innovative supply chain practices: what leading · pdf file · 2013-06-03innovative...

Deloitte Consulting LLP

October 20, 2010

Innovative Supply Chain Practices:What Leading Aerospace and Industrials Are Implementing

4th Annual NASA SupplyChain Quality Assurance Conference

“No I can’t be bothered tolearn from my suppliers,— we’re busy trying tobeat our competition!”

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Five Leading Practices

Practice # 1 Managing the Value Grid

Practice # 2 Developing Real Tier 1 Suppliers

Practice # 3 Leveraging Systems Engineering in Development

Practice # 4 Accelerating Innovation in a Nonlinear World

Practice # 5 Creating Network Flexibility

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Multi-tier supply chain or Value Grid management is an emerging practice

Low price and transaction efficiency

Total landed cost and supply base rationalization

Value Stream Management by leveraging supply chain capacity, capabilities, and network spend to manage critical materials

Transactional Purchasing(Early 80s to late 90s)

Center-led Commodity Team(Late 90s)

Multi-tier Supply Chain Management(Late 2000s)

Emphasis

RemmelePioneer Wilson

???

Customer

OEM

Customer

OEM

TW Metals

Alcoa

Remmele

Tier 3 Tier 1Tier 2 OEM

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Value Grid Management Has Multi-dimensional Opportunities for Collaboration and Improvement

Managing the Vertical

Managing the Horizontal

Managing the Diagonal

Bottlenecks

• Minimizing demand variation/ schedule churn to increase network capacity and OTD performance

• Provide financing /tolling opportunities for weaker tier 1s

Opportunities

•Adjust spend across the tier to free capacity and improve mix

• Manage Outside Service Providers for each tier for cycle time improvements

•Share test equipment and tooling

Value Grid

Tier 1Tier 3 Tier 2 OEM Customer

Managing the Bottlenecks

•Leverage raw materials across the grid

•Use of underutilized assets from adjacent players /create emergency response options

•Buy capacity options/employ hedging strategies

•Deploy Joint Process Improvement Teams/Shop assist

Management dimensions

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Going one level down in the supply chain isn’t sufficient; problems often originate deep in the extended supply chain

• Ultra-precision machining• Heat treatment• Anodizing, Plating, Painting, Chem Film• NDT / X-ray

• Fasteners (screws, nuts, bolts, rivets, nut plates)

• Specialty metal components

• Metal mining• Metal forming• Casting

• Metal forming / cutting

• Metal distribution• Machining

• Cutting • Milling

• Receive and inspect

• Final assembly and test

Machine shops spot buy from service centers – susceptible to volatile / unpredictable pricing and lead times

Supply shortages of specialty metals (titanium, nickel, aerospace aluminum) and fasteners are major lead time contributors

• In-house special processing / testing

• Assembly / kitting

• Machining• Inspection

Tier 2: Special Processors Tier 2: Hardware / Details

Tier 1: Machine Shop OEM

Tier 3 / 4: Raw Materials / Casting

Tier 2: Sub-tier / 3rd-party Suppliers No formal corrective action process for arbitrating conflicts (e.g.

quality, delivery, configuration changes) between supply chain partners

Machine shops constrained by certified 3rd-party sources – captive customers of special processors

Tier 3: Service Center / Casting Shop

Tier 4: Mine / Mill

Client Example –Precision Machining

OEM can leverage its size and gain its fair share of capacity and mind-share with large sub-tier suppliers, share forecasts and business plans, and create a special processing supplier pod for quick response processing

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Productspecificationimprovement

Volumeconcentration

Best priceevaluation

Joint processimprovement

Globalsourcing

Compare “total” costs

Model “should-costs”

Renegotiate prices

Unbundle pricing

Reengineer joint processes

Share productivity gains

Integrate logistics

Support supplier operations improvement

Vendor Managed Inventory

Examine strategic make versus buy

System

enabled

efficiency

Tier 1 ecosystem partners capabilities will need to evolve or they will become Tier 2/3 suppliers

Primary Focus of Commodities Primary Focus of Tier 1s and Major Subcontractors

Consolidate number of suppliers

Pool volume across sites

Redistribute volume among suppliers

Combine volume from different categories

Expand geographic supply base

Develop new suppliers

Profit from global supply / demand imbalances

Conduct product value analysis and engineering

Standardize parts and Substitute materials

Optimize life cycle costs

• Lead integrated Product Engineering & Development teams as a key member of the OEM’s system of systems team

• Develop Product Lifecycle Aftermarket Services for both own products and those of 3rd party alliance partners

