Production managers everywhere strive for process improvements. A 5% cut in labor costs is a commendable achievement, and 10% is considered really good.

The aerospace unit of Fuji Heavy Industries (FHI) is aiming to cut costs by nearly 50%. Indeed, it says it is already more than halfway there.

The intensive, eight-year effort that began in fiscal 2008 has two sides. One is to reduce labor expenditure by 30% via streamlining non-value time—minutes employees spend without working on the product—for example, by walking to fetch tools. Then the remaining labor is to be trimmed a further 30% by reducing value time, meaning that less work must be applied directly in creating a component, such as a Boeing 777 or 787 center wingbox. The two efforts combined will result in halving the amount of labor spent on a given value of output.

It sounds ambitious, to say the least, but FHI says it is now more than halfway through the process, mainly by the attack on non-value time, “factory kaizen” in Japanese terms.

The campaign against costs never ends, stresses Hiroshi Wakai, general manager of the aerospace company of Fuji Heavy Industries. At the end of fiscal 2015, when the current target should be achieved, the company will not stop pushing for improvements. Gleaning more results from each hour is important anywhere; it is all the more important when, as in Japan, labor is unusually expensive. Competitors such as GKN, Korean Air and Korea Aerospace Industries will surely take note of FHI's progress.

Part of the Japanese company's effort in reducing non-value time is reorganizing dealings with suppliers, eliminating unnecessary handling of parts. And when parts arrive, they are now packed into more-complete kits.

Together, these efforts are strengthening FHI's hand in bidding for its most important prospective production program, the 777X, which could extend the long relationship between Boeing and suppliers FHI, Mitsubishi Heavy Industries, Kawasaki Heavy Industries and composite raw material maker Toray. “The Japanese team of MHI, FHI, KHI and Toray is a good, proven team,” says Wakai, adding that FHI would again like to build the center wingbox. The company also integrates the wingbox with the KHI-built main-gear wheelwell structure.

In the factory kaizen program, the company, like other manufacturers, found that simply moving tools and parts closer to where they were needed could greatly reduce the time employees spent walking, says Wakai. Some aerospace firms have made such changes as a result of suggestions from workers. FHI used time-and-motion studies, based on video recordings of the factory floor. The company revised the movement of parts through its factory, eliminating some activity, reduced packaging and changed processes to place parts and equipment in optimal positions. It looked for the shortest routes that parts could follow between their entry and exit doors. FHI Aerospace automotive sibling Subaru helped with advice.

Part of the reduction in movement was the adoption of more-extensive kitting, which was an early part of the reform process, begun in fiscal 2009. Now each station on the production lines has complete kits of all the parts it needs for each aircraft. Previously, there was only a very low level of kitting. The complete kits are better designed, too, says Wakai. “There is no confusion, no losses, and it is easy to control the number of parts,” he says. Skilled workers now spend more of their time using their talents.

This year brought a further change to parts handling. Formerly, FHI would receive a part from a supplier, inspect it and then send it to another supplier for further work. After the second supplier returned the part, FHI might then have sent it to a third supplier for more work, and so on. FHI has now arranged a so-called milk run: parts are passed directly from supplier to supplier, each inspecting its predecessor's and its own work; the final supplier sends the part to FHI. At first, FHI assigned people to the suppliers to help with quality inspection and achieve airworthiness certification in doing so. Now the suppliers inspect alone.

In comparison with the campaign against non-value time, the effort to reduce value time has further to go, perhaps because of the level of technical development.

To some extent, earlier progress is an obstacle. Managers and workers in a manufacturing program will routinely become better at what they do, in a process production engineers call “moving down the learning curve;” ordinary people say “practice makes perfect.” For FHI this is hard because in one of its biggest programs it is already very well practiced. “Improving efficiency for the 777 is a challenge,” says Wakai. “We have already made more than 1,000 center wingboxes, so the manufacturing line is very stable.” Yet the company has found ways to hold labor inputs on the 777 center wingbox steady while boosting output at its Handa plant from October 2012 to meet Boeing's higher delivery rate—8.3 a month from first-quarter 2013, compared with seven a month previously. That alone implies a 19% rise in labor productivity.

