LEAN SIX SIGMA IN SHIPBUILDING

I Radovic, Dr. B Inozu and B J MacClaren, University of New Orleans, USA

Accepted for presentation at European Shipbuilding and Repair Conference on November 2, 2004 in London.

SUMMARY

Recently, several major shipyards in the US have begun to implement a Lean Manufacturing strategy. During the last
two years Northrop Grumman Ship Systems (NGSS) has been transitioning their Lean Manufacturing program to a Lean
Six Sigma program in conjunction with the Lean Six Sigma in Shipbuilding project sponsored by Advanced Maritime
Technology Application Center (AMTAC) at University of New Orleans.

In this paper, we first describe the Lean Six Sigma approach used for process improvement at Avondale, Ingalls and
Gulfport shipyards of NGSS along with the training requirements for implementation. The workforce training strategy
will be described to help understand the prerequisites for shipyard implementation. Then domino effects and resulting
financial impact of defects are presented.

1. INTRODUCTION industry to become one of the driving process

A few years ago, Lean Manufacturing strategy was
introduced in the US shipbuilding industry to help close
the productivity gap with the shipyards in the Far East.
In the past two years, Lean implementations were
followed by the implementation of the Six Sigma
management strategy. During the 2000 - 2002 period,
pilot Six Sigma studies were also conducted at Norfolk
Naval Shipyard, Northrop Grumman Newport News
Shipyard, and Bollinger Shipyards, as well as the
Central Region of the U.S. Maritime Administration,
which operates some Ready Reserve Fleet ships. In the
summer of 2002 Northrop Grumman Ship Systems
(NGSS) started transitioning their Lean program to a
Lean Six Sigma (LSS) program in conjunction with the
LSS in Shipbuilding project sponsored by Advanced
Maritime Technology Application Center (AMTAC) at
University of New Orleans (UNO). This project has
enabled implementation of LSS at NGSS
approximately 12 months earlier than originally
planned. Implementation areas include engineering,
production and transactional processes including supply
chain management and finance. In the very short term,
the LSS methodology evolved in the US shipbuilding
improvement methodologies. However, this evolution
occurred in the other industries as a way to improve
productivity by reducing the product cycle time and
eliminating defects.
Based on the Toyota production system [1], Lean
Manufacturing was first documented in the U.S. by
researchers from MITs International Motor Vehicle
Program about 10 years ago. Their findings were
summarized in the book entitled, The Machine That
Changed The World [2][3]. The concepts of Lean
Manufacturing then became instrumental to the future
of the world auto industry. Subsequently, principles of
lean were embraced by other industries including the
U.S. shipbuilding industry. On the other hand, the
origin of Six Sigma can be traced back to the mid-
1980s when Motorola first introduced the concept. It
originally focused on reducing variation in processes.
However, Six Sigma then evolved into one of the most
powerful management strategies to fundamentally
change the way corporations do business and improve
their bottom line. Implementation of Six Sigma is
relatively new in the U.S. shipbuilding and marine
industry as a whole.

