Esterline Case Essay

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9-906-417 MAY 3, 2006 RICHARD L. NOLAN KAREN A. BROWN SUBODHA KUMAR Esterline Technologies: Lean Manufacturing “. . . if a pilot touches it, looks at it, talks to it, or reacts to it chances are it’s made by Esterline.”1 Robert Cremin,2 Chairman, President, and Chief Executive Officer of Esterline Technologies had been with the company since 1976. In nearly three decades with Esterline, he had served in virtually all of its major operating areas. His recent positions included COO and Senior Group Vice President. When he was appointed President and CEO in 1999, he set the Bellevue, Washington-based company on a new course, with a strategic focus on developing and manufacturing highly engineered custom components for aerospace and defense markets. Esterline closed the year 2005 with revenues of $835 million and income from continuing operations of $51 million; compared to 2004 with revenues of $614 million and income from continuing operations of $29 million. (See Exhibit 1 for the detailed Esterline financial statements.) By the end of 2005, Esterline had 34 business units and employed 7,500 people. Facilities with decentralized responsibility for engineering, production, marketing, and sales, were located in 11 states3 and five countries4 outside of the U.S. According to analysts’ reports, 2006 revenues were likely to exceed $1 billion. Lean manufacturing was an essential part of Esterline’s strategy, but IT was not seen as strategic. Nevertheless, the role of IT in lean manufacturing at Esterline was a continuing debate. Some within the company argued that enterprise IT systems were essential to successful performance, and others believed that they interfered with efforts to remove waste and simplify processes. 1 Esterline 2004 Annual Report, p.15. 2 HBS MBA, class of 1965. 3 These included Washington, California, Wisconsin, Michigan, Illinois, Arkansas,

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