Boiling the Ocean: How a Manufacturer Leveraged the Criteria to Improve its Supply Chain

How to Boil the Ocean

In 2012, Lockheed Martin Missiles and Fire Control (MFC) participated in the Baldrige Executive Fellows Program. As part of the program, John Varley and the other Fellows were given homework: identify a significant challenge in their organizations and use the principles of the Baldrige Criteria for Performance Excellence to achieve significant improvement.

Varley, vice president for Quality and Mission Success--at the 2012 Baldrige Award recipient that designs, develops, manufactures, and supports advanced combat, missile, rocket, and sensor systems for the U.S. and foreign military--knew that MFC's most significant area of improvement was the supply chain. Over the past year, the economy had hit the U.S. Department of Defense (DOD) and its contractors hard, and as spending became tighter, the smaller subcontractors in the industry--those who support the large contractors--were hit the hardest.

According to Steven Sessions, supplier quality director and deputy, Quality Mission and Success, MFC has a multitier supply chain, with suppliers who have subcontractors and so forth, so there are several tiers of suppliers that support MFC. Sessions says when the economy began to squeeze the lower-level, smaller contractors, the tendency was not to lay off the person who created the parts but the person who was in charge of checking the quality of the parts. MFC has contractual relationships with the first line of its supply chain, but how do you assess the risk with lower-level tiers that farm out parts of their work?

Sessions said that MFC was already working on strategies to address supply chain issues when his colleague came back from a Baldrige Executive Fellows session with the idea for a project that "was pretty startling to colleagues." Varley's project focused on how to improve the entire DOD supply chain.

"[Such a project] was closer to boiling the ocean," Sessions says. "We have 2,000+ suppliers, and now we would be taking on a project to help companies that are competitors improve their own organizations."

"John’s premise was that we either all improve together or all decline together because we are so integrated," Sessions says. "It was an interesting insight. We tried to figure out how to use the Malcolm Baldrige [Criteria] model to open up doors to companies that five years ago you would never have thought would open their doors to share processes, tools, and techniques on how to improve the DOD supply chain."

Sessions added that years ago, the top DOD suppliers like Lockheed Martin were very distinct entities, but now they often act as partners in some programs, competitors in others, and suppliers in still others.

Based on the Baldrige Criteria, a strategy called Senior Leadership Engagement and Benchmarking was developed by MFC, and MFC's senior leaders set out to meet with the senior leaders of the other top DOC contractors, getting their commitment around the strategy that we all go up or down together.

The sharing-ideas strategy really took off, with more than 18 major DOD suppliers and others standing in line to take part, Sessions says.

"The Malcolm Baldrige Award has made the whole effort take off to the point now where we're having to leverage seasoned people with more people in the organization in order to keep up with requests," Sessions says. "The interesting part is that we started out thinking that we are going to be . . . helping [other DOD contractors] improve, and we've been able to do that. But out of it, we gained a lot of insight into areas in which we can improve our journey as well. What started out as boiling the ocean, materialized into a real partnership and relationship with some significant companies that are coming up with ideas on how to improve the supply chain that any one of us by ourselves probably would not have been able to achieve."

Sessions says that MFC is working on other strategies to improve the overall DOD supply chain in the long term; for example, staff members are working on how to prevent counterfeit parts from getting into its systems. In close alignment with its customer, MFC is teaming with others in the industry to solve this complex, difficult problem.

Benchmarking Against the Best

"The Malcolm Baldrige model is a very structured approach to improving your business," Sessions says, but MFC didn't turn to the Baldrige Criteria because it needed a framework for improvement. MFC had already won a host of awards, including awards from the Baldrige-based Sterling Award in Florida and Texas Quality Award.

MFC decided that we wanted to get a good, solid, independent benchmark of where MFC was relevant to its performance, Session says. As they decided whom and how to benchmark, they brought forward the "world-class" Baldrige Criteria. "We had several ideas of how to benchmark," he says. "But we wanted to be benchmarked by the best of the best. Our focus was to [apply for the Baldrige Award and] get a site visit and get the outcome of where we stood and where we could improve some more."

Sessions says, "As we began to understand the [Baldrige Criteria], we found that it was very similar to our own vision for improvement that we had been using over the past 10 years. . . . The reason people model themselves around the Malcolm Baldrige model is to get that kind of proven, world-class performance. . . . We've seen dramatic achievements across the business because our senior leaders had the right premises to line up with the Malcolm Baldrige model."

Frank McManus, senior quality leader, MFC, says that when MFC chose to begin using the Baldrige Criteria, "Our leaders wanted us to get not so much the award but the feedback. Having the site visit, with examiners coming to various facilities [and those examiners] representing many different industries and experiences and getting that kind of view [became a] vantage point of how we’re operating and continuously improving."

"The examiners were the carrot," he added; receiving their feedback was incredibly valuable.

The Right Metrics and Why the Baldrige Criteria

Sessions said the MFC business model was structured very similarly to the Baldrige Criteria--very focused on the customer and aligned with leadership

and every aspect of the organization. A Strategic Enterprise Leadership Counsel reviews the MFC business model to ensure that it aligns with both customer and business needs.

Key to the MFC business model is having the right metrics to drive performance that align with customers and are tied to every level of the workforce. Similarly, Session says, the Malcolm Baldrige model focuses on customers, with each operational focus tied into a metric system that is aligned with strategic planning and customer needs.

"That’s the beauty of [such a model]," says Session. "It's very easy for our leadership team to see where areas for improvement are needed because of the instrumentation we have from the smallest of teams to 16 sites, and it rolls up from all of those organizations to the top. . . . We are very process focused with data-driven decisions, and our customer is the primary focus area. We know if we get it right for the customer, our business will follow. The Malcolm Baldrige model follows all these same tenets--always focusing on the customer with robust processes and data-driven decisions. It was a natural fit."

For other organizations, Sessions says the value of the Baldrige Criteria is the structured framework and focus on the customer. "Sometimes companies get too inwardly focused and end up losing sight of [what the customer really needs]. Comparing yourself with other industries and what's considered the best of the best brings insights."

Sessions said that when MFC started with the Baldrige Criteria, "We literally had to flip all of our metrics upside down." Its performance had gotten so good that it was focusing on just the 1% of parts that were coming in bad, for example. To complete its application for the Malcolm Baldrige National Quality Award, MFC had to flip its model to show the good parts of its supply chain, and this led to interesting observations.

"When you start to benchmark yourself, it makes you look at metrics differently," Sessions says. "The whole organization was pretty astonished when it started to pull together metrics in one place [for its Baldrige Award application]. It makes you look back and forward in how you have been performing on your journey and where it would take you. That’s the value [of writing a Baldrige Award application]--that reflection and insight on where we go next."

For more information, attend MFC’s special presentation, “Improving the Supply Chain Using Baldrige,” at the Baldrige Program’s Quest for Excellence® Conference in Baltimore, Maryland.