supplier relationship management - spb.sa.gov.auspb.sa.gov.au/sites/default/files/supplier...

SA Gov Presentation 09th October 2007

Nick FordHead of Procurement, BAE Systems Australia

Supplier Relationship Management


Agenda

– Overview of BAE Systems– Why Strategic Supplier Management– Process for Managing Strategic Suppliers– Relationship Assessment Tool– Questions & Answers


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


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


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


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


– 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


Supply chain performance improvement – a complex engine

Supply Performance

Gearing

Continuous Improvement Plans

Process Improvement

Relationship Management

Input

Supplier Management

Performance

The Engine


RelationshipManagement

SupplierManagement

Performance

The Engine

ProcessImprovement

Supply

Continuous

Improvement

Supplier Management


– 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


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


The Engine

ProcessImprovement

SupplierManagement

Performance

Supply


Continuous

Improvement

Process Improvement


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



SupplierManagement

The Engine

Performance

ProcessImprovement

Supply

Continuous

Improvement



– 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

NOT PROTE CT IV ELY MARKE D

NOT PROTE CT IV ELY MARKE D

February 2004

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

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


The Engine

Continuous

ImprovementSupplierManagement

Performance

ProcessImprovement

Supply


Continuous Improvement Plans (CIP’s)


– 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


Performance

The Engine

Supply

SupplierManagement

ProcessImprovement


Continuous

Improvement

Supply Performance


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.



SupplierManagement

The Engine

Performance

ProcessImprovement

Supply

Continuous

Improvement



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


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


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


Relationship Management Matrix Process

Define relationship

to be assessed


criteria




Agree Consensus

Position



plan

Report Outcomes

Where are we now?


After AgreedTime


Relationship Assessment Tool


Relationship Management Process

Define relationship

to be assessed


criteria




Agree Consensus

Position



plan

Report Outcomes

Where are we now?


After AgreedTime


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

Supplier Average

Communication Initiative Attitude Competence Commitment

Supplier Results

– Participants 14– Overall score 46 ~ Level 2



BAE Systems Result

– Participants 12– Overall score 41 ~ Level 1

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


BAE & Supplier Comparison


– 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


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


4 Scores

•Average of 1 four score per respondent – both parties

•Review Further - Questions 2, 12 & 13

Two way communication


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


BAE & Supplier Consensus

– Consensus points reached 22– Immediate areas to address 5 (score less than 2)


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


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


Relationship Management Process

Define relationship

to be assessed


criteria




Agree Consensus

Position



plan

Report Outcomes

Where are we now?


After AgreedTime


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


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

http://www.comstock.com/web/search/loupe.asp?Image=KS113230.jpg&Type=RF&CatID=&LightboxID=&NoPopUP=T


Relationship Management Plan

NOT PROTECTIVELY MARKED


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:



February 2004

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

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



February 2004

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


Let’s all step up a gear

The Lubricant


SupplierManagement

Performance

The Supplier Management Engine

ProcessImprovement

Supply

Continuous

Improvement


Thank You for Listening&

Any Questions

supplier relationship management - spb.sa.gov.auspb.sa.gov.au/sites/default/files/supplier...

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