committee or Conference
Army Organizationor Operation
Joint Organizationor Operation
Incompletely Defined
Training at Discretion ofCombatant Commander with Guidance
Prepare for DeploymentR-Day
Develop Army Requirements
Determine Resources& Timing
Training Support &
ResourcingConference
AR2B & AWPB Conferences
ARFORGENSynchroni-
zationConference
Combatant Commander,
JFCOM & HQDA
Priorities (including long
term capabilities via
AROC)
Require-mentsIntegration &
Sourcing Conference
Guided by G3 Analysis Army
Equipping and Reuse
Conferences
IRPL and DARPL and
related priorities set by G3
POM Funding POM Funding
Arm
y AC
Arm
y R
eserves
Arm
y N
ation
al G
uard
Rep
ositio
nin
g (R
esou
rce &
Cro
ss-Level)
Reset &
Train
ed in
clud
ing
Call
UP
s(E
x-AC
& N
ew)
Reset &
Train
ed
Recru
its
Rep
ositio
nin
gBaselin
e Eq
uip
men
t Set
POM Funding
Missio
n T
raining
includ
ing M
RX
and
CT
C
HQDA
Arm
y Syn
chro
nizatio
nO
rder
Institutional Training & Doctrine (TRADOC)Facilities (IMCOM)
Foundation
CE
F M
RE
/MR
X
ONS ProcessShort Term Capabilities
Materiel and Logistics (AMC)
Unit Training & Readiness (FORSCOM)
LAD
Supplemental Funding Supplemental FundingSupplemental Funding
Requirements Fielding
Combatant Commander Requests
Current to Future
Tasking
IRP
L
Planning Units Reset/Trained Units Made ReadyUnits Made Available
Determine what and how many resources are needed over time
Develop unit capability level by reconstituting personnel, re-equipping and retraining them.
Army Force Generation Prime Value Chain – Draft Only
Assess units and make ready for missions, including collective training with other operational headquarters.
Keep units ready for action and source against operational or contingency requirements.
Prepare Initial Outfitting Conduct Core Training
Ho
me S
tation
Ind
ividu
al & C
ollective
Trainin
g E
qu
ipm
ent (T
emp
orary
Eq
uip
men
t for C
ollective T
rainin
g)
Conduct Mission Training
Dep
loym
ent E
qu
ipm
ent S
et
AC/RC HQ, BCT
& Support Brigade:
Core Training
Manning & Training
Equipping
Evaluate Strategic Direction
Committee or Conference
Army Organizationor Operation
Joint Organizationor Operation
Incompletely Defined
Training at Discretion ofCombatant Commander with Guidance
Prepare for DeploymentR-Day
Develop Army Requirements
Determine Resources& Timing
Training Support &
ResourcingConference
AR2B & AWPB Conferences
ARFORGENSynchroni-
zationConference
Combatant Commander,
JFCOM & HQDA
Priorities (including long
term capabilities via
AROC)
Require-mentsIntegration &
Sourcing Conference
Guided by G3 Analysis Army
Equipping and Reuse
Conferences
IRPL and DARPL and
related priorities set by G3
POM Funding POM Funding
Arm
y AC
Arm
y R
eserves
Arm
y N
ation
al G
uard
Rep
ositio
nin
g (R
esou
rce &
Cro
ss-Level)
Reset &
Train
ed in
clud
ing
Call
UP
s(E
x-AC
& N
ew)
Reset &
Train
ed
Recru
its
Rep
ositio
nin
gBaselin
e Eq
uip
men
t Set
POM Funding
Missio
n T
raining
includ
ing M
RX
and
CT
C
HQDA
Arm
y Syn
chro
nizatio
nO
rder
Institutional Training & Doctrine (TRADOC)Facilities (IMCOM)
Foundation
CE
F M
RE
/MR
X
ONS ProcessShort Term Capabilities
Materiel and Logistics (AMC)
Unit Training & Readiness (FORSCOM)
LAD
Supplemental Funding Supplemental FundingSupplemental Funding
Requirements Fielding
Combatant Commander Requests
Current to Future
Tasking
Planning Units Reset/Trained Units Made ReadyUnits Made Available
Determine what and how many resources are needed over time
Develop unit capability level by reconstituting personnel, re-equipping and retraining them.
Army Force Generation Prime Value Chain – Draft Only
Assess units and make ready for missions, including collective training with other operational headquarters.
Keep units ready for action and source against operational or contingency requirements.
