Ontario Global Cluster Accelerator

Aéro Montréal Innovation Forum6 Dec 11

Innovations in SME Supplier Advancement

Focus on SMEs

Why change?

What to change?

What is “Innovation”?

What is OAC doing to help?

Global market growth Capacity?

Supply chain New and different roles and responsibilities = Business transformation by suppliers

Boeing rate per month Airbus rate per month

2011 2013

737 31.5 38

767 1.5 1.5

747 0 1.5

777 5 8.3

787 2 10

Annual Total

493 688

Backlog 3505

2011 2013

A320 36 42

A330 8 10

A350 0 2

A380 2 2

Annual Total

530 621

Backlog 4233

One to Many

OEM OEM

TIER 1(SystemsIntegrator)

TIER 1(SystemsIntegrator)

TIER 1(SystemsIntegrator)

TIER 2(Product)

TIER 2(Product)

TIER 2(Product)

TIER 2(Product)

TIER 2(Product)

Tier 3

BTP

Tier 4Processing/Materials

One to Few

Primarily direct supplyMany direct suppliersNo real role for “integrators”

Many “supply paths”Fewer, but still many direct suppliersLimited role for “integrators”Larger role for value-adding suppliers

Fewer “ supply paths”Far fewer direct suppliersExtensive role for “integrators”Still larger role for value-adding parts suppliers

Raw materials

Make-to-print parts and assemblers

Large-scale integration

Platform assembly

Small-scale integration

Value-added parts and assemblies

OEM’sSystem Integrators

System Integrators

Past Emerging Future

Source: A.T. Kearney 2002

Innovation is customer-driven, providing a new product or process that adds value to somebody’s life.

Innovations can improve economic, health, or social well being.

Invention can be defined as the creation or discovery of something new to the world.

Inventions are often producer-driven, following an inventor’s curiosity or area of expertise.

Market Pull

Product / Service &/or Manufacturing Process &/or Business Process

Basic ResearchApplied Research

Product + Manufacturing

Method Development

ProductionTechnology

Development / Demonstration

MarketsTechnology

Infusion

Technology Acquisition

Technology Push

Higher attrition rates = higher riskModest investmentsInstitution-centred

Lower attrition rates = lower riskHigher investmentsCompany-centred

Business Maturity

Cluster Tier 1 Tier 2 Tier 3 Tier 4 Employees

Aerostructures 1 13 42 29 12,400

Landing Gear and Flight Control Actuation

4 13 19 18 9,000

Avionics & Flight Management

2 24 12 3 5,500

Turbine Engines 1 6 17 12 2,900

Environmental Conditioning & Electric Power

2 2 3 2 1,900

MRO 7 10 11 2 7,200

11

Assembly InfrastructureRobotics24/7 Operations

T1 Systems Integrator

T1 Systems Integrator

T2 Equipment/Assembly Providers

T3 BTP Component & S/A Suppliers

T4 Processing/Materials Supplier

Future Major Platforms

T2 Design Engineering

GeometryManufacturabilityMaintainability

Environmental

Sustainability

Transformational Manufacturing

Manufacturing Strategies &

Systems

Applied Technology

Development

Supply Network Performance

ProximityQualificationsSchedule SynchronicityMachine Visibility

MAP SME Advancemen

t

MaterialsMachiningProcessing

Energy ReductionHazardous WasteGreen House Gases

Other Sectors

Strategy for GrowthCVP / SCAOrganizational Dev’t

MAP Overview

What is MAP?

Why do companies want / need MAP?

What do MAP partner companies gain through MAP?

What do SMEs do, as they work through the MAP Business Advancement process?

What is MAP?

◦ Structured, adaptable ‘strategy development’ method

◦ Specifically for SME suppliers

◦ Enables SME management to decide how to transform their business

What do SMEs get through MAP?

◦ A short focused process (5 days over 10 weeks)

◦ SME managers set a few strategic priorities and several specific actions

◦ Often, ‘people’ decisions are among the first

◦ “Vision, Value, and Advantage”

◦ Decisions with confidence: improvement investments; new positions; new customers; etc.

