U.S. ARMY ARMAMENT RESEARCH, DEVELOPMENT AND ENGINEERING CENTER (ARDEC) LEAN/SIX-SIGMA 20 September 2005Presented to32nd National Energy & Environmental ConferencePAUL E. CHIODODirector, Quality Engineering & System Assurance, RDECOM-ARDECChair, AMC Quality FederationCertified Lean/Six Sigma Master Black Belt

LEAN/SIX SIGMABOTTOM LINE UP FRONTThe Integration of Lean and Six Sigma has Provided ARDEC with a Proven Commercial Best Practice for Continuous ImprovementIn Partnership with its Customers, ARDEC has:Increased AwarenessImproved RD&E, Manufacturing and Administrative ProcessesIntegrated Lean/Six Sigma into the Business CultureCulture Change is Occurring!

LEAN/SIX SIGMABOTTOM LINE UP FRONT(Continued)ARDEC Stood Up a Lean/Six Sigma Competency Office to Assure Consistent, Effective and Efficient Deployment, Consulting and Training

ARDEC is Integrating Lean/Six Sigma with a Quality Management System (QMS) and Voice of the Customer (VoC) Protocols on its Journey to Enterprise ExcellenceSMCulture Change is Occurring!

ARDEC L/6s Training & CertificationData from Inception (2000) to PresentIncludes ARDEC, Program Executive Offices (PEO), Contractors, and Other Government ActivitiesBlack-Belts have Green Belt as Prerequisite678133BlackN/A4271025GreenMasterCertTrainBeltIncludes Approx. 3.3% of ARDEC WorkforceIncludes Approx. 27.4% of ARDEC WorkforceGoal: 240 Training Incidents/Yr

ARDEC L/6s ROI$2.66B Savings/Avoidance to Date 20:1 VE Validated ReturnsValue Engineering Adds RigorRecognized StandardIndependent VerificationHard Numbers OnlyAll Aspects of Q$SRQ: Quality/Customer Satisfaction (91% of Projects)$: Cost (70% of Projects)S: Schedule (67% of Projects)R: Risk (84% of Projects)Improvement Projects in:Engineering (35%)Production (32%)Business/Admin (23%)Management (10%) Figures in $MTraining CostsVE Validated Savings Estimated Life-Cycle Avoidance67.332,660

Pay-Back

2.75

67

2300

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Training Costs2.75

VE Validated Savings67

Estimated Life-Cycle Savings2300

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ARDEC L/6s TimelineSix-Sigma Initiated by PM CASLeadership Transitioned to ARDECFirst Certification CeremonyIndustry Benchmark StudiesFirst Integrated Lean/Six-Sigma CourseJUL 2000APR 2001JAN 2006+ARDEC Enterprise ExcellenceSM Plan CompleteAUG 2001JUN 2002May 2003OCT 2002Phase I Launch & Management Buy-InJUN 2004APR 2005GB Training to In-houseL/6s Office Established3rd Ceremony, 500th person trained to date at ARDECPhase II Full Scale DeploymentPhase III Self Sustain for Continuous Improvement

Operation LevelsARDEC L/6s BoardExecutive ChampionsBlack BeltsGreen BeltsTeam MembersMaster Black Belts/L6s Comp Office

ARDEC Process/EBB Project MapEnterprise Excellence Business Development Configuration Mgmt IPT/PM System Engineering Rapid Prototyping Modeling & Sim Process Management Budgeting Process Funds Flow Strategic Management Technology Transfer Workforce Development ProcurementL/6s Competency OfficeCustomerARDEC Mission Aiding ProcessesARDEC Mission Critical ProcessesQMS Training Consulting DeploymentVOC Program Management FundingProducts Innovation & Engineering Technology Transition High Quality Products & ServicesDisciplineAdaptabilitySpeedLabel signifies Executive Black Belt (EBB) Projects that impact ARDEC ProcessesVOC

Executive BB ProjectsARDEC Enterprise ExcellenceIntegration of E2 (QMS, Lean/SS, VOC) with ARDEC Strategic Plan and Development of the ARDEC E2 Deployment PlanARDEC Requirements to Execution Framework & Integrated Prioritization ProcessProcess for prioritizing and allocating ARDEC resources consistent with ARDEC strategic plan and customer requirements Rapid BattletypesIdentify opportunities to quickly deploy innovative solutions directly to the soldierEnterprise Resource PlanningIncrease customer satisfaction across all users that access financial reportingARDEC Technology TransitionIncrease technology transitions from ARDEC tech base to PEO/PM for fielding

Some L/6s Success StoriesM795 155mm Artillery Projectile QualityReduced Critical Defects from 5.0% to 0.5%$250K Annual Cost AvoidanceSafety Risk ReductionSmart/Precision Munitions DevelopmentIncreased use of Modeling & Simulation and Lab Testing for Risk Reduction$35M Cost Avoidance through Reduced Excalibur Ballistic TestingPAX-2A Insensitive Explosive QualityIncreased Yield from 13% to ~ 100%$169M Potential Life Cycle Cost AvoidancePAX-2A Explosive Large-Scale ProductionDeveloped Alternate Large-scale Manufacturing process Cost reduced from $65/lb. to $30/lb. (Savings: $349M lifecycle Army-wide)Implementation on next contract