Prepare Initial Outfitting Conduct Core Training
Ho
me S
tation
Ind
ividu
al & C
ollective
Trainin
g E
qu
ipm
ent (T
emp
orary
Eq
uip
men
t for C
ollective T
rainin
g)
Conduct Mission Training
Dep
loym
ent E
qu
ipm
ent S
et
AC/RC HQ, BCT
& Support Brigade:
Core Training
Manning & Training
Equipping
Evaluate Strategic Direction
Committee or Conference
Army Organizationor Operation
Joint Organizationor Operation
Incompletely Defined
Training at Discretion ofCombatant Commander with Guidance
Prepare for DeploymentR-Day
Develop Army Requirements
Determine Resources& Timing
Training Support &
ResourcingConference
AR2B & AWPB Conferences
ARFORGENSynchroni-
zationConference
Combatant Commander,
JFCOM & HQDA
Priorities (including long
term capabilities via
AROC)
Require-mentsIntegration &
Sourcing Conference
Guided by G3 Analysis Army
Equipping and Reuse
Conferences
IRPL and DARPL and
related priorities set by G3
POM Funding POM Funding
Arm
y AC
Arm
y R
eserves
Arm
y N
ation
al G
uard
Rep
ositio
nin
g (R
esou
rce &
Cro
ss-Level)
Reset &
Train
ed in
clud
ing
Call
UP
s(E
x-AC
& N
ew)
Reset &
Train
ed
Recru
its
Rep
ositio
nin
gBaselin
e Eq
uip
men
t Set
POM Funding
Missio
n T
raining
includ
ing M
RX
and
CT
C
HQDA
Arm
y Syn
chro
nizatio
nO
rder
Institutional Training & Doctrine (TRADOC)Facilities (IMCOM)
Foundation
CE
F M
RE
/MR
X
ONS ProcessShort Term Capabilities
Materiel and Logistics (AMC)
Unit Training & Readiness (FORSCOM)
LAD
Supplemental Funding Supplemental FundingSupplemental Funding
Requirements Fielding
Combatant Commander Requests
Current to Future
Tasking
IRP
L
A3
Roles & responsibilities within processes
A4
Measurement & tracking of success
A2
Establishment of priorities
A1
Integration and coordination of ARFORGEN
A7 A7 A7
Strategy to address constrained resources resulting from ARFORGEN requirements
A6
Clear, complete and timely ARFORGEN Synch. Order
A10
Clarity between ARFORGEN requirements and capabilities
A8 A9
Command and control relationships related to BCT deployment
Shortages and planning for CS and CSS units
A5
Validation of ARFORGEN ratio assumptions (e.g., 1:3 for AC) and formally re-plan for lower ratios
A11
ARFORGEN information technology support strategy
Integration between Army AC and RC
A11
A12
Common AC and RC HR and asset tracking systems
A13
A14
ARFORGEN integration with Institutional Support
FoundationOpportunities
© 2006 George Group Consulting, L.P.
PVC examines policy impact: MRAP exists in a complex ‘ecosystem’...upstream policies and activities profoundly impactdownstream processes and deliverables performance
JROC
Requirements Spec
GFE Vendors
INTEL
COMMS
JAMMER
FLIR OTHER HARDWARE
BFT
TURRET
GPS
BAE
FPI
GDLS
PVI
OTC
IMG
BAE/TVS
Vehicle OEMs
Manufacturing DistributionOperations, Training, &
Sustainment
CO
CO
Ms
ARCENT
NAV-CENT
MAR-CENT
MR
AP
JP
MO
CENTAF
SOF-CENT
GF
E P
MO
s
CE
NT
CO
M
TR
NG
, TE
ST
, &
OT
HE
R
KU
WA
IT
AIR
AIR
SEA
OIF
OE
F
ABERDEEN PG
NTC FT IRWIN
29 PALMS
YUMA PG
NCBC GULFPORT
Integration
SP
AW
AR
Cha
rlest
on
LAND
LAND
AF
GH
AN
IST
AN
DE
PR
OC
ES
SIN
GD
EP
RO
CE
SS
ING
DE
PR
OC
ES
SIN
G
IRA
Q
JDA
B
Contracting
InspectionPoint
~ 26 days(+3 days
interCONUS)
Air: 2 + 4 daysSea: 2 + 31 daysIn-theater Land: 7 daysDeprocessing: 3 days
Data Current as of 10 SEP 07
MaterialFlow
Decisions/Order Flow Coordination
TR
AN
SC
OM
DRAFT
© 2006 George Group Consulting, L.P.
Contractor IT & Weapons Development
� Many IT and weapons systems are over budget and late to contracted delivery lead time, compromising national security
� The origin of Lean Six Sigma was to drive 60% faster lead times,greater flexibility, and 20% lower unit cost at lower volumes, in both design1 and manufacturing
� Current industrial infrastructure talks-the-talk but with few exceptions does not walk-the-walk and must eliminate waste. Retraining needs to begin with their Leadership.
� Systems Engineering lessons2 must be re-focused and applied independently with the incorporation of CPI. Goal: to make programs schedule and cost wise effective through a system wide government industry partnership. 1.Fast Innovation, George et al, 2The Business of Science, Simon Ramo, pp 91-93
© 2006 George Group Consulting, L.P.
Conclusion
� The DoD is presently building a firm foundation of CPI using proven industry best practices.
� Now the DoD must apply CPI horizontally using Prime Value Chain analysis to define user/operator/demand pull metrics
� Infrastructure cost and capacity must be resized up or down to meet demand pull ….and no more. Total cost should be reduced 20%
� Incentives should be aligned such that Moneys saved must be returned to the Department or OSD, not spent to preserve TOA and existing infrastructure cost and capacity
� The DoD must increase effectiveness of programs through the establishment of independent Systems Engineering with CPI.