◦ Align: Strategic Directions – Company Capabilities – People

SMEs value MAP

◦ Industry-led

◦ Proven in practice (peer recommendations)

◦ Ownership of decision breeds commitment to action

◦ Sustainable

MAP is different

◦ Focused on SMEs

◦ Proven, reliable, consistent, repeatable methodology

◦ All business aspects (strategies – capabilities – people)

◦ Only ‘transformation planning’ – not implementation High quality and integrity

How does MAP work?◦ Teams of trained experienced, professional experts

Business, Operations, Human Resources

◦ “Coaches and mentors” (not ‘advisors’)◦ Company managers define their own future

Future-state Vision

Customer Value Proposition / Sustainable Competitive Advantage

Critical Business Functions (MAP Capabilities Framework) Key Positions to drive critical Capabilities

A few Priority Actions to bridge ‘gaps’ between where they are and where they want to be Marketing, Engineering, Operations, Financing, etc., & People

Hoshin Strategy

Deployment

Element 6. Supply Network ManagementPerformance Levels

Level AMinimal

Level BAwakening

Level CProgressive

Level DAccomplished

Level EExcellent

6.1 Ethics and Attitudes

No relationship, supplier involvement or respect for suppliers

No audits Suppliers squeezed

on price and delivery

Suppliers’ loyalty is encouraged

Supplier care focus Informal loyalty to

suppliers but don’t push boundaries

Fully understand supplier selling policy and how they negotiate purchases

Have proactive supplier programs

Meets commercial obligations

Understand how to add value to supplier

Analyze supply chain with customers/ suppliers

All companies are in strict compliance with the law and are without actual or perceived conflicts of interest

Have full trust of suppliers

Jointly develop strategy with suppliers

Active Supplier Portfolio Management: Respect, development, support, selection, evaluation

Full information sharing, transparency

6.2 Communication Poor, incomplete communication

Flow down of customer requirements; good coordination; electronic links of production information

A seamless customer/supplier electronic interface with some customers or suppliers

With most important customers and suppliers, a seamless customer/supplier electronic interface; communication of future requirements to support strategic planning

A seamless customer/supplier electronic interface with all customers or suppliers

6.3 Selection and Approval of Qualified Suppliers

Infrequent or incomplete audits

In house experts determine suppliers individually

Semi-formal approval process exists and used sometimes

Regular audits No formal supplier

process defined in company

Conduct On-site survey annually

Proactively measure performance

Continuously monitor supplier part of our team

Analysis of supplier capabilities relative to end user "spec" number

Almost always follow and incorporate best practices

Have developed metrics to support continuous improvement

Methodology to support continuous improvement strategy

Suppliers are intimately involved with identifying best practices for us

Suppliers proactively work with our team for win/win

Element 6. Supply Network ManagementPerformance Levels

Level AMinimal

Level BAwakening

Level CProgressive

Level DAccomplished

Level EExcellent

6.4 Commercial Agreements

None exist Basic purchase

orders issued

Some automation in place in order issuance

Basic vendor management agreements

Work with supplier to improve purchase methodology

Vendor management agreements that reinforce supply chain partnership principles

Comprehensive contracts including quality and support

Comprehensive vendor management agreements including quality improvement and product support

Continuous and systematic with acknowledged measures of success (organization specific)

6.5 Life Cycle Management

No Life cycle risk assessment

No check list No management of

supply chain

Some responsibility for sub-tier supplier issues

Have basic check list Responsibility for

supplier issues throughout the life cycle

React to crises Supplier problems

get fixed in reactive fashion using team concept method

Proactively work on containment issues at supplier

Comprehensive check list throughout the life cycle

Containment of issues at supplier source

Supplier constantly works with us to identify issues well ahead of time throughout the life cycle

6.6 Continuous Improvement

Little communication with suppliers regarding performance expectation

Flow down of customer performance requirements to suppliers

Joint problem solving (such as root cause analysis) with suppliers

Has a supplier performance development program with focus on critical suppliers

Company takes a lead in improving the performance of its suppliers

6.7 Performance Metrics

Uncertain what supplier metrics are

Suppliers meets minimum expectations

Suppliers exceeds expectations

Understand supplier long term plans and metrics

Use of supplier metrics to make meaningful change

Align strategy with supplier and customer metrics

Collaboratively work with supplier & customer to develop metrics

Assessment◦ where are you today?

Direction-setting◦ where do you want to go?

Action Planning◦ how can you best get there?

Accessible

Adaptable

Builds confidence

Focused

People-oriented

Secure

Sustainable

Action-oriented

Builds commitment

Comprehensive

Objective

Assured Quality

Simple / Strategic

Team-building

Focus on the ‘critical few’◦ not the ‘trivial many’

It’s all about your insights, your decisions, your commitment ◦ It is not about our analysis or our answers or our

recommendations◦ It is about the MAP Team in the role of catalyst

and facilitator

MAP – your business transformation methodDecisions with confidence: Strategies – Capabilities – People

Questions & Discussion