• 1. Improving Supply Chain Management RelationshipsMary Simmerman Vice President, Materiel April 23, 2003Acquisition & Logistics Excellence Conference 1Copyright 2003 Northrop Grumman Corporation
    • 2. AgendaIntroductions Supplier Management – What Does It Mean? The Defense Business – What’s Driving the Transformation? Northrop’s Model – “Strategic Relationships, Strategic Alliances” Key Success Factors Future Vision – Where Do We Go from Here? Questions and Answers2Copyright 2003 Northrop Grumman Corporation
    • 3. Mary Simmerman, VP, MaterielOversee Domestic and International Procurement and Subcontract Management VP, Supplier Management and Procurement at Boeing Space and Communications Co-Lead Supplier Mgmt. Process Council at Boeing Past Life at Northrop in Advanced Systems Division and Grumman Aerospace SME for Material Operations of Boeing Airlift and Tanker 1998 Malcolm Baldridge Award MBA, Keller Graduate School, BA in Business Mgmt., University of Phoenix3Copyright 2003 Northrop Grumman Corporation
    • 4. Cost-Based Adversarial “Vendor” “Tug of War” Non-Evaluative Short-Term Event-Based Collaboration Joint investment Sophisticated Evaluation Tools Long-Term Focus Continuous improvement True PartnershipsQuality IssuesPoor Communic.TQM6 SigmaMetricsIntegrated SystemsNew Tech.SCM FocusPastPresentSupplier Management – What Does it Mean?4Copyright 2003 Northrop Grumman Corporation
    • 5. What Do We Mean Today?A Formal Process by Which Suppliers Are Evaluated and Categorized by Their Ability to Add Value to Our Business Via Investment, Collaborative Planning & Design, Risk-Sharing and Product EnhancementSupplier Management Is Enabling Relationships with Providers of Goods and Services to: Attain Business Objectives Expand Business Opportunities Reduce / Transfer Business Risks5Copyright 2003 Northrop Grumman Corporation
    • 6. Market ShareSignificantly Enhanced revenueBenefits from Supplier ManagementNew Products/ ItemsBroader Name RecognitionReduced CostsNew Distribution ChannelsNew CustomersWhy Manage Suppliers?60-70% of What We Build Is Procured!Customer Satisfaction6Copyright 2003 Northrop Grumman Corporation
    • 7. Industry Consolidation War Tactics Cultural Issues Enhanced Communications Weapons Technology The GenesisThe Defense Business – What’s Driving the Transformation? “Integrated Network” True Partnerships “Systems, Services, Support” Precision Weapons & “Real-Time” Communications GoalsCollaboration7Copyright 2003 Northrop Grumman Corporation
    • 8. The Northrop Model – Supplier EngagementPossess Technology That Would Be Beneficial to Our Future Business Aspirations Align with Our Future Strategies (e.g. NHA, JIT) Have R&D Expenditures That Are Relevant to Technologies We Believe Are Gaps in Our Portfolio Select Potential Strategic Partners (Industry / Geography) with Characteristics That Would Be Critical Differentiators for Us in Future Competitions (e.g. Skills, Political Strengths, Technologies)8Copyright 2003 Northrop Grumman Corporation
    • 9. The Northrop Model –Hawkeye Case StudyIssues: Radar Approach & Team Solidified Within the Navy (NAVAIR, OPNAV, CNO, ASN) Navy Funding Profiles to Support RMP SD&D and Post Multiyear Production RMP SD&D Proposal Submission in June and Contract Award by December FY 2004 NTE Production Proposal Submission in November and AAC Award by December (3 Hawkeye 2000 Aircraft)Strategies: Preserve FY 2003 Budget for SD&D and Production and Preservation in POM-04 Continue Hawkeye 2000 and Advanced Hawkeye/RMP Advocacy Campaigns Work with the Customer for Post MYP Production Via Affordability Options FY 2004-2005 (Hawkeye 2000) FY 2006-TBD (RMP LS / TAMD)Hawkeye Industry TeamTactics: Leverage the Strength of a “Team” in USN, OSD, Congress and the Media Propagate “Value of RMP” as Highest Priority of Advocacy Campaign Stress “Value of Hawkeye 2000/CEC” to Near–term Fleet Operations Develop Affordability Posture on RMP SD&D and Post Multiyear Production Target Key OPNAV Flags Promote Team AccomplishmentsStrategic Intent: Joint Marketing of the E-2C Hawkeye and USN AEW&C Roadmap9Copyright 2003 Northrop Grumman Corporation
