Supply Chain - A Strategic Perspective

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Can Supply Chain Save the World?

Save it from what? What’s happening in our World?

Technology focused industries moving to large, emerging markets, not focused on retaining business in high-margin, lower volume, aerospace sector

Results in limited number of qualified, developed suppliers ─ Industry consolidation continues─ Long-term viability of domestic supplier capability questioned

More technology invention – product and process – taking place off-shore─ ITAR restrictions hamper use of foreign suppliers─ Foreign requirements, product and environmental, different

Aerospace electronics requirements continue to veer from commercial

Lack of supply chain insight hinders ability to manage risk and ensure performance─ Who pays for, ensures, effective supply chain management?─ Who’s making the make/buy and sourcing decisions, and do they represent “best value” to

government?

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Not enough to understand evolving landscape

Must organize to respond quickly, adapt in this environment Issues feel staggering, options seem limited (or limitless) and confusing

─ What requires an immediate reaction? What are appropriate actions? USG and aerospace supply chain are:

─ Recognizing need and market advantage by ensuring access to critical supplied technologies

─ Recognizing SCM as key process/system (are we investing as such?)─ Reducing supply base, focusing business into fewer, better, more strategically aligned

suppliers─ More focused than ever on sub-tier supply management─ Contractual management giving way (begrudgingly) to relationship management

Struggle for everyone, opportunity for those who can successfully integrate and manage their supply chain

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Can any - all - SCM save us?

The discipline of Supply Chain Management is like a giant Chinese menu, filled with options regarding tools, systems, processes, structure, focus, personnel, reporting, contracting, relationship models….

The key is to discern which possible elements, working in concert, are best applied for a given agency, business, endeavor, program, and situation

Knowing what the options are and how they fit together is essential─ What is critical?─ What is superfluous?─ What is most efficient and cost-effective─ What produces the lowest total cost and lowest total risk?

Effective SCM does not shift risk, it reduces/eliminates risk Effective SCM does not move cost, it removes cost Effective SCM allows for the best entities to produce the best outcomes Effective SCM is objectively measured and managed

So what is Supply Chain Management?

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• Supplier Relationship Management• Strategic Sourcing• Concurrent Engineering• Technology Forecasting• Supplier Performance / Quality• Strategic Make-Buy• Subcontract Management• Purchasing• Government Compliance• Demand Forecasting• Requirements Planning• Material Planning• Receiving• Receiving Inspection• Inventory Control• Warehousing• Material Handling• Packaging• Distribution Planning• Transportation• IT• Program Management• Finance• Strategic Planning• New Business Development

Strategic Supply Management

Materials Mgmt.

Physical Distribution

Logistics

Supply Chain Management

2000+

1990s1980s

1960s

Fragmented

Evolving

Integrated

Evolutionary depiction of Supply Chain Management

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‘Know Thyself’

Good Supply Chain Management begins with organizational self-awareness─ More about what you do than what’s done to you─ If you don’t know who you are and what you do, it’s very difficult to know who you need and what

you need─ Your supply chain and supply base are an extension of who you are, in a sense they are you─ Your supply chain extends to the supply base, but its success begins and ends with your decision

making It’s the beginning of successful risk management

─ You can outsource capacity. You can outsource capability. You can out source expertise. Ultimately, you cannot outsource risk.

─ Again, that is you (your success) out there─ Greater level of risk, greater level of control

Difficult to be a visionary─ Easier to be an “Exceptional Thief”

Discipline before tools ─ Know when to invest in collaborative design and mfg tools─ Learn to saw before you buy a chain saw

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So who are we? SCM links customer needs with supplier offerings

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Strategic Supply Management drives tactical ‘drumbeat’

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The Integrated Supply Chain

Supply Chain Mapping – extended network design, multi-tier sourcing/functionality─ By supplier, technology

How involved do you want to be? Do you really want to manage Tier 2 and Tier 3 suppliers? Do you need to? When, where, why?

