Original Date: 08/07/1995
Revision Date: 01/18/2007
Best Practice : Outsourcing of Non-Core Processes
In response to the decline in budgeted dollars allocated for defense programs, Lockheed Martin Tactical Aircraft Systems (LMTAS) initiated cost and risk reduction by outsourcing non-strategic tasks such as machining, sheetmetal part fabrication, and electrical fabrication. This outsourcing process provides quality products at a reduced cost. During this time of rightsizing, LMTAS reduced its workforce drastically. This reduction influenced both hourly and management personnel. While hourly employees declined by 53% and management declined by 49%, the company was able, through outsourcing, to realize a 94% reduction in behind-schedule hours and realize a 100% compliance of delivery on kits and spares with no delinquencies.
With outsourcing, a reduction in support operations was also realized without significant impact on customer compliance. While economic and customer requirements dictated rightsizing, LMTAS was able to reduce support personnel in those disciplines deemed strategic and not outsourced. This effort netted a reduction in the ratio of support personnel to direct labor from 2.1:1 to 0.7:1. Realizing the risks associated with outsourcing, LMTAS met with its vendors and negotiated their membership on internal Integrated Product Teams (IPTs), thereby securing buy- in and a sense of ownership of the company’s methodology. This vendor-and-internal teaming has resulted not only in filling a void but has produced a 100% reduction in spares delinquencies, a 99.9% reduction in part shortages, and a 99.9% reduction in hours of work performed out of sequence because of shortages.
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