INTRODUCTION TO SUPPLY CHAIN MANAGEMENT Inbound Logistics…..raw materials to the shop floor BILL MOTLEY, CEM, CQMgr, PMP 10/14/2018

E-MFG SCM LEAN Supply Chain Management SCM can be described as part of 3-D concurrent engineering: Product-Process-Supply Chain LEAN zero waste, max flexibility, max value stream E-MFG the use of the Internet and all other electronic means to manage the entire manufacturing enterprise SCM all activities associated with the flow and transformation of materials and its related information from source to end user 10/14/2018

Supply Chain Management Definitions Supply Chain – the flow of materials, information, funds and services from raw material suppliers through factories and warehouses to the end customers. A supply chain also includes the organizations and processes that create and deliver these products, information, and services to the end customers. Supply Chain Management – a total systems approach to managing the entire supply chain. The function of Supply Chain Management (SCM) is to plan, organize and coordinate all the supply chain’s activities. 10/14/2018

Upstream Internal Downstream Cereal Supply Chain Customers Upstream Internal Downstream Grain Producer Processing Facility Packaging Distributors Stores Lumber Company CorrugatedPaper Co. Boxes Paperboard Customers Grain Cereal Customers Customers Packaged Cereal Label Manufacturing Labels 10/14/2018

The Modern Supply Chain Environment Background: Global competition More complex products More diverse product lines Shortened product lifecycles Heightened customer expectations Problems along the Supply Chain: Uncertainties: demand forecast – influenced by competition, prices, weather, tech development, etc. delivery times – machine failures, road conditions, traffic jams, etc. quality problems – internal or external production delays – material availability, machine failures, etc. Cost: High inventory financing and carrying costs, obsolescent material – worst in class vs. best in class is 3X-4X dollars more 10/14/2018

Supply Chain Problem: Materiel is now THE major cost in production: it costs a lot to hold but we also never want to run out! How do we balance? Traditional Supply Chain Solutions: Vertical integration – purchasing Upstream supply chain tier suppliers in order to control “uncertainty” (i.e. Ford’s purchase of rubber for car tires). Building inventories as “insurance” against supply chain uncertainties very difficult to correctly determine inventory levels for each product and part if set too high (inventory) = large cost of maintaining a high inventory if set too low (inventory) = no insurance against high demand or slow delivery (lead) times 10/14/2018

SCM Design Product Design; modular or integral Make or Buy Distribution Network Inventory Control Contractual relationship w/suppliers Supplier coordination and KPIs Info Technology and Decision Support Systems 10/14/2018

Supplier Selection Criteria Past performance & previous experience Ability to meet capacity & delivery rqmts Financial stability Ability to provide technical support Adequacy of the quality mgt system Estimated total cost of dealing with the supplier 10/14/2018

Supplier KPIs Quality Delivery Product cost Responsiveness Cost due to customer failures, shop floor disruptions and failure at incoming inspection Technological leadership 10/14/2018

INFORMATION DISTORTION ALONG THE SUPPLY CHAIN SELF-OPTIMIZATION & MISTRUST LACK OF INFORMATION/WRONG INFO DELAY AND DELAY PROPAGATION The “Bullwhip” Effect 10/14/2018

SCM Value Shifts Corporations Communities Physical Assets Intellectual Assets Closed Collaboration The move from vertical to virtual integration is the product of the shift in 20th century business, economic and technology models. Information technology is both a cause and an accelerator of the transformation, which includes: Corporation to corporation competition is being replaced by communities of corporations competing; Physical assets traded for intellectual assets; and, Closed business systems giving way to collaborative relationships. These are the characteristics of the shift from vertical to virtual integration. Vertical Integration Virtual Integration 10/14/2018

The New Manufacturing Design and integration only – perhaps some assembly Contract Manufacturers – build-to-print Third-party logistics providers 10/14/2018

THE RISE OF DISPERSED MFG “Low-Cost Country” Sourcing More modern factories in low-cost areas Reduction of trade barriers Some factories are emerging as global leaders in certain technologies 10/14/2018

SCM TRENDS EXPECT OUTSOURCING TO INCREASE FOR ALL PRODUCTS PRIMES INCREASINGLY FOCUSED ON DESIGN AND INTEGRATION 90% - 100% OUTSOURCED WILL NOT BE UNUSUAL IN THE FUTURE 10/14/2018