─ Discriminating Technologies Supply Chain map of a particular critical supplied technology

─ By data flow and/or function─ By cash and/or product

Objectives of Optimizing the Internal Supply Chain

Building a competitive advantage•Reduced cycle times

•Part selection time•Supplier lead times

•Lower costs•piece parts, assemblies•labor •part mastering, parts expediting

•Reduced material waste •Strategic vs. Tactical focus •Optimized supply base support and flexibility•Actual costs easily used in proposal setting

Reducing the risk in executing programs•Reduced program schedule slips

•Increased on-time delivery performance •Increased % of parts received by need date

•Assured part availability•Improved quality of parts, assemblies•Reduced level of part obsolescence•Improved supplier performance•Optimized prioritization of work•Improved materiel, supply chain visibility •Access to availability within the supply chain

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Example of Integrated Supply Chain: Depicts tactical flow with continuous feedback from strategic activities

Project future part,

technology requirements

Product Structure,mastered parts, BOM: Requirements ready to be planned and bought – initiate, drive product structure into MRP

PartsManagement - Time-phased Material Planning: Quantities, need dates, requisitions

Supply Mgmt: Tactical buying, Strategic Supply Mgmt

Receipt

Inspection: Prioritized, expedited

Inventory: Optimized stock

Design in optimized solution: Identify, use preferred parts (symbols in CAD)

Update Preferred Parts list over time

Consolidate forecasted material requirements into

RFQs for Purchase Agreements (PAs)

Establish PAs, negotiating reduced costs and leadtimes, based on forecasted

needs

Focus business into Preferred Suppliers through use of PA

process

Preferred Parts from Preferred

Suppliers routed Dock-Stock

Track supplier trends, reduce obsolescence

Drive improved supplier performance through supplier report cards, performance reviews

MRP

Engineering

Supply Chain Mgmt

Mission Assurance

ACTS

PDM

CADStandardized quality levels

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Examples of Integrated Supply Chain Metrics

Strategic Objective Metric Functional OwnerBuilding a competitive advantage Reduced cycle times Percent of parts on BOM using Preferred Parts (BPSL) Engineering

Average supplier lead-time by commodity SCM - Supply MgmtConversion Time: Requisition to Purchase Order SCM - Supply MgmtParts inspection: dock to stock throughput (time of receipt to inventory) SCM & Mission AssurancePercentage of Lots Dock-to-Stock SCM & Mission Assurance

Lower costs Purchase Price Variance vs. Plan SCM - Supply MgmtReduction in planning labor charged to programs SCM & ManufacturingReduction in part mastering labor charged to programs Components Eng

Reduced material waste Reduction in number of parts procured but never used SCM & ManufacturingIncrease in material transfers between programs SCM & ManufacturingInventory levels, turns SCM - InventoryReduction in yearly material scrap SCM - Inventory

Strategic Supply Management Reduction of Supply Base (# of Suppliers) SCM - Supply MgmtPercent of Business with Preferred Suppliers SCM - Supply MgmtPercent of dollars on Contract or Purchase Agreement SCM - Supply Mgmt

Optimized supply base support and flexibility Supplier Report Cards, ratings SCM - Supply Mgmt

Reducing the risk in executing programs Reduced program schedule slips Percent of parts / data requirements delivered on time SCM - Supply Mgmt

# of designs completed in time to support procurement need dates EngineeringReduce planned orders that are late from start (given expected lead times) ManufacturingPercent of parts delivered to program need dates SCM & ManufacturingReduction in the number of assembly kit shortages Manufacturing

Assured part availability Percent of Parts in Supplier Managed Inventory SCM - Supply MgmtImproved quality of parts, assemblies Supplier Quality Rating: Percent Parts Acceptable Mission AssuranceImproved supplier performance Supplier Report Cards, ratings SCM - Supply MgmtReduced level of part obsolescence TBD Components Eng

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In Conclusion…

SCM is an increasingly important discipline and provides a broad array of options Understanding and articulating the various aspects is essential to optimum use of SCM

Performance begins with a holistic view of the flow of the technologies required, their development and sources, and an analytical approach to defining, developing and improving the supply base

Significant advantage to those who can pull this off

Whether ‘Supply Chain’ can save the world is yet to be determined… … but properly employed SCM systems, processes, tools and personnel can dramatically

improve an organization’s performance