Supply-chain management The power of strategic partners
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Transcript of Supply-chain management The power of strategic partners
Supply-chain managementThe power of strategic partners
Marc Casseres
APICS Professional Development Meeting
April 21, 2009
Page 2
Outline
• Supply-chain management – the basics
• Supply-chain strategy development
• Procurement methodology
• Internal logistics methodology
• Lean supply-chain enablers
• Strategic partners
• Conclusion
Page 3
Customers Suppliers
VMI
Dock-to-Shop
Kanbans
Certified Suppliers
BuySite
CMOShip Trigger
iBins
Exostar
A demand-driven supply chain
• 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 4
7 guiding supply-chain principles
1. In sync with factory demand
• Reduced cycle time
• Increased availability
2. Integrated supplier partners
• Reduced supply base
• Trusted and seamless Relationships
3. Lean material logistics
• Demand pull
• Supplier-managed inventories
• Dock to stock / point of use
4. Material affordability
• Leveraged volumes
• Reduced material cost
• Open-book pricing
5. Material availability guarantee
• Certified suppliers
• Pipeline to forecast
• Bonded inventory
6. Integrated with new product
introduction
• Design collaboration
• Preferred parts
• Rapid prototyping
7. Aligned with global business needs
• Speed to market
• Price to win
• Assured quality
Page 5
Strategic supply-chain integration
ChaosChaos
• Frequent shortages
• No visibility outside 4 walls
• Heavy expediting
• Excessive inventory
• Poor material quality
• Long lead times
• Mass incoming inspection
• Unstable systems
Strategic supply chain integration isoptimization at the enterprise level
“Functional parochialism”“Functional parochialism”
StabilityStability
• Controlled inventory
• Some lean practices
• Reliable material quality
• Varied lead times
• Supplier qualification
• SPC-based incoming inspection
• Large central stores
• “Invisible systems”
• Reliable forecasts
• “Managed” customer demand
“Internal cooperation”“Internal cooperation”
Industry best
practiceIndustry best
practice
Strategically
integrated supply chain
Strategically
integrated supply chain
“Internal integration”“Internal integration”
“External integration”“External integration”
• Schedule sharing
• EDI and Web linkages
• Supplier-managed inventory
• Supplier self-qualification
• Leveled requirements
• No incoming inspection (dock-to-shop)
• Service/spare catalogs
• Point-of-use restocking
• Kanban signals
• Pay on consumption/receipt
• Buy to forecast/configure to order
• Build to forecast/ship to pull
• Supplier-driven product improvement
• Product/process design integration
• Strategic alignment with suppliers
• Shared risk (strategic alliances)
• B2B Web transactions
• Global inventory visibility and planning
• Pull/kanban deliveries
• “Unfettered” customer demand
• Integrated customer to supplier logistics network
• Ongoing customer lead-time minimization
• Consumption-based scheduling (customer to supplier)
Page 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 7
3-tiered procurement methodology
Discrete material requirement
Supplier-managed
inventory (SMI)
• Commodity partners
• On-site suppliers
• Pipeline to forecast
• Ship to replenishment trigger
• Kanban replenishment
• Certified suppliers (dock to shop)
• Blanket PO/consolidated monthly billing
Leveraged volume
procurement
• Combine requirements across business
• Release POs against agreements
• Traditional receiving / inspection/stock/issue
• Full incoming inspection
• Traditional A/P
• Standard T’s&C’s
Discretely issued
purchase order
• Buyer negotiates price and delivery
• Traditional receiving / inspection/stock/issue
• Full incoming inspection
• Traditional A/P
• Standard T’s&C’s
Page 8
Inventory classification
% Cost% Cost% Cost% Cost75.0%75.0%75.0%75.0%
18.0%18.0%18.0%18.0%
4.3%4.3%4.3%4.3%2.7%2.7%2.7%2.7%
100%100%100%100%
% Parts% Parts% Parts% Parts3.8%3.8%3.8%3.8%
12.4%12.4%12.4%12.4%
13.1%13.1%13.1%13.1%70.7%70.7%70.7%70.7%
100%100%100%100%
Each commodity requires a different approach to ensure materialavailability, highest quality, and lowest possible cost
Commodity procurement methodology
• Critical to understand material costs vs. material volume and transactional volume
Page 9
BAE Systems’ supplier partner selection criteria
• Commodity coverage
• Past performance
• Quality performance
• Life-cycle management capability
• Inventory risk sharing
• Direct material pricing
• Service fee/markup (if applicable)
• Payment terms
• Freight
• Inventory positioning commitment
• Delivery lead time (from trigger)
• Technical support
• Implementation capabilities
• 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 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.
Factory
point of use (POU)Forecast
MRP requirements
Requisitions
POs
Material transfers
Receiving transactions /
back-flushing
Supplier’ s rep
BAE Systems office
Stockroom
Kanban bins
Discrete kits
Milk run delivery to:
In-house or
supplier’s warehouse
TriggerTrigger
Reorder
loop
Page 11
Distribution model
Partnership agreement
Direct factory trigger
Point of use
Supplier-managed
Supplier-managed
Supplier-managed
Supplier-managed
Certified supplier
Invoicing
Accounts payable
MIS support
Product standardization
DFAR / ITAR compliance
Obsolescence disp.
Product design
Asset carrying cost
Partnership agreement
Direct factory trigger
Point of use
Supplier-managed
Supplier-managed
Supplier-managed
Supplier-managed
Certified supplier
Invoicing
Accounts payable
MIS support
Product standardization
DFAR / ITAR compliance
Obsolescence disp.
Product design
Asset carrying cost
BAE SYSTEMSFUTURE ACTIVITIES
BAE SYSTEMSFUTURE ACTIVITIES
REDUCED
SHARED
SHARED
SHARED
REDUCED
ELIMINATED
ELIMINATED
ELIMINATED
ELIMINATED
ELIMINATED
ELIMINATED
REDUCED
REDUCED
SHARED
ELIMINATED
ELIMINATED
Sourcing/quotation
Procurement
Receiving
Storage
Distribution
Material handling
Inventory management
Quality inspection
Invoicing
Accounts payable
MIS support
Product standardization
DFAR / ITAR compliance
Obsolescence mgmt.
Product design
Asset carrying cost
Sourcing/quotation
Procurement
Receiving
Storage
Distribution
Material handling
Inventory management
Quality inspection
Invoicing
Accounts payable
MIS support
Product standardization
DFAR / ITAR compliance
Obsolescence mgmt.
Product design
Asset carrying cost
DISTRIBUTION CURRENT ACTIVITIES
DISTRIBUTION CURRENT ACTIVITIES
Sourcing/quotation
Procurement
Receiving
Storage
Distribution
Material Handling
Inventory Management
Quality Inspection
Invoicing
Accounts Payable
MIS Support
Product Standardization
DFAR / ITAR compliance
Obsolescence mgmt.
Product design
Asset carrying cost
Sourcing/quotation
Procurement
Receiving
Storage
Distribution
Material Handling
Inventory Management
Quality Inspection
Invoicing
Accounts Payable
MIS Support
Product Standardization
DFAR / ITAR compliance
Obsolescence mgmt.
Product design
Asset carrying cost
BAE SYSTEMS CURRENT ACTIVITIES
BAE SYSTEMS CURRENT ACTIVITIES
Page 12
Not all inventory organizations need all enablers – but flexibility to apply appropriately is essential to lean enterprise implementation
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
Page 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 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 15
Service delivery model alignedto 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 16
Our customers
We Protect Those Who Protect Us®