SA Gov Presentation 09 th October 2007 Nick Ford Head of Procurement, BAE Systems Australia Supplier Relationship Management
SA Gov Presentation 09th October 2007
Nick FordHead of Procurement, BAE Systems Australia
Supplier Relationship Management
SA Gov Presentation 09th October 2007
Agenda
– Overview of BAE Systems– Why Strategic Supplier Management– Process for Managing Strategic Suppliers– Relationship Assessment Tool– Questions & Answers
SA Gov Presentation 09th October 2007
Our Global Company
– BAE Systems is an international company engaged in development, delivery and support of advanced Defence and aerospace systems
– Sales over A$28 billion
– More than 90,000 employees
– Major operations across five continents in 130 countries
– Capability in land, sea, air and space
– Pioneer technology, a heritage stretching back hundreds of years
– BAE Systems Australia
– Customer - Australian Defence Force
– Annual Sales $550m
– Approximately 2,700 employees
– Over 50 sites across Australia, including in most capital cities
– More than 50 years in operations in Australia
SA Gov Presentation 09th October 2007
BAE Systems Australia – Strategic Vision
To be a leading through-life capability partner to the Australian Defence Force optimising Australia’s defence across air, land and sea
Capability Partnering Areas:Fast Jet Support & maintenance Autonomous SystemsRotary Wing Support & maintenance Guided Weapons (Naval Air Defence)Military Flight Training Mission Support SystemsHigh Frequency Surveillance Electronic WarfareMission Systems Training & Simulation
SA Gov Presentation 09th October 2007
Procurement Facts & FiguresBAE Systems Global
– Approx $13.2bn spend – Sub-Contracts ($7.4bn)– Direct Material ($2.9bn)– Indirect Overheads ($2.9bn)
– 15,000 suppliers
BAE Systems Australia – Procurement Spend $346m
– Sub-Contracts ($201m)
– Direct Material ($46m)
– Indirect Overheads ($99m)
– 60% with Australian Industry
– 2,000 suppliers (22% SME’s)
Procurement spend, risk & complexity is growing, thus, so is the importance of supply chain management
Complexity& Value
Time
System & subsystems, subcontract sub-assemblies
Component level, in house manufacture
SA Gov Presentation 09th October 2007
BU Procurement
– Sub-Contract Management
– Direct Procurement
– Indirect Procurement
CorporateProcurement
Procurement Emphasis– Effectiveness Focus – Leverage supplier expertise– Supplier strategy– Contract performance– Relationship expertise– High opportunity for cost
reduction & risk management
Procurement Emphasis– Efficiency Focus - Price &
continuation of supply – Commodity strategy– Source selection– Commodity expertise– High opportunity for price
reduction– eRFX & eAuctions
Functional Emphasis– Functional improvement focus– Support & Governance– Frameworks & templates– Training & Development– share best practice
Risk & Complexity
PartnershipPrinciples
e.g. Joint Bus’Strategy & Plan
Strategic Suppliers
Key Suppliers
Supplier Management Principles
e.g. Product /PlatformStrategy, JIP
Commodity Managemente.g. Raw material strategy
Resource Management, Training & Development
Supplier Development & Relationship Management Facilitation
Policy, Procedures, Governance and System Management
Preferred Suppliers&
Tactical Suppliers
Scope of Procurement & Sub-Contracts
Valu
e &
Thro
ugh
Life
Cos
t
SA Gov Presentation 09th October 2007
– Why a Strategic Relationship?– Market leaders in proven product capability– Integral to BAE Systems business strategy– Substantial investment by Supplier and BAE Systems in developing product
capability for current programs and future potential– Significant previous, current & future long term business opportunities
– Areas of Opportunity – Holistic management across BAE Systems– Increase understanding and alignment of each parties business strategies – Develop and improve relationships– Establish and agree performance metrics– Jointly work to improve performance and reduce costs
Strategic Supplier Management
SA Gov Presentation 09th October 2007
Supply chain performance improvement – a complex engine
Supply Performance
Gearing
Continuous Improvement Plans
Process Improvement
Relationship Management
Input
Supplier Management
Performance
The Engine
SA Gov Presentation 09th October 2007
RelationshipManagement
SupplierManagement
Performance
The Engine
ProcessImprovement
Supply
Continuous
Improvement
Supplier Management
SA Gov Presentation 09th October 2007
– Headline Strategic Supply development process for BAE Systems.
