High-Mix, Low-Volume Lean Manufacturing Implementation and Lot Size Optimization at an Aerospace OEM

High-Mix, Low-Volume Lean Manufacturing Implementation and Lot Size Optimization at an Aerospace OEM by Jonathan M. Rheaume Bachelor of Science in Mechanical Engineering, Tufts University (1995) Bachelor of Science in Chemical Physics, Tufts University (1995) Submitted to the Department of Mechanical Engineering and the Sloan School of Management in Partial Fulfillment of the Requirements for the Degrees of Master of Science in Mechanical Engineering and Master of Science in Management In Conjunction with the Leaders for Manufacturing Program at the Massachusetts Institute of Technology June 2003 2003 Massachusetts Institute of Technology. All rights reserved. Signature of Author______________________________________________________________ Department of Mechanical Engineering Sloan School of Management May 2003 Certified by____________________________________________________________________ Deborah Nightingale, Thesis Supervisor Professor of Aeronautics and Astronautics and Engineering Systems Certified by____________________________________________________________________ Donald Rosenfield, Thesis Supervisor Senior Lecturer of Management Certified by____________________________________________________________________ Timothy Gutowski, Thesis Reader Professor of Mechanical Engineering Accepted by____________________________________________________________________ Margaret Andrews, Executive Director of Masters Program Sloan School of Management Accepted by____________________________________________________________________ Ain Sonin, Chairman, Graduate Committee Department of Mechanical Engineering ____________________________________________________________________ 2 High-Mix, Low-Volume Lean Manufacturing Implementation and Lot Size Optimization at an Aerospace OEM By Jonathan M. Rheaume Submitted to the Department of Mechanical Engineering and the Sloan School of Management on May 18, 2003 in partial fulfillment of the Requirements for the Degrees of Master of Science in Mechanical Engineering and Master of Business Administration Abstract Hamilton Sundstrand provides the aerospace industry with both original equipment and aftermarket product support. This division of the United Technologies Corporation posted over $3 billion in revenues in 2001. Hamilton Sundstrand has manufacturing locations and service centers worldwide. In the wake of the events of September 11, 2002, the aerospace industry finds itself amid the largest downturn in the history of aviation. To cut costs and to streamline operations, Hamilton Sundstrand is introducing lean production techniques in their factories. This thesis describes the implementation of lean manufacturing methods in the Windsor Locks, CT plant in the Air Management Systems Division. A description of the methodology used to introduce lean concepts as well as a comparison with the one advocated by MIT’s Lean Aerospace Initiative appears within. In addition, this thesis provides examples of the implementation of lean methods in the Heat Exchanger Core Assembly Area. As a part of this work, the author developed an optimization technique for inventory lot sizing for a set of machines with high replenishment costs. Upon implementation, coordinated replenishment in the Fin Forming Area of the factory is projected to yield a one-time inventory reduction in excess of $100k in addition to annually recurring savings of $45k in holding costs and set-up costs. This thesis also touches upon operations strategy by presenting the results of interviews with leading macroeconomists on the business climate in several emerging labor markets. In addition, the thesis presents a discussion of organizational factors related to the introduction of widespread change in an organization with specific examples related to the introduction of lean manufacturing methods in the Windsor Locks plant. Last of all, this thesis offers recommendations for lean implementation, introduction of coordinated replenishment, and observations on domestic manufacturing. Thesis Supervisor: Donald Rosenfield Title: Senior Lecturer; Director of Leaders for Manufacturing Program Thesis Supervisor: Deborah Nightingale Title: Professor of Aeronautics and Astronautics and Engineering Systems ____________________________________________________________________ 3 Acknowledgements I would like to thank Hamilton Sundstrand for sponsoring this work. In addition, I would like to thank the Leaders for Manufacturing Program at MIT for its support. Throughout the course of the thesis project, it has been my pleasure to work with several talented individuals at both Hamilton Sundstrand and MIT. In particular, I would like to acknowledge: Donald Rosenfield of the LFM program, thesis advisor; Debbie Nightingale of the Lean Aerospace Initiative at MIT, thesis advisor; Timothy Gutowski of the Mechanical Engineering Department at MIT, thesis reader; Mike Niemczura of the Strategy Group at Hamilton Sundstrand, advisor; and Eric Rohrbacher of the Production and Process Improvement Group at Hamilton Sundstrand, supervisor, who helped me in every possible way. I would like to especially thank David Engel and Bob Keating of the Fin Forming Area at Hamilton Sundstrand’s Windsor Locks facility. Mr. Keating’s intuitive ideas about coordinated replenishment serve as the foundation of this thesis. Also, special thanks to: John Boyd Kevin Lawlor Tony Flippo Al Deprospero Dick Bragg David Lewis Brian Cowell Gary Keene Jacqueline DeMatos Robert Cleary Art Allaire Raj Barman Mary Savino Maria Grillo David Taylor Dino Bedinelli Tom Allen Joe Derosa Stephen Graves Thomas Römer I dedicate this thesis to the memory of my father. ____________________________________________________________________ 4 Table of Contents Abstract ................................................................................................................................ 3 Acknowledgements ............................................................................................................. 4 Table of Contents ................................................................................................................ 5 Table of Figures ................................................................................................................... 8 Table of Tables .................................................................................................................... 8 Chapter 1: Introduction ........................................................................................................ 9 1.1 Hamilton Sundstrand ................................................................................................ 9 1.2 Lean Manufacturing ............................................................................................... 10 1.3 Summary of Findings ............................................................................................. 10 1.4 Organization of Thesis ........................................................................................... 11 Chapter 2: Project Description and Literature Review ...................................................... 12 2.1 Problem Statement .................................................................................................. 12 2.2 Project Description ................................................................................................. 12 2.3 History of Lean Manufacturing at Hamilton Sundstrand-Windsor Locks ............. 14 2.4 ACE: Achieving Competitive Excellence .............................................................. 15 2.5 MRD: Market Rate of Demand ............................................................................. 17 2.6 Lean Manufacturing Literature Review ................................................................. 19 2.6.1 The Origins of Lean Production ...................................................................... 19 2.6.2 The Toyota Production System ....................................................................... 21 2.6.3 Lean Machine .................................................................................................. 23 2.6.3.1 Transition to Lean ..................................................................................... 23 2.6.3.2 Elements of Lean ...................................................................................... 24 2.6.4 World Class Manufacturing ............................................................................ 25 2.6.5 Review of Prior LFM Theses on Lean Manufacturing ................................... 25 Chapter 3: Lean Transition Methods ................................................................................. 30 3.1 Lean Aerospace Initiative’s Transition-to-Lean Roadmap .................................... 30 3.1.1 Background of LAI .......................................................................................... 30 3.1.2 The Transition-to-Lean Roadmap ................................................................... 31 3.2 Hamilton Sundstrand’s MRD Transition Method .................................................. 33 3.3 Comparison of HS vs. LAI Lean Transition Methods ........................................... 33 Chapter 4: Implementation of Pull in Heat Exchanger Core Area .................................... 36 4.1 Kick-off of Cross Functional Team ........................................................................ 36 4.2 Initial Data Collection ...........................................................................................

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