LOCKHEED MARTIN ELECTRONICS BUSINESSES SAVE OVER $7 MILLION BY REPLACING MIL-SPEC COMPONENTS WITH COMMERCIAL PARTS
BETHESDA, MD, December 21st, 1998 -- "Two companies in Lockheed Martin's Electronics Sector have realized $7 million in savings on government and commercial programs by using off-the-shelf hardware in place of military specified (MIL-SPEC) components. The efforts by Lockheed Martin Control Systems and the Lockheed Martin Government Electronics Systems' Launching Systems business support both the Lockheed Martin Corporation's (NYSE: LMT) enterprise-wide adoption of best practices and the U.S. Department ofDefense's Civil/Military Integration program. "This is a great example of how our businesses are collaborating toidentify, exchange and implement best practices and commercial processes inways that enhance Lockheed Martin's competitiveness in the globalmarketplace," said Robert B. Coutts, Electronics Sector president and chiefoperating officer. "These initiatives also benefit our U.S. governmentcustomers, who share in the documented savings we achieve while continuing toreceive products of the highest quality." The Control Systems team in Johnson City, New York, and Fort Wayne,Indiana, eliminated many military-specified components in its Full AuthorityDigital Engine Control (FADEC) products, used on thousands of commercialaircraft jet engines. Ceramic microcircuits on the FADEC's digital processormodule were replaced with commercial plastic-encapsulated components. Control Systems developed a disciplined process for selecting, qualifying,and screening plastic parts for use in demanding aerospace applications.During the recent FADEC certification process, the Federal AviationAdministration (FAA) complimented Control Systems' commercial parts managementpractices. Lower-cost commercial components are yielding savings in excess of $5million a year on FADEC products. The move to commercial parts also ensures acontinuing source of supply at a time when many manufacturers are exiting themilitary components business. The best practice also was implemented at Lockheed Martin LaunchingSystems in Baltimore, Maryland, on the Vertical Launching System program. TheBaltimore facility's implementation on the MK-41 Vertical Launching System(VLS) saved $2.7 million by eliminating re-screening of military specifieddiscrete components. According to James Milton, director of materiel, thefacility plans to save an additional $10.3 million by using commercialcomponents on circuit card assemblies and consolidating two electricalassemblies into one assembly using commercial components. The MK-41 VLS, amulti-missile storage and firing system, is deployed aboard U.S. Navy AEGISdestroyers and cruisers. Savings on the VLS program have been achieved on systems currently undercontract. Comparable savings would be realized on future orders foradditional systems. "Implementation of the military specification elimination best practice onother Department of Defense contracts is under way elsewhere within theLockheed Martin Electronics Sector," Coutts said. "This example of realsavings two companies have achieved on two programs with one best practicedemonstrates the potential benefit Lockheed Martin and its customers canrealize through the broader application of streamlined processes andcommercial practices." The redesign of products to eliminate military specified components isamong the actions identified under the Corporation's "LM21 Best Practices"initiative, intended to enhance the competitiveness of Lockheed Martinbusinesses as they approach the 21st Century. The initiative -- which servesas the umbrella for multiple productivity improvement efforts such as leanmanufacturing and Six Sigma -- is expected to yield annual savings of at least$2.6 billion by 2002. "Elements of Lockheed Martin's best practices initiative correlate withthe priorities of our Department of Defense customers, particularly in the useof commercial components and practices that drive down costs and improvemaintainability," Coutts said. "Working in partnership with our customers, wehave demonstrated our ability to achieve meaningful savings that support boththe Defense Department's Single Process Initiative and Lockheed Martin's focuson enhancing shareholder value. The Single Process Initiative provides an expedited process forcontractors to propose the use of commercial or contractor-unique processesand practices on all programs executed at approved facilities. The relatedCivil/Military Integration program promotes the use of commercial items,operations and practices for designated military systems. Darris Martin, facilitator for the Electronics Sector's Supplier SingleProcess Initiative, said the sector has realized over $9 million in savings byworking with suppliers and subcontractors under the SPI, and is reviewingproposals with more than $9 million in potential additional savings.