– SCE methodologies are utilised for operational & strategic suppliers
– SCE’s purpose is to create and develop partnership between BAE and our suppliers which drive supply chain performance improvements
– SCE in use across UK, Saudi, N. America & Australia
Supply Chain Excellence (SCE)
SCE has a proven track record of delivering improvements in cost, delivery, quality & efficiency
SA Gov Presentation 09th October 2007
Supplier Management ProcessCost, Quality, Delivery & Relationship MetricsContinuous Improvement PlanBusiness Improvement FrameworkBusiness Continuity PlanningAligned StrategyQuarterly Business ReviewsSupply Chain Conferences
Operational Suppliers
SCE Suppliers
Supplier Management ProcessQuality & Delivery MetricsAligned StrategyBest Practice SharingSupply Chain Conferences
Low to Medium SpendAlternative Sources
Performance & Recognition
SCE SuppliersHigh Spend
Critical to BusinessLong Term Relationships
Single/limited alternative sources
SA Gov Presentation 09th October 2007
The Engine
ProcessImprovement
SupplierManagement
Performance
Supply
RelationshipManagement
Continuous
Improvement
Process Improvement
SA Gov Presentation 09th October 2007
500
Innovation and Learning
Drive To Achieve
Through Resulting in Excellence
500Results
PeopleResults
Criterion 7
CustomerResults
Criterion 6
Society Results
Criterion 8
Key Performance
Results
Criterion 9
60
200
90
150
Enablers
Policy &Strategy
Criterion 2
Partnerships & Resources
Criterion 4
Leadership
Criterion 1
90
80
90
100 140
Criterion 3 Criterion 5
Processes
500
Innovation and Learning
DriveDrive To AchieveTo Achieve
ThroughThrough Resulting in Excellence
500Results
PeopleResults
Criterion 7
CustomerResults
Criterion 6
Society Results
Criterion 8
Key Performance
Results
Criterion 9
60
200
90
150
Enablers
Policy &Strategy
Criterion 2
Partnerships & Resources
Criterion 4
Leadership
Criterion 1
90
80
90
100 140
Criterion 3 Criterion 5
Processes
EFQM Business Excellence Model
Strategic Business Improvement, tools & approach
Kanban
Materials MachinesPeople
JobStandardisation
Visual Controls
Set-up Reduction
5 ‘s’ Housekeeping
7 Wastes and SPC / Quality Tools
A framework for Lean Operations ……….
Manufacturing Excellence Model
– Manufacturing Excellence– Aligned to BAE SYSTEMS internal
manufacturing improvement methodologies.
– Equally applicable to large or small organisations in both high and low volume manufacturing
– Business Excellence– Utilises EFQM or Baldridge or Business
Excellence, as appropriate– Encompasses the total business – Identifies strengths and opportunities
for improvement
SA Gov Presentation 09th October 2007
RelationshipManagement
SupplierManagement
The Engine
Performance
ProcessImprovement
Supply
Continuous
Improvement
Relationship Management
SA Gov Presentation 09th October 2007
– Is a measure of relationship and behaviours on a two-way basis between BAE and the supply chain.
– The purpose is to drive the appropriate behaviours within the supply chain.