This paper first highlights the transformation of Lean
and Six Sigma methodologies into Lean Six Sigma
strategy in shipbuilding. The workforce training
requirements are described to show the support needed
for the shipyard implementation. Then the domino
impact of defects is presented on a shipbuilding
example to help understand impact of work in process
defects on shipyard production. Finally an example of
ROI calculations will be presented to show a LSS
project impact on the bottom line along with culture
change requirements.
2. TRANSITIONING FROM LEAN TO
LEAN SIX SIGMA
In the late 1990s Lean Manufacturing emerged to be
one of the key methodologies for improvement in the
US shipbuilding. Various research projects were funded
to support this initiative with a goal to improve
competitiveness of the US shipbuilding. As a proven
approach in the other industries, Lean was widely
accepted to be the methodology to drive the process
improvement among US shipyards. Cycle times to
build the ships were long and they needed to be
reduced to meet both commercial and navy customer
requirements. After a few years of implementing Lean,
some of the US shipyards went one step further by
implementing Six Sigma. NGSS went even further by
transitioning its Lean program to LSS process
improvement strategy. Both Lean and Six Sigma were
seen as methodologies that work in synergy improving
the cycle time and reducing variation. To better
describe this synergy we will first briefly explain both
Six Sigma and Lean concepts.
2.1 SIX SIGMA
Six Sigma began as a quality improvement effort to
identify and reduce all sources of variation. It then
evolved into an overall management strategy for
measuring and improving performance across different
processes. The main emphasis of Six Sigma is the
application of statistical tools in a disciplined manner,
which requires data-driven decision-making. Six Sigma
is about controlling processes to get the desired results.
The target process can be any process critical to
customer satisfaction and bottom line benefits such as
maintenance, supply chain management, manufacturing
products within specifications, or providing services
efficiently and effectively. Each process has a number
of inputs and each input has various degrees of impact
on the output. Inputs are given by process suppliers
and outputs are received by customers of the process.
The challenge is to make the necessary adjustments in
processes so that the impact of noise or uncontrollable
input variables are minimized to limit variation, i.e., to
control your process. Six Sigma tools enable the
identification of critical input parameters with the
biggest impact on product or process variation.
Interestingly, experience has shown that in many cases
these critical parameters are not intuitive.
One of the most powerful tools that Six Sigma offers to
an organization is a structured approach to problem
solving. A projects success depends on the careful
planning and completion of each phase. The core
phases of the Six Sigma strategy are: define, measure,
analyze, improve and control (DMAIC). A process that
attains Six Sigma level capability means it has 3.4
defects per million opportunities, an almost perfect
process. Looking more closely at this reveals some
surprising revelations. For example, if a computer is
restarted 500,000 times and it has a 99% chance of
successfully re-booting, it would crash 4,100 times.
With Six Sigma performance, it would crash less than
twice [4]. More strikingly, the same performance level
can be applied to the airline industry. If airplane
maintenance practices only attained the three sigma
level, a single airplane would experience 820
mechanical failures in 100,000 flights. At Six Sigma
performance levels, there would not likely be a single
failure. This represents a situation where Six Sigma
performance is not a compromise. However, not all
processes need to be at the Six Sigma level.
In a broader business sense, Six Sigma is the pursuit of
world-class quality. It is the quest for providing a
better product or service, faster, and at a lower cost
than the competition [4]. In particular, there are three
basic goals pertaining to business, technology, and
culture that are part of this pursuit for world-class
quality. First, Six Sigma supports the long-term
business plan to achieve customer satisfaction while
simultaneously increasing market share and profit
margin. Next, leaders are trained to use state-of-the-art
technology to meet performance goals. And finally,
Six Sigma breeds a world-class culture to maximize
competitive advantage. [5]
2.2 LEAN MANUFACTURING
Lean Manufacturing is focused on eliminating non-
value added activities and special cause issues, process
standardization, and reducing process noise. It is less
technical and more rapid when compared to Six Sigma.
Lean Manufacturing is excellent for developing a
culture that accepts change and helps breed one focused
on continuous improvement, or so-called Kaizen [6].
Lean Manufacturing employs Kaizen methodology for
continuous improvement and links it to processes to
reduce lead time, increase flexibility, and eliminate
waste [6]. Lean Manufacturing eliminates non-value
added activities according to The Seven Deadly
Wastes [7]. These are defined as the waste of:
 Overproduction producing more than the
customer will buy which leads to excessive
inventories;
Inventory excess inventory of parts and
materials before they are required;
Transportation the unnecessary movement of
material or product;
Processing unnecessary or inefficient
operations;
Scrap excessive defects and rework of
materials, labor and overhead;
Motion non-value added movement of
workers and equipment;
Waiting excessive time waiting to proceed to
the next step in the process, or idle time. [7]
Lean creates a self-sustaining culture by focusing on
the Five Ss. These are Sort, Set & Order, Shine,
Standardize, and Sustain. This system provides the
motivation for a workforce to maintain a neat, clean,
and efficient workplace. Improvement projects are
called Lean Events where a team of process
Figure 1: Typical Process Results From LSS
Shipbuilding is a distinct manufacturing industry.
Unlike other manufacturing industries, shipbuilding
does not produce mass quantities of its products in the
U.S. It usually builds one ship for a long period of time
and most ships are different than the one before it.
Also, the scale in which it must be built is
unprecedented compared with other industries. These
are the largest moving structures built in the world.
However, one thing does make it alike most other
manufacturing industries shipbuilding is a systematic
process. In this way, each ship may be unique but is
built using the same processes as its predecessors. This
stakeholders focus on a process for up to a week to
reduce occurrences of waste.
2.3 LEAN SIX SIGMA
In the past two years many organizations realized that
Lean and Six Sigma methodologies compliment each
other. The integration of Lean and Six Sigma provides
a rapid process improvement strategy for attaining
organizational goals. When separated, Lean
Manufacturing cannot bring a process under statistical
control, and Six Sigma cannot dramatically improve
cycle time or reduce invested capital [6]. Together,
synergistic qualities are created to maximize the
potential for process improvement. Figure 1 shows the
combined power of Lean and Six Sigma. M. L. George
describes LSS as a methodology that maximizes
shareholder value by achieving the fastest rate of
improvement in customer satisfaction, cost, quality,
process speed, and invested capital[9].
enables LSS to be effectively applied to shipbuilding
and to produce significant gains in process
performance.
The large size of the ships being built requires great
amounts of material, parts and equipment. As a result,
inventory management is vital to a successful
operation. Furthermore, as the amount of material,
parts and equipment increases so does the opportunity
for defects and variation within the shipbuilding
process. The large volume of material, parts, and
equipment must also be moved from one place to the
next, until it finally makes its way to the ship. The cost
of waste and long lead time is potentially very high.
There are also a large number of different processes
that must occur before a single piece of steel becomes a
part of a ship. Likewise, the complexity of ship system
design and the cost to rework these defects leaves little
room for error. A defect in some shipbuilding
scenarios can result in serious setbacks, both in time
and money. To maximize the benefits of LSS
implementation, the concept rollout within a shipyard
needs to be performed in stages.
Fortunately, all of the above elements are present in the
shipbuilding. Benefiting from the favorable rollout
scenario, NGSS started its implementation by selecting
the highest visibility area. Reduction of defects in the
factory processes was seen as the area that workforce
will be able to embrace first. To make LSS happen a
large amount of workforce training is required in
several tiers. Top management, middle management,
foremen, line employees all need to be trained to make
LSS a success. In the next section, workforce training
requirements are described.