• Reinforce robust Commercial Management practices such as value based pricing and risk sharing

• Develop & deploy Collaborative Infrastructures to facilitate virtual project working across geographies, customers and supply partners

Relationship Restructuring

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Serial Electronic Unit (SEU) Software

Servo CCA's

Power Supply Chassis Display

Software PIM Coding

Video PMC CCA

FCI SEU Motherboard Power PC

Turret

BAE LST Ball I2TV CCA's

Laser Pointer

TFU Motherboard

FCI Harnesses

ALST ELRF

Misc Machine

Assemblies

Laser Designator

Imager (IOT

ELCAN)

Detector (IOT RVS)

Optics (IOT

ELCAN)

Gimbal (IOT RTSC)

Afocal (IOT

ELCAN)

Hardware

Program: XYZ

The Supply Chain Leverage Index incorporates systems engineering, design and supply chain capabilities early in a staged-gate review

System (Program Level)

Module (IPTs)

Sub-systems

Building blocks

Example of the SCLI framework applied to a Program

Blue—Off-the-shelf Building Block: Building block that can be re-used without modification from superior supplier

Green—Program Family Building Block: Building block that has been modified (e.g., morphed or scaled) from an off-the-shelf building block using common supplier

Yellow—Adapted Building Block: Design incorporating relaxed specification with new supplier to improve cost/schedule/ quality performance or new design using demonstrated technology with existing core supplier to improve features or capabilities

Orange—Watch Building Block: Building Block that has been used before but for which there are significant open issues with the supplier (delivery or quality performance).

Red—New Design Building Block: Building block that requires significant Engineering or Supply Chain effort to support new design or qualify supplier

Color Code

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As a program manager which of these designs will keep you up at night?

Gate #1 Gate #3

Serial Electronic Unit (SEU)

Servo CCA’s

Software

Turret

Power Supply Chassis) Display

Software PIM Coding

Video PMCCCA

FCI SEUMotherboard Power PC

BAE ListBall I2TV (Note-

proposed with and without)

Laser Pointer

CCA’s

ALSFTELRF

MISC Machine

Assemblies

LaserDesignator

Imager(IOT ECLAN)

Detector(IOT RVS)

FCI Harnesses

TFU Motherboard

Optics(IOT ECLAN)

Gimbal(IOT RTSC)

Afocal(IOT ECLAN)

Serial Electronic Unit (SEU)

Servo CCA’s

Software

Turret

Power Supply Chassis) Display

Software PIM Coding

Video PMCCCA

FCI SEUMotherboard Power PC

BAE ListBall I2TV (Note-

proposed with and without)

Laser Pointer

CCA’s

ALSFTELRF

MISC Machine

Assemblies

LaserDesignator

Imager(IOT ECLAN)

Detector(IOT RVS)

FCI Harnesses

TFU Motherboard

Optics(IOT ECLAN)

Gimbal(IOT RTSC)

Afocal(IOT ECLAN)

Client Example –Defense Electronics

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R&D is a non-linear network game whose value increases with the number of participants—it is not a simple pipeline

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New England Aerospace Network of 254 companies

Tier 1 Tier 2 Tier 3 OSP Logistics15% 44% 10% 29% 2%

Source: © 2004 HBS associate professor Lee Fleming; United Technologies; Deloitte Analysis

Network of New England Inventors

Legend

Node/Color:

Sizeof Node:

Link:

Inventor /Org

Importanceof Invention

Collaboration Tie

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Network Knowledge/

Lessons Learned

Application Ready Models and Tooling

Pre-Certified Assemblies

OEM Network Partners

Knowledge-Based Product Definition

Technology “Bookshelf” Investment

Architecturesx x

Hardware

Software100100100101010110

Data Analysis

Processes/Practices

Y

N

Tooling

Reuse Knowledge Management

Integrative networks can combine reuse libraries, technology bookshelves and knowledge-based product definitions for fast creation

High Velocity/LEAN Creation Process

• Conceptual Design

• Generic Configurations

• Final Configuration

• Phase-Gated Process

• Design and Development Process

COTS

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Leading Manufacturers are optimizing their footprint and network flexibility

Firms are optimizing their manufacturing and logistics footprint....

..... While enhancing their flexibility

As Is Supply Chain To be Supply Chain CASTdpm / LogicTools

Low Cost Supply Chain/SourcingLow Cost LaborCurrency Hedge

Capacity and Planned

Redundancy

Cycle Time/lead

Time Reduction

innovative supply chain practices: what leading · pdf file · 2013-06-03innovative...

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