– The tool assess the relationships & provides:– a measure of the existing relationship
– A measure of where the relationship needs to be
– an action plan for the parties to own and work with
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2
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COMMUNICATION INITIATIVE ATTITUDE COMPETENCE COMMITMENT
Criteria ScoreReviewer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22Respondant 1 1 3 1 0 2 1 2 0 0 1 0 2 1 2 1 2 1 1 2 2 1 1 27Respondant 2 2 3 1 0 1 2 3 1 2 1 0 1 1 1 1 1 1 1 1 1 0 1 26Respondant 3 2 3 2 2 1 2 3 2 2 1 2 2 2 2 1 1 3 2 2 2 1 2 42Respondant 4 2 3 1 2 2 1 1 1 2 1 1 2 1 2 1 2 0 2 1 0 1 1 30Respondant 5 1 3 1 0 1 0 0 0 0 1 0 1 2 0 1 1 1 0 1 2 0 1 17Respondant 6 3 2 2 0 1 1 1 0 1 1 0 1 2 1 1 1 1 1 1 1 1 2 25Respondant 7 3 3 2 1 1 1 1 1 0 1 0 1 1 3 1 1 0 0 1 2 0 1 25Respondant 8 2 2 0 1 1 1 1 0 0 0 0 1 2 1 1 1 0 0 0 1 0 0 15Respondant 9 2 3 1 2 2 1 2 2 2 2 0 1 2 2 1 1 2 1 3 1 1 1 35Respondant 10 3 3 2 3 2 2 2 2 2 2 2 2 3 2 2 1 2 2 3 3 1 2 48BAES Result 2 3 1 1 1 1 2 1 1 1 1 1 2 2 1 1 1 1 2 2 1 1 30Previous Result 0
CommitmentCommunication Initiative CompetenceAttitude
0 1 2 3 4CommunicationInitiativeAttitudeCompetenceCommitment
Relationship KPI
SA Gov Presentation 09th October 2007
The Engine
Continuous
ImprovementSupplierManagement
Performance
ProcessImprovement
Supply
RelationshipManagement
Continuous Improvement Plans (CIP’s)
SA Gov Presentation 09th October 2007
– The Joint/Continuous Improvement Plan sits at the heart of the SCE Process.– It’s a prioritised plan of activities which a BAE & the supplier intend to undertake
in order to improve effectiveness and performance.– It’s a vehicle to have effective dialogue in respect to continuous improvement.– Improvement activities are geared towards the agreed KPI’s
INPUTS
•Customer Requirements•Strategy Document
•On-going Improvements•Existing Programs
•Assessment Outputs•Goals, Targets and Measures
•Risks and Dependencies•Business Continuity Planning
CIP
•Supplier Owned•Focused on Business Goals•SMART Objectives
•Reviewed for Progress/Benefits•Flowed down to Suppliers
•Flexible to allow additional Inputs
KPI’s
•BAE SYSTEMS and Supplier Owned
•Focused on BAE SYSTEMStargets
•Reviewed jointly for progressand benefits
•Linked to Recognition/StrategicSupplier Status
•Milestone driven/Time-bound
Joint Improvement Plan
SA Gov Presentation 09th October 2007
Performance
The Engine
Supply
SupplierManagement
ProcessImprovement
RelationshipManagement
Continuous
Improvement
Supply Performance
SA Gov Presentation 09th October 2007
Performance & Recognition– Key Performance Indicators (KPI’s) provide a
consistent approach to the measurement of performance
– Delivery– Quality– Cost– Relationship
– Recognition of sustained performance and continuous improvement is a key element of the programme.
SA Gov Presentation 09th October 2007
RelationshipManagement
SupplierManagement
The Engine
Performance
ProcessImprovement
Supply
Continuous
Improvement
Relationship Management
SA Gov Presentation 09th October 2007
Relationship Management– An essential part of supplier management
– Relationships drive performance & results, thus why not measure it?
