Better Buying Power 2.0: Affordable Innovation through Government and Industry Collaboration

Transcription

1 LOCKHEED MARTIN PROPRIETARY INFORMATION Better Buying Power 2.0: Affordable Innovation through Government and Industry Collaboration Lockheed Martin Proprietary Information Alan Jackson Director, Strike Systems Lockheed Martin

2 Better Buying Power in Industry BBP in Industry takes on a different connotation Industry and Government are motivated differently Reducing the overall cost of weapons systems is the goal Some equate this to reducing profits Reducing profits only benefit one party - a lazy approach to fixing the problem Cost reductions must be cooperative between the US Government and contractors to get desired results Reducing costs must come with a willingness to change and accept risk AP0913_1641_2

3 Better Buying Power in Industry We have the ability to reduce the cost of weapons Each phase of a program allows for different ways to implement cost reductions Stable Requirements Funded Cost Reduction Initiatives Value Engineering Change Proposals AP0913_1641_3

4 What is Affordability Partnering with our customers and suppliers Aligning life-cycle cost with the customer s longrange investment and force structure plans Maximizing Operational Effectiveness within the available budget during: Concept Exploration Technology Demonstration (TD) Engineering & Manufacturing Development (EMD) Low Rate Initial Production (LRIP) Production Support Affordability: Partnering With Our Customers And Supply Chain To Balance Performance And Cost To Create Best Value Solutions AP0913_1641_4

5 Program Phases/Drivers Was: Concept TD EMD LRIP FRP Technology Risk Performance Reliability Affordability Performance Reliability Affordability Sustainability Now: Concept TD EMD LRIP FRP Affordability Affordability Affordability Affordability Affordability Technology Risk Performance Reliability Affordability Performance Reliability Affordability Sustainability AP0913_1641_5

6 Managing Product Affordability Through The Life Cycle Determine Best Value System Architecture: QFD CAIV Trades System Optimization Designing for Affordability: PDK/Design Kaizens Subsystem CAIV Design to Cost TKOs QFD, DFMEA Technology Insertions Design for Lean Manf. Design for Assembly Producibilty (DFM, Cpk) Design for Six Sigma Process Development PKOs Pre-Prod Kaizens PFMEA Factory Layout Kaizen Material Handling Kaizen Continuous Improvement/ Affordability: VSMs, Cycle Time Reduction, RPMs, 6S, Variation Reduction Yield Improvement Only 5% of Life Cycle Cost can be impacted after the Development Phase AP0913_1641_6

7 Normal Annual Buy Cost Realities Year N-1 Actuals Labor Factory Support Subcontracts Bill Of Materials Sys Engr / PM Year N WIP Labor Factory Support Subcontracts Bill Of Materials Sys Engr / PM Year N+1 Proposed Labor Factory Support Subcontracts Bill Of Materials Sys Engr / PM Escalation Obsolescence Base Erosion Learning Lean Manufacturing Value Engineering Change Proposal AP0913_1641_7

8 Today s Annual Buy Cost Realities Year N-1 Actuals Year N WIP Year N+1 Proposed Labor Factory Support Subcontracts Bill Of Materials Sys Engr / PM Labor Factory Support Subcontracts Bill Of Materials Sys Engr / PM Labor Factory Support Subcontracts Bill Of Materials Sys Engr / PM Escalation Obsolescence Base Erosion Line Gaps Overhead Adders Learning Lean Manufacturing Value Engineering Change Proposal AP0913_1641_8

9 Cooperative Cost Reduction Programs Unlock the technical baseline for changes that lower system cost Must be balanced with risk of implementation Changes are batched to spread investment and manage test costs Must have a business case that makes sense Can leverage Foreign Military Sales customer funding Can address obsolescence and reliability Improved performance / margin is often a side benefit Must be a cooperative effort between PMO, Prime, and Suppliers AP0913_1641_9

10 Missile Cost Reduction Program Missile Cost Reduction Program established in 2011 Program Management Office funded with FY P$ Savings through increased Foreign Military Sales Goal: Reduce missile by 30% Cost Reduction Approach Reduce cost through mfg process changes / supplier competition Lean events in factories and suppliers Reduce cost through design & development (Spiral Development) Control Actuator Assembly Modernized electronics and motors Uncooled Infrared Seeker Replace cooled detector with Long Wave Infrared camera and optics Guidance Electronics Unit Modernization of electronics and software Launch Tube Assembly Reduce cost of materials and processes Implement cost reductions through the Engineering Change Process AP0913_1641_10

11 PAC-3 US Missile Cost Savings Due to DCS/FMS Synergy $5.000 $4.500 $4.000 $3.500 $3.000 $2.500 US Stand Alone US with FMS Synergy $2.000 $1.500 $1.000 $0.500 $- FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 AP0913_1641_11

12 Historical Example Longbow Missile Unit Price ($K) Mid-points 0 Award LRIP 1 $ Units LRIP 1 Missile qty increase and associated economies (352 missiles - >1,056 missiles) Cost Reduction Initiatives (Early Cut-in) Antenna/Radome Gimbal Assembly Transmitter (CRP) LRIP 2 Award LRIP 2 $198 1,056 Units LRIP 2 CRP Transceiver BUY 1 Award BUY 1 $176 1,100 Units BUY 2 $136 2,000 Units FMS NTE UNIT 200 $155 Mid-Point Quantity for each Buy FMS NTE UNIT 200 $153 LRIP 1 LRIP 2 BUY 1 BUY 2 BUY 3 BUY 4 BUY 5 BUY 6 Note: (1) LRP 1, LRP 2 and BUY 1 Unit Price Excludes Rate Tooling (2) BUY 2, 1 st Year of my Adjusted for BUY 3-6 EOQs CRP Missile Price Curve LONGBOW ($K) BUY 3 $131 2,200 Units BUY 4 $129 2,200 Units BUY 5 $99 2,200 Units BUY 6 $94 1,797 Units AP0913_1641_12

13 BBP: A Recipe for Success Understanding customer requirements early is critical to affordable weapon concept / design Design-to-cost targets ( should cost ) Aligning life-cycle cost with the customer s long-range investment and force structure plans FRP Programs are under increasing cost pressures CRI Programs can open a window of opportunity to significantly reduce cost CRI Investments provide significant payoff for USG Affordability: Partnering with our customers and supply chain to balance performance and cost to create best value solutions A Pessimist Sees The Difficulty In Every Opportunity; An Optimist Sees The Opportunity In Every Difficulty. Winston Churchill AP0913_1641_13

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