As with like methodologies that require culture change,

LSS implementation should be approached in stages 3. LEAN SIX SIGMA SHIPBUILDING
that start in an area of high visibility, with high WORKFORCE TRAINING STRATEGY
potential for success and return on investment.
Examples of such areas would include Production, Through the collaborative effort, authors provide LSS
Engineering, and Information Systems. The nature of training to NGSS as well as mentoring for numerous
this work is highly compatible with the application of LSS projects. In addition, the group is conducting
LSS techniques, including: research projects on various aspects of LSS such as
refinement of a cost of poor quality system to drive
Repetitive processes, many associated with project selection, institutionalization of change, root
automated equipment cause corrective action for project delays, knowledge
Controlled Factory environment, under one management to replicate gains from LSS projects, data
roof quality assurance, critical equipment availability
High volume material and parts flow, with improvement, and Design for Six Sigma (DFSS).
families of similarity Extensive background in education and shipbuilding
Stable, team-based workforce, maximizing the experience of instructors is needed to provide a
return on investment of training learning experience that translates directly to on-the-job
High leverage on downstream operations by performance. Shipbuilding environment is different
improving quality and accuracy from the previous implementation of LSS. Translating
Highly visible and measurable in terms of the LSS in the language of shipbuilding was a
cycle time, work in process, and quality. challenge that shipyard was aware about from the
beginning. Figure 2 shows the timeline of LSS
implementation and UNO collaboration at NGSS.

Increasing Program Complexity Competitive Environment Opportunity to Excel

1985 1990 1993 1994 1995 1998 1999 2000 2001 2002 2003 2004

Lockheed Missile & NGSS Lean Six Sigma Kick-Off

Motorola Goodrich Boeing Space NGSS Infrastructure Development
Space - LM21 Six UNO / GCRMTC LSS Project Yr 1
Six Sigma Lean Enterprise Lean Six Sigma Self Sustaining Program
Sigma Structure with Black Belt / Champion Training starts
Design UNO / GCRMTC LSS Project Yr 3
Lean focus NGST Six Sigma Kick-off
IBM UNO starts GB/BB Training & Mentoring
Six Sigma KM initiative begins
Master Black Belt training Starts
Raytheon UNO / NGSS Six Sigma Pilot UNO / GCRMTC DFSS Pilot
Boeing Aerospace Allied Signal
Six Sigma on Avondale Cranes 60 BB/ 60 GB projects in progress
Lean Six Sigma General Electric
Honeywell Norfolk Naval Shipyard Six Sigma Pilot
NGSS expands LSS program
J&J Expands to Portsmouth, Puget Sound,
UNO / GCRMTC LSS Project Yr 2
Six Sigma Programs Pearl Harbor
Green Belt training kick-off
NGNN Six Sigma Pilot
45 projects completed
40 BB / 5 GB projects