– Improved Relationships will– Improve understanding
– Reveal opportunities for improvement
– Help identify the issues & problems
– Facilitate / encourage dialogue
– Create expectations
But it will NOT fix a poorly performing relationship or Deliver any
benefits, only completing the agreed actions will
SA Gov Presentation 09th October 2007
Critical Success Factors
Senior Sponsorship – responsibility & authority to resource & resolve issues
Senior Sponsorship – responsibility & authority to resource & resolve issues
Commitment – both parties commitment to seek improvement in the relationship
Commitment – both parties commitment to seek improvement in the relationship
Process / approach –the use of an agreed, visible process & approach
Process / approach –the use of an agreed, visible process & approach
Agreement – parties take shared responsibility for the resolution of issues
Agreement – parties take shared responsibility for the resolution of issues
Resources – will be made available to address and resolve issues
Resources – will be made available to address and resolve issues
SA Gov Presentation 09th October 2007
How companies communicate and interact in supply chains is a key factor in influencing industry’s ability to perform
The highest standard of relationship management will be achieved through a structured engagement process involving all relevant functions with regular reviews at operational and strategic levels
Structured Engagement Process
Define relationship
to be assessed
Understand and agree
criteria
Understand Supplier’s Perception
Understand Customer’s Perception
ComparePerceptions Gap Analysis
Agree Consensus
Position
Agree the To-BeTarget
Produce / update action
plan
Report Outcomes
Where are we now?
Discuss & Capture Issues
After AgreedTime
SA Gov Presentation 09th October 2007
Relationship Management Matrix Process
Define relationship
to be assessed
Understand and agree
criteria
Understand Supplier’s Perception
Understand Customer’s Perception
ComparePerceptions Gap Analysis
Agree Consensus
Position
Agree the To-BeTarget
Produce / update action
plan
Report Outcomes
Where are we now?
Discuss & Capture Issues
After AgreedTime
SA Gov Presentation 09th October 2007
Relationship Assessment Tool
SA Gov Presentation 09th October 2007
Relationship Management Process
Define relationship
to be assessed
Understand and agree
criteria
Understand Supplier’s Perception
Understand Customer’s Perception
ComparePerceptions Gap Analysis
Agree Consensus
Position
Agree the To-BeTarget
Produce / update action
plan
Report Outcomes
Where are we now?
Discuss & Capture Issues
After AgreedTime
SA Gov Presentation 09th October 2007
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2
3
4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Question Number
Scor
e
Supplier Average
Communication Initiative Attitude Competence Commitment
Supplier Results
– Participants 14– Overall score 46 ~ Level 2
SA Gov Presentation 09th October 2007
Communication Initiative Attitude Competence Commitment
BAE Systems Result
– Participants 12– Overall score 41 ~ Level 1
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2
3
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Question Number
Scor
e
BAE Average
SA Gov Presentation 09th October 2007
BAE & Supplier Comparison
Communication Initiative Attitude Competence Commitment
– Consensus points 15– Perception Gaps 7
0
1
2
3
4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Question Number
Scor
e
BAE Average Supplier Average
SA Gov Presentation 09th October 2007
Zero ScoresCommunication Initiative Attitude Competence Commitment
•Average of 1 zero per respondent – both parties
•Review Further - Questions 1, 17 & 21
Personal relationships Process control
capability
Adequate resourcing
0
1
2
3
4
5
6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Supplier BAE Overall
SA Gov Presentation 09th October 2007
4 Scores
•Average of 1 four score per respondent – both parties
•Review Further - Questions 2, 12 & 13
Two way communication
Communication Initiative Attitude Competence Commitment
Ethics & protocols
Trust
00.5
11.5
22.5
33.5
44.5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Supplier BAE Overall
SA Gov Presentation 09th October 2007
BAE & Supplier Consensus
– Consensus points reached 22– Immediate areas to address 5 (score less than 2)
Communication Initiative Attitude Competence Commitment
0
1
2
3
4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Question Number
Scor
e
BAE Average Supplier Average Consensus
SA Gov Presentation 09th October 2007
Relationship Characteristics
Level 0 Level 1 Level 2 Level 3 Level 4
• Relationship in conflict
• Confrontation behaviour
• Lack of understanding / differences about business objectives
• Performance, contractual and resource issues
• Immature relationship or in transition
• Positive behaviour at individual levels
• Potential for growth but can regress
• Some issues identified and being addressed
• Stable relationship
• Positive behaviour between groups
• Efforts focussed on developing mutual understanding
• Issues acknowledged
• Developing partnership
• Developing joint teams
• Some mutual understanding of business goals
• Activity focussed towards achieving shared goals
• Issues managed to minimise differences
• Mature partnership
• Collaborative, joint teams
• Clear understanding of mutual objectives at all levels
• Shared development activity
• Issues not apparent
RMM Score:
< 22 points
RMM Score:
23 – 43 Points
RMM Score:
44 – 65 points
RMM Score:
66 – 83 points
RMM Score:
84 - 88 points
Jan 0642 - Level 1
SA Gov Presentation 09th October 2007
Relationship Management Process
Define relationship
to be assessed
Understand and agree
criteria
Understand Supplier’s Perception
Understand Customer’s Perception
ComparePerceptions Gap Analysis
Agree Consensus
Position
Agree the To-BeTarget
Produce / update action
plan
Report Outcomes
Where are we now?
