Six Sigma process improvements and sourcing strategies following factory fire

Abstract

This thesis addresses Six Sigma process improvements and the supplier management issues resulting from the shift to external suppliers in the aftermath of a fire. Originally, this thesis was to address a lean implementation in Raytheon's substrate fabrication area. It was intended to build on work done by Satish Krishnan, which focused on a lean implementation in a related area. However, a fire in Raytheon's El Segundo substrate area forced Raytheon to outsource substrate production and brought to the forefront a different set of challenging issues. The fire shut down production for 21 days, creating pressure to capture lost ground once operations resumed. The increased demand and burden on resources during the recovery uncovered inefficiencies in key processes. One of the areas that increased in importance following the fire was magnet assembly. The first half of this thesis (Chapter 3 through Chapter 6) applies Raytheon's Six Sigma framework to the magnet assembly process in an effort to reduce non-value added work and increase standardization and control. Six Sigma incorporates many of the principles of lean manufacturing, such as continuous improvement and the elimination of non-value added work.

(cont.) The first half of this thesis focuses on the Six Sigma framework because of Raytheon's strong commitment to the approach, rather than the larger set of issues in lean manufacturing. Typically, the vertical integration decision is one of the key strategic choices facing a firm. The fire crippled Raytheon's substrate fabrication area and changed this decision from a strategic one to a tactical one. Rebuilding the substrate capability in El Segundo would require close to a year. In the short term, Raytheon was forced to shift substrate production from El Segundo to external suppliers or alternate internal sites. The second half of this thesis (Chapter 7 and Chapter 8) addresses the issues associated with outsourcing a technically complex product. The initial substrate offload accelerated the timeframe for establishing suppliers and for dealing with concerns like intellectual property, coordination, dependency and the strategic consequences of outsourcing a key technology. This thesis attempts to address these implementation issues as well as the strategic implications of outsourcing substrates.