    • 10. The Northrop Model –F-35 Case StudyStrategic Intent: Collaborative Design and Engineering while pursuing “Best Value”Issues: Cost containment is key for the program Investment structure requires sourcing strategy for participating countries RFB/RFQ are “model” based Design and production specs are evolving as the bid process progressesStrategies: Exploit technologies which support collaborative design and engineering to address weight and configuration challenges Employ “ePMO” for document and data sharing for global team Deploy common engineering standards (CATIA)F-35 Global TeamTactics: Developed JSL “Virtual PMO” for global project management support Balance “best value” and collaborative engineering capabilities to meet cost and design challenges Develop specific incentives for team to address center fuselage and weight challenges.10Copyright 2003 Northrop Grumman Corporation
    • 11. Continuous Review Process Based on Performance Measures Reflecting Total Cost of Ownership Must Be in Place to Provide Ongoing Monitoring of the Supplier's Effectiveness “Platinum Source” Case Study Key Success Factors – Supplier Relationship Management11Copyright 2003 Northrop Grumman Corporation
    • 12. Key Success Factors – Supplier Relationship Management, Platinum Source12Copyright 2003 Northrop Grumman Corporation
    • 13. Key Success Factors – Supplier Benefits13Copyright 2003 Northrop Grumman Corporation
    • 14. Key Success Factors – Supplier Relationship ManagementSuppliers / Contractors Are Selected Strategically, with a Long-Term Focus, Rather Than Historic Short-Term, Transaction-Based. Organization Must Commit the Resources to Develop Mutually Beneficial Relationship. Demands on Suppliers Requiring Capital Investments Necessitates the Sharing of Plans and Schedules Utilize Suppliers As a Knowledge Source and Share Benefits of Expanding Into New Markets, Assessing Value-Based Opportunities, Discovering New Cost Savings, and Extending Current Functionalities14Copyright 2003 Northrop Grumman Corporation
    • 15. Key Success Factors – Supplier Relationship Management (Cont)Involve Key Suppliers in Long-Term Strategic Alliances, Where Specific Capabilities May Need to Be Developed. MWBEs May Be a Good Source for This. Align Suppliers, IR&D to Technology Maps15Copyright 2003 Northrop Grumman Corporation
    • 16. Business PartnersWorldEnterprise GroupSAP R/3Business WarehouseOrder Entry, ILS, CSFinancialsHRFulfillment...E-ProcurementStrategic Enterprise ManagementPortal.....Extending Scope (New Dimensions & Add-Ons) COLLABORATIONInternetExtranetIntranetENTERPRISEKnowledge WarehouseSupplier Relationship MgtCollaborative PLMAPOCRMCustomer Relationship MgmtMFG, QAProcurementBillingCompleteIES III/IVFoFKey Success Factors – Technology Blueprint16Copyright 2003 Northrop Grumman Corporation
    • 17. User-initiated, catalog-based requisitioningStrategic SourcingOrder Execution and SettlementProduct Life Cycle ManagementOrder Planning and CreationEDIDirectIndirectSupplier Collaboration, Management, ImprovementSpecification DevelopmentePLM (PDM, CAD/CAM, Proj. Mgmt, collab, etc.)ERPSupply Chain PlanningSupply Chain Execution“e-procurement” Indirect ProcurementComponent Supplier Management (CSM)EngineeringPurchasing, Mfg.Planning, Supply ChainPlant, IT, WarehouseLinkage #1Linkage #2Linkage #3Key LinkagesSupplier / Part / Category Master Data Detailed Cost Element Definition / Measurement Supply / Demand Plans and ChangesMake vs Buy Analysis Spending Analysis via BOMs Linking as-Designed BOM to Sourcing Workflow Drawing Sharing / Mark-Up Generic Collaboration Tools Total Cost of OwnershipContract Parameters KPIs and Monitoring Rules (Blanket) POFuture Vision – Technology Capabilities17Copyright 2003 Northrop Grumman Corporation
    • 18. SupplierCustomerSupplierCustomerSupply Chain Extended Information SystemsCustomer Extended Information SystemsPurchasingProductionLogisticsOrder ManagementSales, Marketing & ServiceCore Applications and ArchitectureRFx TechnologyPDM/PLMTotal SC Inventory VisibilityStrategic SourcingFuture Vision – The Eventual Model – “Connectivity”18Copyright 2003 Northrop Grumman Corporation
    • 19. Questions and Answers19Copyright 2003 Northrop Grumman Corporation
    • 20. 20Copyright 2003 Northrop Grumman Corporation