Supply Chain - A Strategic Perspective

1. Supply Chain - A Strategic Perspective

2. 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?

3. 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

4. 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?

5. • Supplier Relationship Management • Strategic Sourcing Integrated Strategic Supply • Concurrent Engineering Management • Technology Forecasting • Supplier Performance / Quality 2000+ Strategic Make Buy • - • Subcontract Management 1960s • Purchasing Evolving • Government Compliance • Demand Forecasting Supply Chain Management 1990s • Requirements Planning 1980s Material Planning • • Receiving Fragmented • Receiving Inspection Materials Mgmt. • Inventory Control • Warehousing Logistics • Material Handling Physical • Packaging Distribution • Distribution Planning • Transportation IT • • Program Management • Finance • Strategic Planning • New Business Development Evolutionary depiction of Supply Chain Management

6. ‘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

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

8. Strategic Supply Management drives tactical ‘drumbeat’

9. 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

10. Example of Integrated Supply Chain: Depicts tactical flow with continuous feedback from strategic activities Update Preferred Parts list over time Project future part, technology requirements Focus business into Preferred Suppliers through use of PA process Drive improved supplier performance through supplier report cards, performance reviews Track supplier trends, reduce obsolescence • Design in optimized solution: Identify, use preferred parts (symbols in CAD) Product Structure, mastered parts, BOM: Requirements ready to be planned and bought – initiate, drive product structure into MRP Parts Management - Time-phased Material Planning: Quantities, need dates, requisitions Supply Mgmt: Tactical buying, Strategic Supply Mgmt Inspection: Prioritized, expedited Inventory: Optimized stock Receipt ACTS CAD MRP Standardized quality levels Preferred Parts from Preferred Suppliers routed Dock-Stock PDM Consolidate forecasted material requirements into RFQs for Purchase Agreements (PAs) Establish PAs, negotiating reduced costs and leadtimes, based on forecasted needs Engineering Supply Chain Mgmt Mission Assurance

11. Examples of Integrated Supply Chain Metrics

12. 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