Combining
CombiningSixSixSigma
SigmaQuality
Qualitywith
withLean
LeanSpeed
Speed
Reducing
Reducingcomplexity
complexitythrough
throughLean
Lean
Increasing
Increasingprocess
processcapability
capabilitythrough
throughSix
SixSigma
Sigma

1/27/04

Figure 2. UNO-NGSS LSS Collaboration

Getting the right project for the LSS training class is Companies which developed CoPQ systems can choose
essential for successful workforce education. the projects based on the bottom line impact. However,
many organizations implementing Six Sigma tend to
use a prioritization matrix [10]. These matrixes are
completed by utilizing customer data which, by its
nature, does not account for actual costs of poor
quality.
More time needs to be spent training Champions, Black
Belts, and Green Belts on the impact of CoPQ,
including domino effects in the manufacturing
process. The emphasis on expanding CoPQ coverage to
include domino effects in training classes and
mentoring sessions can make project impact assessment
more realistic.
The need to modify the existing Lean Manufacturing
implementation by introducing a Six Sigma toolbox
was recognized in complex product manufacturing as a
way of dealing with variation in a resource constrained
environment with an expanding workload. It was also
discovered that CoPQ is more complex to quantify in
this scenario. Where as domino effects are significant
when quantifying CoPQ, a literature survey showed
that there is very little research done on this subject,
also referred by some as snowball or ripple effects. energy in ripples can be absorbed by inventory.
The study of CoPQ and domino effects is needed to
clearly reap the benefits of integrating Lean and Six
Sigma methodologies. CoPQ and domino effect
concepts should also be included in both Lean and Six
Sigma training courses.
As far as project selection is concerned, including
CoPQ assessment as a supplement to expert-opinion-
based project selection the matrix criteria will become
more effective. An example of such a matrix is given
in Figure 1, where AOR means Area of Responsibility
and BB means Black Belt [11]. As shown in Figure 1,
even though Six Sigma is a data driven methodology,
numerous organizations use subjective judgment and
expert-opinion-based weights as the primary method
for project selection. The obstacle in using CoPQ data
including domino effects for project selection is the
missing link between CoPQ data and accounting chart
of accounts. If a company associates the accounting
system with the CoPQ system including domino
effects data, Six Sigma project selection can be based
on hard data.
4. IMPACT OF DOMINO EFFECTS IN
SHIPBUILDING PROCESSES
This section discusses the domino effect of poor
quality. First, a discussion of the typical breakdown of
the costs of poor quality (CoPQ) is presented. Next,
the often neglected domino effect costs are reviewed.
When a failure occurs somewhere in the system, the
effects ripple throughout the system in a manner similar
to that of an earthquake. Obviously rework must be
performed and scrap may be generated at all of the
stations between where the defect was created and
where the defect was discovered. However, the excess
costs attributed to the defect are much more extensive.
Upstream and downstream processes may be affected
by having to reschedule work. The rescheduling of
work at one station may cause priorities at other
stations to change. When those stations priorities
change still others will change, and so forth.
Rescheduling costs include, expenses such as extra
setups and tear-downs, idle time, expediting costs for
transporting materials, the cost of planners and
schedulers needed to make the changes, and the costs
of delivery delays to other products whose priorities
were reduced.
These problems are particularly severe in lean/Just-in-
time (JIT) systems due to the reduced amount of work-
in-process (WIP) inventory. When a stations schedule
changes and the inventory needed for the new highest
priority job is available, the ripple effect is attenuated
or even terminated. However, in lean/JIT systems
where a conscious effort has been made to reduce WIP
inventory, it is necessary to adjust the priorities at
supplying stations. Thus, the ripple continues, but the
Accounting for the domino effect is difficult for
many companies. By using the conventional unit-based
cost systems, there is no one way to accurately
determine ripple effects [12]. A study was also done
using transition probabilities to explain how failure
costs flow and accumulate in the entire production
system. The only problem with using transition
probabilities is that they can be subjective in nature
[13].
The problem with Job cost systems is that they capture
costs by having time and materials charged to the jobs
being processed. For instance, if a worker is setting up
to work on Product A, their time is charged to Product
A. However, if a problem with Product B forces the
worker to break the setup for Product A and do Product