Discuss & Capture Issues
After AgreedTime
SA Gov Presentation 09th October 2007
Setting the Target
Level 0 Level 1 Level 2 Level 3 Level 4
• Relationship in conflict
• Confrontational behaviour
• Lack of understanding / differences about business objectives
• Performance, contractual and resource issues
• Immature relationship or in transition
• Positive behaviour at individual levels
• Potential for growth but can regress
• Some issues identified and being addressed
• Stable relationship
• Positive behaviour between groups
• Efforts focussed on developing mutual understanding
• Issues acknowledged
• Developing partnership
• Developing joint teams
• Some mutual understanding of business goals
• Activity focussed towards achieving shared goals
• Issues managed to minimise differences
• Mature partnership
• Collaborative, joint teams
• Clear understanding of mutual objectives at all levels
• Shared development activity
• Issues not apparent
RMM Score:
< 22 points
RMM Score:
23 – 43 Points
RMM Score:
44 – 65 points
RMM Score:
66 – 83 points
RMM Score:
84 - 88 points
Jan 0755 - Level 2 Jan 08
66 - Level 3
SA Gov Presentation 09th October 2007
Relationship Management Action Plan
Issue Action Owner / Date
Status
1. Communications 1.1 Orderbook management is time
consuming due to incompatible reporting formats
Agree data/comms structure at desk level between CS&S OS Expediting and MBA Production Control Misalignment of orderbook data resolved, will continue to monitor (10/8)
MS/GC/PC 31/07
Align meeting structure to optimise x-BAES meetings Action outstanding with IL (10/8)
IL 31/07
1.2 Current BAES meeting frequency is impacting MBA Commercial team’s availability Utilise electronic meeting facilities:
Webex training to be arranged for next Ops Review Training for stakeholders at Ops review 12/10 (10/8)
SR 31/07 Deferred to 12/10
1.3 Effectiveness of meetings is compromised by lack of preparation
Stakeholder inputs to be captured and forwarded 1 wk before Ops Reviews
SR/FR ongoing
Outstanding Invoice report to be forwarded to SR monthly
CM ongoing
1.4 Visibility of invoice clearance/queries is poor and is affecting MBA financial planning Overdue invoices to be investigated and
recovery action reported back to MBA SR ongoing
2. Initiative CA scheme to be used to recognise joint BAES/MBA initiatives: Process to be presented to MBA stakeholders Held pending output of Air Systems/ Eurofighter seat enhancement project (10/8)
SR 31/08 Deferred to 30/10
2.1 Need to engage wider community to generate continuous improvement and cost reduction suggestions
Advertise success: future projects success to be reported in In-House newsletters
SR/MG tba
3. Attitude 3.1 Responsiveness to queries is poor and
sometimes difficult to get through to MBA on the phone
Use Contact map, to identify appropriate person(s), use voicemail if person not available. Response to messages to be monitored
All ongoing
4. Competence 4.1 Lack of awareness of Panavia payment
requirements Panavia Processes (Nato/AY) to be reviewed at next Ops Review Meeting to be arranged to review & understand the process & responsibilities (10/8)
CP 31/08
Review of MBA QA/Eng process control and alignment with BAES requirements
AC/TT complete
