Supply-chain management The power of strategic partners


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Supply-chain management The power of strategic partners

  1. 1. Supply-chain management The power of strategic partners Marc Casseres APICS Professional Development Meeting April 21, 2009
  2. 2. Outline • Supply-chain management – the basics • Supply-chain strategy development • Procurement methodology • Internal logistics methodology • Lean supply-chain enablers • Strategic partners • Conclusion Page 2
  3. 3. A demand-driven supply chain Customers Suppliers Exostar BuySite VMI Ship Trigger CMO Kanbans iBins Dock-to-Shop Certified Suppliers • Focused on the customer pull – products, performance, cost, technology management, time to market, etc. • Requires reengineering the enterprise – processes, metrics, responsibilities A fully integrated and lean supply chain leverages material logistics, procurement, subcontracts, and supplier engineering by partnering with fewer but superior suppliers — To provide affordable products to our customers on time, every time Page 3
  4. 4. 7 guiding supply-chain principles 1. In sync with factory demand 5. Material availability guarantee • Reduced cycle time • Certified suppliers • Increased availability • Pipeline to forecast 2. Integrated supplier partners • Bonded inventory • Reduced supply base 6. Integrated with new product • Trusted and seamless Relationships introduction 3. Lean material logistics • Design collaboration • Demand pull • Preferred parts • Supplier-managed inventories • Rapid prototyping • Dock to stock / point of use 7. Aligned with global business needs 4. Material affordability • Speed to market • Leveraged volumes • Price to win • Reduced material cost • Assured quality • Open-book pricing Page 4
  5. 5. Strategic supply-chain integration Strategically Strategically Industry best Industry best integrated integrated practice practice supply chain supply chain Stability Stability • Supplier-driven product improvement • Schedule sharing • Product/process design integration Chaos Chaos • EDI and Web linkages • Strategic alignment with suppliers • Controlled inventory • Supplier-managed inventory • Shared risk (strategic alliances) • Some lean practices • Supplier self-qualification • B2B Web transactions • Frequent shortages • Reliable material quality • Leveled requirements • Global inventory visibility and • No visibility outside 4 walls • Varied lead times • No incoming inspection planning (dock-to-shop) • Heavy expediting • Supplier qualification • Pull/kanban deliveries • Service/spare catalogs • Excessive inventory • SPC-based incoming • “Unfettered” customer demand inspection • Point-of-use restocking • Poor material quality • Integrated customer to supplier • Large central stores • Kanban signals logistics network • Long lead times • “Invisible systems” • Pay on consumption/receipt • Ongoing customer lead-time • Mass incoming inspection minimization • Reliable forecasts • Buy to forecast/configure to order • Unstable systems • Consumption-based scheduling • “Managed” customer demand • Build to forecast/ship to pull (customer to supplier) “Functional parochialism” “Internal cooperation” “Internal integration” “External integration” “External integration” “Functional parochialism” “Internal cooperation” “Internal integration” Strategic supply chain integration is optimization at the enterprise level Page 5
  6. 6. Supply-chain strategy development • Procurement methodology • Internal logistics methodology • Quality systems methodology • Financial methodology (payables and tracking) • IT systems support methodology • Facilities support methodology • Contractual methodology (T’s & C’s) Page 6
  7. 7. 3-tiered procurement methodology Discrete material requirement Discretely issued Leveraged volume Supplier-managed purchase order procurement inventory (SMI) • Buyer negotiates price • Combine requirements • Commodity partners and delivery across business • On-site suppliers • Traditional receiving / • Release POs against • Pipeline to forecast inspection/stock/issue agreements • Ship to replenishment • Full incoming inspection • Traditional receiving / trigger inspection/stock/issue • Traditional A/P • Kanban replenishment • Full incoming inspection • Standard T’s&C’s • Certified suppliers (dock • Traditional A/P to shop) • Standard T’s&C’s • Blanket PO/consolidated monthly billing Page 7
  8. 8. Commodity procurement methodology Inventory classification % Parts % Cost 3.8% 75.0% 12.4% 18.0% 13.1% 4.3% 70.7% 2.7% 100% 100% • Critical to understand material costs vs. material volume and transactional volume Each commodity requires a different approach to ensure material availability, highest quality, and lowest possible cost Page 8
  9. 9. BAE Systems’ supplier partner selection criteria • Commodity coverage • Payment terms • Past performance • Freight • Quality performance • Inventory positioning commitment • Life-cycle management capability • Delivery lead time (from trigger) • Inventory risk sharing • Technical support • Direct material pricing • Implementation capabilities • Service fee/markup (if applicable) • SDB solution • Supplier performance requirements • Must provide resources at BAE Systems’ sites • Must maintain 60-90 days of bonded forecasted inventory • Must fill replenishment signals within 7 days • Must agree to consolidated billings • Must maintain dock to shop Page 9