B, the time spent tearing down and then later resetting
up for Product A is still charged to Product A.
Similarly, if a problem with Product B causes the
worker to have to stay late to finish work on Product A,
that was interrupted by Product B, the overtime will be
charged to Product A. To better demonstrate impact of
the domino effects in manufacturing an example is
given in the next section.
4.1 SHIPBUILDING EXAMPLE
The following example will help to better illustrate the
domino effect in shipbuilding. The panel production
line in Figure 3 consists of three sequential production
stations: plate joining, stiffener positioning, and
stiffener welding. For simplicity, each station is
assumed to have a lead-time of 2 hours for every panel
and a 1 hour setup to change from one panel to the
next. Travel time between stations is considered
negligible.
A simple Gantt chart schedule by station appears in
Figures 4 and 5. The schedule in Figure 4 assumes
there is a 4 hour buffer of WIP inventory in between
each of the stations. That means that the schedule is set
such that panels arrive at production stations 4 hours
prior to when they are scheduled to be processed. As is
shown below, this inventory helps buffer the panel
production from quality problems. However, there is a
significant cost associated with having that extra
inventory.
Figure 5 shows the schedules for the stations assuming
no WIP buffers. This is essentially the ideal JIT
environment. Certainly, few if any manufacturing
facilities have achieved this ideal. It is used here
merely to help illustrate how the domino effect is
exacerbated by lean systems that still have quality
disruptions.
Plate Stiffener Stiffener
Joining Positioning Welding
Plates &
WIP WIP
Stiffeners
Figure 3. Panel Manufacturing Process
Figure 4. Station Schedules for Panels A thru F with
4 Hour WIP Buffer (S = setup)
Figure 5. Station Schedules for Panels A thru F with
No WIP Buffer (S = setup)
4.1(a) Timely detection of defect scenario
The least disruption problem this panel production
would encounter is if a quality defect occurs at the plate
joining station and is detected during final inspection at
the plate joining station. Certainly, the plate joining
station will need to rework Panel As and those costs
(rework and scrap) are easily captured by many
accounting systems. However, consider the domino
effects of this problem. Using the schedule in Figure
4 where there is a 4 hour inventory buffer, note that the
plate joining station can rework Panel A from hours 3
to 5. Thus, Panel A will arrive at the stiffener
positioning station at hour 5, which is 2 hours prior to
when it is needed. Therefore, no downstream
rescheduling is needed. Note, however, that what was
a 4 hour buffer is now down to 2 hours. There is only
room now for one more such problem before the
protective buffer is fully depleted. Assuming that the
plate joining station can work some overtime to get
caught back up, the WIP buffer can then be increased
back to 4 hours. However, as noted before, the job that
gets charged for the overtime will likely not be Panel
A.
Now consider the ideal lean situation depicted in Figure
5. Here there is no protective buffer of WIP inventory.
Thus, even if a problem occurs at the plate joining
station and is detected at the plate joining station,
significant domino effects are felt throughout the
panel production. Since the plate joining station will
have to spend time reworking Panel A, the stiffener
positioning and stiffener welding stations will have
holes in their schedules later where they were supposed
Panel to be processing Panel A. However, the lack of
material will cause them to go idle for 2 hours. Thus,
Panel A will be late by 2 hours. Depending on the
situation this could result in lost incentives, delay
charges, expedited transportation/delivery costs, and/or
lost customer goodwill. Furthermore, the problem is
not just limited to Panel A. All successive panels will
incur the same CoPQ until some excess capacity (i.e.
overtime) is available that allows the panel production
to catch up.
An alternative to the above lean scenario is that when
Panel A is found to be deficient, that panel is set aside
and not processed until excess capacity becomes
available. This will keeps successive panels from being
late. However, Panel A will be significantly later
(more than just 2 hours).
4.1(b) Delayed detection of defect scenario
What happens if a quality defect is created at the plate
joining station but not found until the stiffener
positioning station has completed processing Panel A?
Looking at the 4 hour buffer schedule shown in Figure
4 reveals that the problem would not be discovered
until hour 9. If Panel A is immediately rerouted back
to the plate joining station it could be reworked from
hour 10 to 12 (hour 9 to 10 is needed for setup to do
Panel A). This will, of course, delay Panel D and all
successive panels at the plate joining station by 2 hours
until some excess capacity is available. However, due
