Presentation on theme: "Lower Cost Country Sourcing A Collection of Lessons Learned."— Presentation transcript:
Lower Cost Country Sourcing A Collection of Lessons Learned
The Call Your boss calls you into his office and says: We need to have suppliers in Lower Cost Countries - go get us some.
What’s next?? Hope Pray Call I need a supplier?
Agenda A Collection of Lessons Learned from Several Companies Covering Upfront Issues Identifying Suppliers Qualifying Suppliers Managing Suppliers
Upfront Issues Sourcing product in a LCC is a long term venture, not a quick win event It will take significant time and effort. Your approach must be different than working with domestic suppliers Cultural Issues Language Issues Plan on developing and growing your suppliers
Export Issues Know your Export Requirements International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) Failure to follow the law can result in Civil and CRIMINAL penalties If manufacturing to a customer drawing or specification, make sure permission to export the technical data and hardware has been granted by the customer
ITAR - EAR ITAR is Controlled by the State Department The State Department web site provides guidance and time estimates for the approval process Double the estimated approval time to reduce risk. EAR is Controlled by the Department of Commerce Guidance is available via their web site
ITAR - EAR If in doubt, contact/retain an expert. Failure to follow the law can result in Civil and CRIMINAL Penalties.
Identifying Suppliers Sister Businesses If other portions of your business are overseas, leverage their regional resources Usually their suppliers will not work for you if they are not in the Aerospace Industry Volumes Regulatory Requirements Industry Requirements
Identifying Suppliers Sister Businesses Use the regional resources of sister businesses to identify potential suppliers They understand the culture They understand the language They know how to find suppliers in that region
Identifying Suppliers Customers Leverage your customers Works especially well where the customer is requesting “offsets” in participating nations. Cannot defer selection or management to your customer
Identifying Suppliers The Internet Use the Internet Look for suppliers who make product similar to the ones you want to source They are tooled to make the parts They understand the requirements and tolerances
Identifying Suppliers The Internet Look for suppliers in regulated industries (food, medical) These suppliers understand working in a regulated environment These suppliers understand working with tight tolerances These suppliers often times manufacture in lower volumes
Challenges Lack of understanding of Aerospace Industry expectations Culture Language Do not take shortcuts in the qualification process!
Qualifying Suppliers Use on-ground resources to fully determine the Supplier’s abilities Conduct your own detailed AS9100 audit even if they are third party registered
Qualifying Suppliers Fully determine the Supplier’s abilities Conduct a multi-discipline business assessment Purchasing Quality Manufacturing Engineering Use the Baldrige Model to assess their business processes and execution
Qualifying Suppliers Language will be an issue and may impact how you transfer data Determine English ability of the staff Determine literacy of workforce If literacy is an issue, clearly understand how the people involved with your product will be able to manufacture it successfully. A possible solution is detailed pictorial work instructions with minimal text
Qualifying Suppliers Special Processes Special Process performance to Aerospace standards is a major issue at most LCC suppliers Most suppliers are not Nadcap accredited You will need to perform detailed audits with your own or contracted resources who are skilled in each special process
Qualifying Suppliers Special Processes Do not delegate special process supplier approval to your supplier Make sure they only use your approved special process suppliers if they outsource Even if you are purchasing Black Box Product Until the special processors become Nadcap accredited, plan on annual audits Do not underestimate the work required Make sure you capture this in your cost model
Qualifying Suppliers Part Qualification Have pre-production samples made Run samples through full analysis, including destructive testing if necessary Review the results with the suppliers Ideally at the supplier with the parts so there is clear understanding of the issues Get detailed corrective action plans and hold regular progress reviews Remember the distance - allow enough time and budget for this step.
If you do your work properly upfront, most of the supplier management process can be done remotely START SLOW! Don’t put a large volume in at one time High risk to you Delivery May swamp them Long distance – long recovery Quality Start small, work out the bugs, have a success, and then build the volume
Managing Suppliers Build the relationship Plan how your companies can grow together over decades, not years Make sure both you and the supplier wins Remember This is not a quick win, short term game - it requires long-term commitment to get the desired results