Some L/6s Success Stories (continued)

Tank Training Ammunition Joint ReliabilityProcess Re-design$6-14M Annual Cost AvoidanceArtillery Ammunition Digital X-Ray Equipment Integrated Contractor & Governments Approval Processes 6 Months Reduced to 4 Months (Savings: $120K)M734A1 Mortar Fuze Production YieldAnalysis identified Design DeficiencyRe-design Reduced Scrap from 5.0% to 0.1% (Savings: $50K/month)120mm Mortar Fin Malfunction InvestigationDeveloped Corrective Actions to Release Suspended Mortar Ammunition (Stockpile worth $200M)Reduced Risk in Future Procurements

Some On-Going L/6s ProjectsGreen Small Caliber AmmunitionElimination of Lead Environmentally FriendlyProducibility of Tungsten-TinMissile/Artillery Grenade Fuze RemovalNew Fuze Meets UXO RequirementsGrenade RecapitalizationEstimated Savings of $41.5M

Some Administrative L/6s Success Stories

Excalibur/TCM Procurement Acquisition Lead Time54% ReductionInsensitive Munitions Waiver ProcessStreamlined Approval Process2+ year cycle Reduced to 7 MonthsECP Review & ApprovalCycle Time Compliance Increased from 89 to 100%New-hire Integration$78K Estimated Yearly SavingsPrinter Cartridge Recycling

PAX-2A Explosive QualityImprove the yield of PAX-2A Manufacture at Lab-Scale by developing an alternate mix process that meets high-speed LAP requirements.

TypeXEngineeringProductionBusinessManagement

Quality or Customer SatisfactionCo$tAlternate slurry mix process developed that meets minimum bulk density requirements of 0.85 g/ccBenefited from other Q$SR areasBenefited from other Q$SR areasProduction yield potential of 100%, up from the original mix process less than 30%. This paves the way for Large-Scale production of PAX-2A.ScheduleRisk

M80/PAX-2A High-Speed Load, Assemble & Pack (LAP)Increase the yield of LAP-compatible PAX-2A explosive production and increase the production rate of Dual-Purpose Improved Conventional Munitions (DPICM) between maintenance cycles.

TypeEngineeringXProductionBusinessManagement

Quality or Customer SatisfactionCo$tPM-CAS (sponsor) indicated this effort will allow achievement of strategic goals.Increase Manufacturing yield from 13% to 50%Grenade Penetration increase of 25%Reduced Product variation- increased SPCIncreased required cone push-out force by 200%Reduce PAX-2A Unit Cost from $132/lb to $68/lbReturn on $1.5M Program Capital investment$1.2B Future Cost Savings to Potential PAX-2A Customers for Manufacture/LAPAssets saved in ASP from enemy fireGrenade LAP cost savings of $5.41/unitM915 Cartridge MR in 1QFY05 with IM enhancement Load & Preserve Grenades in FY02-03 under current FY97/98 LRIP contractConduct Accelerated PQT Effort by 4 MonthsImpact GMLRS/M864 RECAP ProjectsSignificantly Reduced Program Risk to PM-CAS managed M915 and future DPICM Artillery programs for IM insertionSignificantly increased potential for mission successIncreased survivability of engaged troopsScheduleRisk

Procurement Acquisition Lead Time (PALT)Combined the two existing PALT processes into one streamlined (Alpha) process for XM982.

TypeEngineeringProductionXBusinessManagement

Quality or Customer SatisfactionCo$tPM-CAS (sponsor) ecstatic in that existing schedules were high risk in meeting DA requirements.Cost avoidance of $12 M, based on a minimum saved effort of four months.VE Validated Savings: $8.9 MCombined the quasi-concurrent 24-month Army PALT and the 24-month International PALT processes into a single 11 month Alpha contracting effort.Significant risk reduction in meeting DA directed milestones for the XM982 program. The reduced PALT time eliminates a high risk factor in the program.ScheduleRisk

The E2 FrameworkQMSVoC6sLeanCultureEfficiencyEffectivenessReqmtsConcepts from paper by VSE Corp.