to the presence of the 4 hour WIP buffer, none of the
panels coming off of the stiffener welding station are
delayed. Once again we see that the inventory buffer
acts to absorb the energy in the domino effect. This
scenario is illustrated in Figure 6.
Figure 6. New Schedule after Reworking Panel A (S
= setup)
Figure 4 illustrated that without the 4 hour buffer a
problem that goes undetected becomes more
problematic. In this case the problem is found at hour
5. The plate joining station is in the middle of
processing Panel B at this point. Therefore, it is
necessary for the plate joining station to either break
the setup for Panel B and immediately do Panel A
(Figure 7) or wait for Panel B to be completed and
insert Panel A (Figure 8). Based on meeting
completion times, not allowing setups to be broken
(Figure 8) performs better. Figure 7 shows that Panel B
would be completed by the stiffener welding station on
time. However, Panel A would be late by 4 hours (hour
13 rather than hour 9), Panel C would be 3 hours late
(hour 16 rather than hour 13) and Panel D would also
be 3 hours late (hour 19 rather than 16). Thus, the
CoPQ including the domino effect is the cost of
being late for panels A, C, and D; rework costs for
Panel A at both plate joining and stiffener positioning
stations; and idle time for the stiffener welding station.
Figure 7. New Schedule to Rework A with Broken
Setups Allowed (S = Setup)
Figure 8. New Schedule to Rework Panel A with
Broken Setups Not Allowed (S = Setup)
The example has shown the domino effect
implications on both JIT and non-JIT manufacturing. In
the case of large systems manufacturing such as ships,
airplanes, oil platforms, the CoPQ domino effects
appears in many upstream and downstream production
processes. Understanding the magnitude of the
domino effect in large systems manufacturing can be
the key for quantum leaps in the process improvement
initiatives such as LSS, since a company would truly
understand the affect on the bottom line.
5. SHIPBUILDING LEAN SIX SIGMA
PROJECT EXAMPLES
Since 2000, authors have been involved in Six Sigma
implementation, starting the Continuous Improvement
of Drydocking Project sponsored by the Office of
Naval Research via the Gulf Coast Region Maritime
Technology Center at the University of New Orleans.
Pilot projects included reduction of growth work during
drydocking, ship repair specification development,
crane availability improvement, paint cost reduction,
ship repair contract development, error reduction in
shipyard accounts payable process, as well as tow tank
process improvement. The first wave of LSS
Implementations included accuracy of deflanging I-
beams, and accuracy of stiffener fitting process at panel
line, which are led by the authors as well as numerous
pilot projects led by NGSS employees. Some of these
projects are summarized below.
5.1 ACCURACY OF DEFLANGING OF I-
BEAMS
A baseline study was conducted to identify the
performance of the current process and adherence to
accepted hull standards. The focus of the project was
on deflanging I-beams after data collected from the
baseline study revealed excessive variation in the
process. This variation creates welding re-work and
results in added weight to the structure. The standard
procedure for the process was analyzed and found to be
inefficient in some areas. This tends to increase cycle
time and likely adds to process variation. Maintenance
practices are also studied to identify the effectiveness
of the current maintenance policy and to examine the
availability of the machine. To reduce the variation of
the deflanging process and more effectively meet hull
standards, several improvement areas were identified.
A modification to the web sensor that controls the
plasma cutting torches was deemed necessary to reduce
deflanging variation. The modification significantly
improved process control limits and also reduced the
amount of material left on the structure after being cut
[15].
5.2 ACCURACY OF STIFFENER FITTING
PROCESS AT PANEL LINE
To improve the accuracy of structural placement and
neat edge alignment measurements, the researchers
conducted several multifunctional department meetings
to come up with a new tool that will improve
measurement accuracy. Several designs were presented
and a decision was made to build a new tool. The
application of the new measurement tool is expected to
significantly improve panel line accuracy. In addition,
it was also decided to implement a Lean tool called
visual factory to help people working in the panel
line manage measurement data collection through
displaying the data as soon as collected. A bulletin
downtime will be minimized to achieve the NGSS
target Availability. Furthermore, an important
deliverable of the Control phase will be to identify
savings and cost avoidance as a result of this project.
Due to the high level of criticality calculated for this
crane, the return on investment for this project will
likely be very favorable [16].
Categorized "Crane" Downtime 2004

