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Lower Cost Country Sourcing

Lower Cost Country Sourcing

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Lower Cost Country Sourcing

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  1. Lower Cost Country Sourcing A Collection of Lessons Learned

  2. The Call • Your boss calls you into his office and says: We need to have suppliers in Lower Cost Countries - go get us some.

  3. What’s next?? • Hope • Pray • Call 1-800-I need a supplier?

  4. Agenda • A Collection of Lessons Learned from Several Companies Covering • Upfront Issues • Identifying Suppliers • Qualifying Suppliers • Managing Suppliers

  5. UPFRONT ISSUES

  6. Upfront Issues • Sourcing product in a LCC is a long term venture, not a quick win event • It will take significant time and effort. • Your approach must be different than working with domestic suppliers • Cultural Issues • Language Issues • Plan on developing and growing your suppliers

  7. Export Issues • Know your Export Requirements • International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) • Failure to follow the law can result in Civil and CRIMINAL penalties • If manufacturing to a customer drawing or specification, make sure permission to export the technical data and hardware has been granted by the customer

  8. ITAR - EAR • ITAR is Controlled by the State Department • The State Department web site provides guidance and time estimates for the approval process • Double the estimated approval time to reduce risk. • EAR is Controlled by the Department of Commerce • Guidance is available via their web site

  9. ITAR - EAR • If in doubt, contact/retain an expert. • Failure to follow the law can result in Civil and CRIMINAL Penalties.

  10. Identifying Suppliers

  11. Identifying SuppliersSister Businesses • If other portions of your business are overseas, leverage their regional resources • Usually their suppliers will not work for you if they are not in the Aerospace Industry • Volumes • Regulatory Requirements • Industry Requirements

  12. Identifying SuppliersSister Businesses • Use the regional resources of sister businesses to identify potential suppliers • They understand the culture • They understand the language • They know how to find suppliers in that region

  13. Identifying SuppliersCustomers • Leverage your customers • Works especially well where the customer is requesting “offsets” in participating nations. • Cannot defer selection or management to your customer

  14. Identifying SuppliersThe Internet • Use the Internet • Look for suppliers who make product similar to the ones you want to source • They are tooled to make the parts • They understand the requirements and tolerances

  15. Identifying SuppliersThe Internet • Look for suppliers in regulated industries (food, medical) • These suppliers understand working in a regulated environment • These suppliers understand working with tight tolerances • These suppliers often times manufacture in lower volumes

  16. Qualifying Suppliers

  17. Qualifying Suppliers • Challenges • Lack of understanding of Aerospace Industry expectations • Culture • Language • Do not take shortcuts in the qualification process!

  18. Qualifying Suppliers • Use on-ground resources to fully determine the Supplier’s abilities • Conduct your own detailed AS9100 audit even if they are third party registered

  19. Qualifying Suppliers • Fully determine the Supplier’s abilities • Conduct a multi-discipline business assessment • Purchasing • Quality • Manufacturing Engineering • Use the Baldrige Model to assess their business processes and execution

  20. Qualifying Suppliers • Language will be an issue and may impact how you transfer data • Determine English ability of the staff • Determine literacy of workforce • If literacy is an issue, clearly understand how the people involved with your product will be able to manufacture it successfully. • A possible solution is detailed pictorial work instructions with minimal text

  21. Qualifying Suppliers • Perform detailed reviews to clarify your requirements • Detailed contract review • Supplier Quality Manual • Packaging expectations • Documentation expectations • Supplier management expectations • Don’t Assume Anything

  22. Special Processes

  23. Qualifying SuppliersSpecial Processes • Special Process performance to Aerospace standards is a major issue at most LCC suppliers • Most suppliers are not Nadcap accredited • You will need to perform detailed audits with your own or contracted resources who are skilled in each special process

  24. Qualifying SuppliersSpecial Processes • Do not delegate special process supplier approval to your supplier • Make sure they only use your approved special process suppliers if they outsource • Even if you are purchasing Black Box Product • Until the special processors become Nadcap accredited, plan on annual audits • Do not underestimate the work required • Make sure you capture this in your cost model

  25. Qualifying SuppliersPart Qualification • Have pre-production samples made • Run samples through full analysis, including destructive testing if necessary • Review the results with the suppliers • Ideally at the supplier with the parts so there is clear understanding of the issues • Get detailed corrective action plans and hold regular progress reviews • Remember the distance - allow enough time and budget for this step.

  26. Managing Suppliers

  27. Managing Suppliers • If you do your work properly upfront, most of the supplier management process can be done remotely • START SLOW! • Don’t put a large volume in at one time • High risk to you • Delivery • May swamp them • Long distance – long recovery • Quality • Start small, work out the bugs, have a success, and then build the volume

  28. Managing Suppliers • Build the relationship • Plan how your companies can grow together over decades, not years • Make sure both you and the supplier wins • Remember • This is not a quick win, short term game - it requires long-term commitment to get the desired results

  29. Questions?