GOAL: A LEAN, MEAN SUPPLIER BASE F-22 SUPPLIERS Alliant TechSystems Electrodynamics HamiltonSundstrand Honeywell Rosemount NWL Global Tooling Models & Tools M. C. Aerospace Interval Hughes Treitler Amphenol Bendix Boeing Kaman MPC Supplier Content as % of Contract Value 100 % 90 80 70 60 50 40 30 20 10 BFG/Simmonds GD Armament Dowty Decoto Primex Sanders Schlosser Timet Castings Argo-Tech Crane/Lear Romec Fenwal Safety Syst Litton Itek Wyman Gordon Aerojet Aircraft Eng Avica Chem-Tronics Circle Seal Eaton Hexcel Honeywell Kaiser LM Aero - Palmdale Litton BAE Systems Marvin Eng OEA Aerospace Pacific Scientific Parker Bertea Parker Hannifin Raytheon BF Goodrich (Rohr) Sierracin/Sylmar Sterer Superform USA Sweeney Eng Symetrics Telair Int’l Teledyne Vickers TRW Pratt & Whitney 70% Boeing Defense 60% 61% GKN Westland Hamilton Sunstrand Pratt & Whitney Boeing LM Aero F-22 SPO EDO Lucas Aerospace Curtiss Wright Hexcel, AlliedSignal Smiths Ind. Northrop Grumman Orbital Sciences This chart represents the team members we have all across the country. Our main partners are represented by the dark green states and the suppliers are listed around the outside. Suppliers make up approximately 60 to 70% of the dollars spend on the F-22 as can be seen from the center chart. Honeywell Motorola Brunswick, Walter KIDDE Howmet, Alliant TechSystems BAE Systems Menasco Raytheon Training Raytheon TI ICI Fiberite Vickers Harris Intellitec LMEM Pall Aero Trilectron LM Aero Ft. Worth LM Aero Marietta BAE Systems Avionics - UK Helmet Integrated Systems - UK Normalair Garrett-UK Kidde Graviner Ltd - UK GOAL: A LEAN, MEAN SUPPLIER BASE 10/14/2018

SCM TRENDS ASSEMBLY BECOMING A COMMODITY SCM BECOMING A STRATEGIC FACTOR SCs MUST FUNCTION LIKE A SINGLE ENTITY ELECTRONICS LEADS ALL OTHER MFG SECTORS IN THE OUTSOURCING OF FAB AND ASSY IS SCM THE ULTIMATE CORE COMPETENCY? SC MANAGEMENT TO SUPPLIER MGT? 10/14/2018

BOEING 787 Modular design Design work in US, Japan, China, Russia Fabrication all in Japan, France and Italy except for nose, cockpit and vertical stab. Air transport vice sea Contracting councils for each module 10/14/2018

IMPROVING SC PERFORMANCE DESIGN FOR PRODUCIBILITY,MODULARITY, STANDARDIZATION, COMMONALITY, AND POSTPONEMENT “SHORTEN THE CHAIN”: FEWER STRATEGIC PARTNERS W/ WORLD CLASS QUALITY AND DELIVERY ADDING INTELLIGENCE and End-to-End VISIBILITY OF THE CHAIN: TECHNOLOGY: WWW B2B, integrated ERP BETTER DEMAND FORECASTS: ”all forecasts are wrong” - hybrid inventory control: MRPII + JIT - order long-lead materials/components based on demand forecasts and econometric models 10/14/2018

SCM ISSUES A capable prime means little if its supply chain has quality and delivery issues Are there risks in a global supply chain? Is the government losing insight into its primes’ SCs? Does it matter? Does your prime have management and technical processes to manage its supply chain? These are issues we have not faced before on this scale Use your DCMA resources 10/14/2018

The Effects of 9/11 Alternate sourcing arrangements formalized Formalized transportation alternatives More sophisticated logistics/ERP software to know where materials are at any time Inventory levels being increased by 10% to 15% Parts being ordered earlier, more lead times being built into production schedules 10/14/2018

Top Ten SC Managers per AMR Research 2004 Dell Nokia Proctor & Gamble IBM Wal-Mart Toyota Motor Johnson & Johnson Johnson Controls Tesco PepsiCo 10/14/2018