In reducing value time applied to the 777 program, FHI's emphasis has been on greater efficiency in making current parts with current equipment. For the 787, there is more automation and progressively improving part design to reduce manufacturing time.

The company has revised the programming of the automatic riveter it uses in making the center wingboxes of 777s, with the result that the machine is getting its work done faster. Similar changes to the routines of machining centers are making them produce parts in less time.

The 787 program, meanwhile, is still ramping up production rates; it should be poised for a steep slide down the learning curve. FHI is giving it a good shove by applying more machinery to building the aircraft's center wingbox than it has in previous programs.

FHI and a supplier have developed a long-life tool called the R-Drill for work on carbon-fiber reinforced plastic, the predominant material of the 787. The diamond-coated tool's key feature is a smoother and more rounded shape that imparts and suffers less stress as it works. FHI says the R-Drill works five times faster than its predecessor and lasts 15 times longer. An upgraded version is oil-cooled for even faster operation. FHI is working on more versions—for making bigger holes and to further improve the drill shape. The company originated the idea, but it has authorized its supplier to manufacture and sell it for other customers.

Another new tool is a semi-automatic drilling motor. The alternative, a fully automatic drilling machine—some kind of robot—will not fit inside the 787 center wingbox, but fully manual drilling, previously used, required much more time to achieve the necessary quality. With the semi-automatic machine “the hole quality improves drastically,” says Wakai. The tool is used on the outside of the center wingbox, too.

FHI has also improved its water-jet-cutting processes for the 787s program. They are used mainly for trimming the upper and lower panels of the composite center wingbox. Giving no details, Keisuke Kamo says FHI is working to improve water-jet cutting and other manufacturing techniques. “Production rates are going up, so if I can make a small improvement there will be a big reduction in costs,” says Kamo, general manager of fixed-wing aircraft engineering.

An important element of reducing value time on the 787 has been a redesign of some of the aircraft's parts so they are easier to make. FHI has done this, necessarily, with Boeing's permission. The Japanese company is closely studying production methods that dispense with autoclaves, but this is unlikely to be applied to its 787 parts and probably not for major 777X components, if FHI gets to build them. Using autoclaves imposes considerable capital and operating costs, but Japanese aerospace engineers expect the great pressure cookers will still be needed at least into the 2020s to deliver the strength demanded of major wing structures.

FHI's cost savings are not limited to increasing labor efficiency. The company is attacking its inventories. For all of Japan's reputation for just-in-time manufacturing, in which parts arrive only when they are needed, aerospace companies here have tended to keep big inventories. FHI is aiming to cut its stocks so they are sufficient for one year's consumption. Capital costs may not be so big an issue in a low-interest country such as Japan, but storage expenses are significant. A key reason for the tendency to hold big stocks is a reluctance to throw away parts when design changes render them surplus, says a third FHI official, noting that most aircraft materials last forever.

One supplier reform remains elusive. For some parts, FHI contracts through an intermediary, which assumes the risks of building an inventory. Japanese industry officials say the intermediaries add considerable mark-ups for their services, but Wakai says FHI is still only looking at whether to bypass them. Relations between the parts manufacturers and intermediaries are strong, he notes.

In any efficiency drive, a standard approach is outsourcing some of a company's core activities, which for FHI is manufacturing. FHI has done some, but not much.

The company has no plan to set up a plant outside of Japan, where it might benefit from cheaper labor rates, though it might order more parts from abroad. For the 787, it already imports composite parts from South Korean and U.S. manufacturers. Kamo stresses that the company's strength is in assembly of complex and sophisticated parts. That is not easy for manufacturers in developing countries to compete against, but FHI is convinced it must keep pushing ahead with its efficiency drives to stave off the day when new competitors can approach its costs and quality.