4.2 Confidence in robustness and application of MBA QA and Engineering Change processes Complete and review actions arising from
Process review AC/TT 31/08
5. Commitment 5.1 Understand issues around x-Business
Engagement (MBA resource pull across BAES business units)
Pursue via MESP SR/IL ongoing
– Produce a joint improvement plan – Identify 5 or 6 key actions based on the results from
the review that will help to achieve target level for relationship
– Each action to have an identified “owner” responsible for completion
See example
Celebrate success
and Keep Going
SA Gov Presentation 09th October 2007
Relationship Management Plan
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BAE SYSTEMS Submarines and
XYZ Electronics
Relationship Management Plan (RMP)
Submarines
Fred JonesHead of Supply Chain
Date:
Bill MartinSupplier Manager
Date:
John SmithProject Director
Date:
Joe BloggsProject Manager
Date:
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COMMUNICATION INITIATIVE ATTITUDE COMPETENCE COMMITMENT
Section 4.1 – Submarines view of XYZ (1St Review) Scores
Criteria ScoreReviewer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22Respondant 1 1 3 1 0 2 1 2 0 0 1 0 2 1 2 1 2 1 1 2 2 1 1 27Respondant 2 2 3 1 0 1 2 3 1 2 1 0 1 1 1 1 1 1 1 1 1 0 1 26Respondant 3 2 3 2 2 1 2 3 2 2 1 2 2 2 2 1 1 3 2 2 2 1 2 42Respondant 4 2 3 1 2 2 1 1 1 2 1 1 2 1 2 1 2 0 2 1 0 1 1 30Respondant 5 1 3 1 0 1 0 0 0 0 1 0 1 2 0 1 1 1 0 1 2 0 1 17Respondant 6 3 2 2 0 1 1 1 0 1 1 0 1 2 1 1 1 1 1 1 1 1 2 25Respondant 7 3 3 2 1 1 1 1 1 0 1 0 1 1 3 1 1 0 0 1 2 0 1 25Respondant 8 2 2 0 1 1 1 1 0 0 0 0 1 2 1 1 1 0 0 0 1 0 0 15Respondant 9 2 3 1 2 2 1 2 2 2 2 0 1 2 2 1 1 2 1 3 1 1 1 35Respondant 10 3 3 2 3 2 2 2 2 2 2 2 2 3 2 2 1 2 2 3 3 1 2 48BAES Result 2 3 1 1 1 1 2 1 1 1 1 1 2 2 1 1 1 1 2 2 1 1 30Previous Result 0
CommitmentCommunication Initiative CompetenceAttitude
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Section 7 – Actions and Plans
GREEN27.02.04SCPWGT
Brief the outcome of the Relationship Workshop into the Integrated Work Team (IWT)
1.2
GREEN31.05.04PBGTPWJE
Establish a programme of process review and education in order to provide a greater understanding from both parties. This activity is essential in order to deliver a fully integrated programme team
1.6
GREEN30.04.04PWGT
Jointly develop and delivery a programme of ‘Product Awareness’ The programme to address the need to provide a greater understanding of the Submarines business, Astute and the XYZ contribution.
1.5
GREEN27.02.04SCGT
Submarines to communicate ‘The Challenges Ahead – 2004’ to XYZ.1.4
GREEN31.03.04SCPWGT
Develop a communication strategy for the Programme. The approach to address strategic, operational, functional and social needs of the Team.
1.3
GREEN27.02.04SCPWGT
Establish a structure and regime for joint team meetings/ events. These to include: - Programme and Progress Reviews (Weekly), Team Building, Social Activity, Visits (DDH and SMITE)
Review 1
Action 1
StatusBy WhenBy WhoDescription/ActionRef
SA Gov Presentation 09th October 2007
Let’s all step up a gear
The Lubricant
RelationshipManagement
SupplierManagement
Performance
The Supplier Management Engine
ProcessImprovement
Supply
Continuous
Improvement
SA Gov Presentation 09th October 2007
Thank You for Listening&
Any Questions