  10. 10. BAE Systems’ SMI logistic methodology • Typical SMI utilizing supplier’s employees to perform the transactions required to order, receive, and deliver material to production areas. The supplier’s employees are located within the facility and have Intranet access to support the SMI. Forecast Factory MRP requirements point of use (POU) er Requisitions Trigg POs Material transfers Milk run delivery to: Stockroom Kanban bins Reorder Discrete kits loop Supplier’ s rep BAE Systems office Receiving transactions / back-flushing In-house or supplier’s warehouse Page 10
  11. 11. Distribution model BAE SYSTEMS BAE SYSTEMS DISTRIBUTION CURRENT DISTRIBUTION CURRENT BAE SYSTEMS BAE SYSTEMS CURRENT ACTIVITIES CURRENT ACTIVITIES ACTIVITIES ACTIVITIES FUTURE ACTIVITIES FUTURE ACTIVITIES Sourcing/quotation Sourcing/quotation Sourcing/quotation Sourcing/quotation ELIMINATED Partnership agreement Partnership agreement Procurement Procurement Procurement Procurement ELIMINATED Direct factory trigger Direct factory trigger Receiving Receiving Receiving Receiving ELIMINATED Point of use Point of use Storage Storage Storage Storage ELIMINATED Supplier-managed Supplier-managed Distribution Distribution Distribution Distribution ELIMINATED Supplier-managed Supplier-managed Material Handling Material Handling Material handling Material handling ELIMINATED Supplier-managed Supplier-managed Inventory Management Inventory Management Inventory management Inventory management ELIMINATED Supplier-managed Supplier-managed Quality Inspection Quality Inspection Quality inspection Quality inspection ELIMINATED Certified supplier Certified supplier Invoicing Invoicing Invoicing Invoicing REDUCED Invoicing Invoicing Accounts Payable Accounts Payable Accounts payable Accounts payable REDUCED Accounts payable Accounts payable MIS Support MIS Support MIS support MIS support SHARED MIS support MIS support Product Standardization Product Standardization Product standardization Product standardization SHARED Product standardization Product standardization DFAR // ITAR compliance DFAR ITAR compliance DFAR // ITAR compliance DFAR ITAR compliance SHARED DFAR // ITAR compliance DFAR ITAR compliance Obsolescence mgmt. Obsolescence mgmt. Obsolescence mgmt. Obsolescence mgmt. REDUCED Obsolescence disp. Obsolescence disp. Product design Product design Product design Product design SHARED Product design Product design Asset carrying cost Asset carrying cost Asset carrying cost Asset carrying cost REDUCED Asset carrying cost Asset carrying cost Page 11
  12. 12. IT systems support methodology – lean supply chain enabling factors • Multi-inventory organization architecture vs. singular process architecture • Common, co-mingled inventory vs. project procurement/inventory management • Moving average unit cost vs. project-specific standard cost • Back-flushed/“post-pegged” inventory valuation vs. pegged procurement and inventory valuation • Order management (soft-linked customer demand) vs. project contracts (hard-linked customer demand) • Common quality plans vs. project quality clausing • “POU pull” vs. inventory management “locator code push” • Controlled FIFO consumption trigger vs. lot traceability Not all inventory organizations need all enablers – but flexibility to apply appropriately is essential to lean enterprise implementation Page 12
  13. 13. Lean supply-chain effects • Improve profitability through cost minimization • Simplification and standardization • Minimize inventory • Reduce handling • Reduce transactions • Increase sales through superior supply-chain services • Increase value-adding processes • On-site suppliers • Improve competitive position through timely delivery of high-quality products and services • Reduce cycle times from supplier to customer • Increase inventory turns • Improve competitive position through ability to launch new products quickly and efficiently • Dynamic synchronization of supply-chain processes • Reduced product realization cycle times • Improve new-product manufacturability and quality Page 13
  14. 14. Responsiveness vs. rationalization • Typical “before” comments: • “How hard can it be to schedule airplane builds?” • “Why can’t the customer get his MRP scheduled properly?” • “It not our fault we were late to ship product ‘X’ – the customer pulled in the schedule last week.” • “The customer dropped those in the schedule behind me – I was already late when I saw the first requirement for those.” • “We’d be on schedule if the customer level loaded his schedule.” • “Give me a req and I’ll buy it – but you are inside lead time.” • A new mindset: • “The customer is allowed to ask for anything.” • It is up to us to figure out how to be ready and provide it with the shortest possible reflex cycle. • It’s never the customer’s fault – it is always our fault. How can we improve? Page 14
  15. 15. Service delivery model aligned to global business needs • Speed to market, product cost, quality • Flexibility to adapt • Lean and agile to provide the material – on time, every time as pulled from the DFT factories • Supplier partnerships • Reduce lead times, process variability, and total material cost • Preferred parts • Supplier-managed inventories and logistics Provide affordable products to our customers on time, every time Page 15
  16. 16. Our customers We Protect Those Who Protect Us® Page 16