board displaying both neat edge alignment and January February March April May

structural placement measurements was placed in the 130

"Crane" Downtime 2004
panel line to help the production team see how the 110
200.0

process performs over time. The bulletin board will

Downtime (hrs)
150.0
90
also give management a picture of the processes 100.0

Downtime (hrs)
70
without interfering with production [15]. 50.0

0.0
50 January February March April May

30

5.3 CRANE AVAILABILITY 10

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LSS is now used extensively to improve the
Availability metrics of equipment at NGSS. One such
project is focusing on the Availability of a critical Figure 9 Crane Downtime Chart Indicating Total
crane, and uses data generated by the Production (Inset) and Categorized Downtime [16]
organization to identify common failure categories and
to work with the Maintenance organization to perform
root cause analysis and corrective actions (RCCA). 6. VALIDATION OF SAVINGS

The data collected by Production not only reports
downtime due to mechanical failures, but also due to
non-maintenance related events causing stop time. The
data collection system also has a category to record
weather related downtime since coastal weather
regularly causes this particular crane to be idle.
Generally, these two categories are the portion of
downtime that is not related to mechanical failure or
any other maintenance related activity.
The chart in Figure 9 identifies common downtime
categories on a monthly basis beginning in January
2004. In this figure, the scale has been removed to
protect proprietary information. The data shows a five
month period of corrective maintenance related
downtime is 47% whereas weather related and
operations related stop time are responsible for 22%
and 20% of downtime respectively. Figure 9 (inset)
shows how addressing the root causes of various
downtime categories has resulted in a significant
reduction of downtime for the crane for the January to
May time period. The total downtime has been reduced
by 42%, but downtime due to only mechanical failure
has been reduced by 70%.
However, this LSS project is currently in the Improve
phase and there are several root cause categories and
processes that still need to be addressed. It is evident
that this is causing some fluctuations in the cranes
monthly downtime. Once these additional RCCA tasks
are completed, the project will progress into the Control
phase where an effective Control Plan will be
developed to stabilize and monitor the cranes
downtime. Based upon project objectives, the
As mentioned in the section 4 of this paper, accounting
for all CoPQ costs represents a major challenge when
trying to quantify the benefits of LSS projects.
Financial Indicators are based on investment and
savings. For shipyard LSS projects, there are two
investors: shipyard and ship-owner (customer). If
project is successful savings accrue to shipyard or ship-
owner or both shipyard and ship-owner. This situation
results in two indications of financial worth, one to
each investor.
To better illustrate validation of savings we will show
the example stiffener welding project [17]. The actual
dollar amounts have been removed to protect
proprietary information.
6.1 SHIPYARD SAVINGS
Savings to shipyard include:
Reduced rejection of stiffener due to quality,
Increased processing speed allowing less labor,
Reduced cost of welding wire due to smaller weld size,
Reduced cost of weld rework due to improved quality,
Reduced beam setup time (not yet determined ~ no
estimate calculated), and
Reduced inspection time (not yet determined ~ no
estimate calculated).
It should be noted that weld-grind and grind costs were
determined by timed experiment for sample panels
undergoing rework. Defects and defect rates with
associated cost before improvements and after
improvements were computed.
A summary of savings for shipyard results from these
the project is shown in Table 1.
Table 1 Summary of Annual Cost Savings to
Shipyard [17]
Reduced rejection of stiffeners XXXXX*
due to quality
Increased processing speed XXXXX
allowing less labor
Reduced cost of welding wire XXXXX
due to smaller weld size
Reduced cost of weld rework XXXXX
due to improved quality
Current Total Estimated XXXXX
Savings to Northrop Grumman
*Due to nondisclosure agreement the dollar values will
not be shown.
6.2 SHIPOWNER SAVINGS
Cost savings that are available to the ship-owner
include improved ownership costs, and in the case of
stiffener welding these ownership costs are principally
derived from reduced dead weight of the vessel. Using
methods developed by a ship program office to
estimate the beneficial effects of weight reduction, the
savings to the ship-owner for that weight reduction can
be found, over the life of the ship. However, this is only
part of the weight reduction. Improvements to the
stiffener quality resulted in reducing its weight. A
formula developed by the ship program office includes
calculations of fuel savings for the ship-owner resulting
from the weight reduction.
When the ship contract is a cost plus contract, savings
to the shipyard are also savings to the ship-owner. So,
the net savings to the ship-owner includes both the
ownership costs, and the cost of construction.
However, the timing of these costs is different. Savings
from decreased ownership costs occur for every year of
ship operation, and savings from decreased cost of
construction represent one time savings, occurring
when the ship is constructed.
6.3 PROJECT COST
Project costs are principally salary costs and training
costs with a small amount of supplies expended. Since
employees may have multiple roles and multiple LSS
projects, the time devoted to each project is applied
used to develop a percent of time devoted to this
project. This percent is then used to obtain a pro-rata