Why Change to Lean/Six-Sigma Way of Doing Business?ARDEC Reorganization led to Transformation from a Traditional Product-Driven Structure to an Integrated Continuous Measurable Improvement Process-Driven Way of Doing BusinessPositive Impact Obtaining Faster, More Comprehensive, Fact Based Solutions in support of GWOT, OIF, OEFNeed to Promote Enterprise Excellence (QMS, L/6s, VOC)A disciplined, structured approach for process and product optimization that is focused on the effectiveness' and efficiency bottom line of the organization

ARDEC Lean/Six-SigmaTake-a-WaysNeeds to be Driven from Top Management for an Effective Organizational Culture ChangeAssure L/6s Projects are Properly Aligned to Customer RequirementsProvides resources and commitmentsARDEC L/6s Competency Office Provides: Centralized ManagementOrganic GB Consulting & Training ActivitiesVSE Partnership Still EssentialLimited Black Belt Pool (Black Belt Distributed to Organization)All Phases of the Acquisition Life Cycle and All Business Processes Offer Opportunities for Improved Effectiveness & EfficiencyL/6s is a Fundamental Component of ARDECs Enterprise ExcellenceSM Structured and Disciplined Approach to Meet Mission ObjectivesLean/Six Sigma is a Commercial Best Practice that is Providing the Army Meaningful Savings Every Quality, Reliability and Process Improvement Equates to Real Dollars!!

The foundation of our L/6s transformation is a trained workforce who can identify the opportunities for improvement and who can use the analytical tools to answer those challenges. Our vision is to not to drive individual projects but, rather, to create a climate where L/6s is a way of life.

ARDEC (in partnership with our PEO customers) is undergoing an extensive training initiative, with the ultimate goal being 100% Center awareness and understanding of the tenants of L/6s.

To date, the exact training goal (types, percentages, etc.) is still under consideration. However, while the end state is still fluid the journey has begun, with 27.4% of the workforce receiving formal (Green Belt) training and more than 14% of those continuing on to higher-level (Black Belt) training.

Furthermore, ARDEC has 6 Master Black Belts who act as subject matter experts and who will help shape the Centers long-term L/6s strategy. Though still relatively early in our journey (only 25% of the workforce receiving formal training), Picatinny has already reaped significant benefits from L/6s.

To date, Picatinny has identified over $2.66B in life cycle savings/avoidance to the Army.

But even looking at our success through a skeptical eye, Picatinny still has recognized approx. $67M in Value Engineering returns (scored by our independent Value Engineering Office) from its $3M training investment a better than 20:1 ROI! And this represents only a small portion of Picatinnys L/6s projects.

The measure of L/6s success is the Q$SR model that mandates positive returns in the areas of Quality (customer satisfaction), Cost, Schedule and/ or Risk. As can be seen by the data provided, Picatinny has done a fine job impacting on all these issues, with many projects satisfying multiple requirements.

It is also worth note that while we are an RD&E Center, we have identified savings in all aspects of the acquisition life cycle, including improving internal management and administrative processes.Infrastructure: builds the foundation for success. The next few slides describe several Lean and Six Sigma success stories. It is important to note that this is only a small sampling and, as previously stated, each project has provided tangible quality, cost, schedule and risk benefits to the Army.

PAX-2a Production: Upon small scale analysis, it was found that the Picatinny Arsenal Explosive (PAX) 2A type II could not be manufactured in a cost effective manner using the current process. Through Process Mapping, FMEA and Design of Experiments, the process redesign increased yield from 70% for the current process to near 100% for the faster process providing significant cost savings impacting Artillery and Rocket systems. This savings will require a switch in supplier and will be implemented at the next buy.

Artillery Ammunition Digital X-ray Equipment: Reduced qualification cycle time for Projectile High Explosive Nondestructive Inspection Equipment X-ray System (PHENIXS). Use of the DMAIC process identified process inefficiencies and risk areas allowing for a 33% reduction in qualification time.M734A1 Mortar Fuze Production: A 5% scrap rate for the fuzes electronic assembly was resulting in related losses of approx. $50K/month. Using Six Sigma protocols, the failure was determined to be due to cracking capacitors caused by mechanical & thermal stresses in the manufacturing process. Re-orientation of the capacitor solved the problem, without increasing unit cost.120mm Mortar Fin Malfunction Investigation: A preliminary investigation into short 120mm mortar rounds indicated the cause as fin blade shear. Using Six Sigma protocols, high Ignition Cartridge pressure was identified as the root cause and subsequent redesign resulted in saving a $200M stockpile.

Lean/Six Sigma has also been used to improve Administrative processes.

IM Waiver Process: The waiver approval process was not standardized, often causing program delays including impacts upon Materiel Release. Through the use of such tools as a Process Map and FMEA (Failure Mode & Effects Analysis) a pamphlet was created to provide a clear, structured, repeatable process.

As I conclude my presentation, I would ask that you come away from this brief with some significant points:

A New Army Thrust is Requiring Program Managers to take a more aggressive approach to life cycle costs.

Given the years of Bloated Bureaucracy, there are plenty of opportunities throughout the Armys materiel acquisition process to improve efficiency and effectiveness.

The Army has committed to Lean and Six Sigma and has already shown positive Return-on-Investment.

And, Lean and Six Sigma savings serve not only the acquisition community and the field commanders, but help to create a better, faster Army at reasonable cost to the taxpayer.

Once again, let me express my thanks to the ASQ and the conference committee for their invitation and I look forward to the question & answer period that follows.