Original Date: 03/06/2006
Revision Date: / /
Best Practice : Earned Value Management System
Raytheon-Louisville has developed a strategy to enhance financial accounting and value tracking across the manufacturing process. The system integrates earned-value management and material resource planning to provide manufacturing, planning, accounting and senior leaders with performance indicators and tools to aid in critical decisions necessary for process optimization and business projections.
Raytheon-Louisville uses a sophisticated software system to track earned value against material resources and funding allocations. Since 1999 the system has evolved and refined into what is today’s Information Manufacturing Intelligence (IMI) system. The system integrates revenue stream inputs with an earned value management system (EVMS) and manufacturing resource planning (MRP) that provide leaders with performance indicators and tools to aid in critical decisions necessary for isolating problems, process optimization, and business projections. The system also ties infrastructure such as assets, contracts, and places into the tool.
A core use of the EVMS is to provide a backbone of metrics for the bimonthly and senior management business meetings that focus on performance and drive company strategies. Key members from all Integrated Product Teams (IPTs), senior management, department heads, Raytheon Six Sigma™ (R6σ), business and accounting, planners, and manufacturing MRP personnel are expected to take inputs from the weekly Integrated Information System (I2S) data and to resolve or prepare responses to actions assigned. The meeting is used to coordinate efforts in periodic program reporting, monitor key metrics, and track the status of manufacturing resource use at all levels. Since the system ties to the MRP system, value can be calculated over each process, purchase order, or part number in the manufacturing path and is compared against budgets and projected status. When unexpected overruns occur, teams can quickly identify the anomaly and make corrective actions by analyzing variances down to the part number of a system. In anticipation of new work, the user can identify simulated process capacity and workloads to determine how to effectively transition the manufacturing workforce and properly allocate resources. Changes can then be flowed back into the MRP system quickly and efficiently.
The IMI system function is a Web-enabled intranet portal, allowing users flexible access. The IMI synchronizes with the MRP system weekly and is time-phased to yield monthly projections of labor, material, and other costs. IMI experts and managers maintain an on-site presence at Raytheon and play a lead role in facilitating the transfer and reporting of data to the end users. Although a large number of reporting, data filtering, and sorting options are available directly, they can also provide special project support to individual teams or IPT leads. Key metrics provided by the system include support-to-touch ratios, efficiency, procurement status, cost performance index (CPI), schedule performance index (SPI) and trends, baseline cost of work scheduled, baseline cost of work performed, actual cost of work performed, estimate at completion, and stack-ups against targets and goals. When planned schedules and budgets are not being met, it is quite easy to drill down into the foundation data to focus on the drivers. Manufacturing process control levels can now be easily scrutinized for deltas that might lead to product variances and/or defects.
All members of the Earned Value (EV) Team have access to the I2S system and can pull data collections as needed to troubleshoot focus areas. Normally a core team reviews the data and flags issues for IPT leads. For the most part, the EVM hybrid system enables more accurate solutions by management due to three process steps. First, the production processes drive the data into the system rapidly and predictably. Second, the data is sorted into value comparisons against optimal and troubleshot. Third, actions are created and handled conscientiously in efficient team meetings. Some efficiencies identified include a reduction of 75% in MRP and accounting staffs. Production labor stability is greatly enhanced, and process fine-tuning is now much more precise.
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