basis for the employee time. Each employee who is a
Black Belt candidate is expected to complete three six
sigma projects, so the training cost is needs to be
amortized over the three projects. Supplies are also
used on projects with a pro-rata absorption estimate.
The salary and training costs dominate. Some other
costs include the cost of hourly participants and
material costs for the fabrication of test panels. Each of
these costs is determined in the order outlined here.
Table 2 summarized the costs experienced by the
shipyard during the life of the project.
Table 2 Summary of LSS Project Costs [17]
Type of Cost Amount
Black Belt Candidate XXXXX
Hourly Meeting Costs XXXXX
Fabrication Costs Labor XXXXX
Fabrication Costs Material XXXXX
The shipyard Return on Investment (ROI) for this
project is calculated to be 2,409.7%. Clearly, this
project has shown significant benefits to the shipyard.
The shipowner ROI is determined to be 486.7% as a
result of the stiffener welding LSS project. Clearly
booth shipyard and shipowner benefited. Ultimately, an
LSS project financial success depends on how the
company culture is willing to change. In the next
section we will discuss impacts of culture on LSS
implementations.
7. CULTURE CHANGE
LSS implementation requires culture change. This is
especially important in shipbuilding were data driven
culture is relatively new. One of the characteristics of
successful LSS efforts is that top management thinks of
LSS as a culture. It becomes a way of life where all
improvement efforts fit under the umbrella of LSS.
Although the LSS implementation is still relatively new
in shipbuilding, the shipbuilder examples used in this
paper shows the full support for the LSS program.
Expanding workforce training creates larger groups of
people that are able to speak in terms of LSS. All
improvement activities start to fit under the LSS
umbrella. Ultimately, the shipbuilder will reach the
LSS sustainability goals once the LSS is no longer
referred to as a program. Furthermore, it may not even
be referred to as LSS.
Using the research conducted by the authors, it was
realized early that culture change takes time. Creating
data driven environment is critical for the success of
LSS. As more people get educated that making decision
based on data is prudent way to develop good
improvement actions, the shipyard will be able to
benefit more on LSS. The other aspect of LSS success
is based on timely LSS project completion. As
mentioned before, LSS is based on small manageable
projects that produce high returns. A small project
means that it should not last more that six months for
Black Belt projects and four months for Green Belt
projects. This time limits keep project teams focused on
eliminating defects in the small manageable areas.
Last but not least is ability of people to work in teams.
Significant amount of time is spent training Green Belts
and Black Belts on how to work in teams. To keep the
project teams focused, Green Belts and Black Belts
need to create the environment of dependency where
personal success is a team success and vice versa. The
LSS team culture helps promote LSS methodology
throughout the organization. The more people become
part of LSS teams the bigger is the momentum and LSS
become the way to operate a company. This was
observed in our shipbuilding case described in this
paper.
8. CONCLUSIONS
LSS is essential for the success of any competitive
shipbuilder. The combined benefits of the two
methodologies support the need for shipbuilders to
cope with the scale and complexity of its processes.
Together, Lean and Six Sigma are capable of
improving the performance of shipbuilding processes
and cultivating a culture of continuous improvement.
LSS enables merging process improvement initiative to
achieve greater improvements.
To improve any shipbuilding process, shipyards need to
have good accounting for CoPQ. The largest moving
structures in the world build in shipyards are produced
in a systematic manner where thousands of processes
lead to building a ship. These processes are related and
understanding of domino effects is critical to be able
to prioritize improvement activities. Since LSS is a data
driven improvement methodology, it is essential to
make decisions on starting LSS projects using CoPQ
data. Shipyards that are implementing Lean and Six
Sigma and once that are thinking of starting LSS need
to build the CoPQ foundation. A good CoPQ system
that accounts for domino effects also helps validate
LSS project savings by having the financial baseline.
There are several lessons learned from the first
implementation of LSS in the shipbuilding
environment:
LSS requires data accuracy to produce results
LSS project times needs to be monitored to
assure project focus and completion
LSS can produce favorable results for both
shipyards and ship-owners
Workforce education and time allocation for
the project is vital.
In conclusion, LSS has a great potential to improve
shipyard competitiveness by shortening process cycle
and reducing WIP variation. Shipbuilding process deals
with large amounts of WIP each representing products
with potential for defects. This makes the application of
LSS appealing to shipbuilding.
9. ACKNOWLEDGEMENTS
The authors gratefully acknowledge the contributions
of the following groups and individuals for their
contribution to this paper through the research projects:
Office of Naval Research, Gulf Coast Region Maritime
Technology Center, Steve Strom, Dr. Marino (Nick)
Niccolai, Steve Maguire, Dr. Clifford Whitcomb, Dr.
Anthony Patti, Kevin Jarvis, William Leonard, Nubia
Westland, Donald Dorsey, Gene Reed, Regan
Hoffmayer, Prof. Will Lannes, Nicholas Skific, Joe
Snodgrass, Michael Garcia, Andrian Hanson, Dr. Alley
Butler and Mark Pavkov.
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