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Lower Cost Country Sourcing A Collection of Lessons Learned.

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Presentation on theme: "Lower Cost Country Sourcing A Collection of Lessons Learned."— Presentation transcript:

1 Lower Cost Country Sourcing A Collection of Lessons Learned

2 The Call  Your boss calls you into his office and says: We need to have suppliers in Lower Cost Countries - go get us some.

3  What’s next??  Hope  Pray  Call 1-800-I need a supplier?

4 Agenda  A Collection of Lessons Learned from Several Companies Covering  Upfront Issues  Identifying Suppliers  Qualifying Suppliers  Managing Suppliers


6 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

7 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

8 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

9 ITAR - EAR  If in doubt, contact/retain an expert.  Failure to follow the law can result in Civil and CRIMINAL Penalties.

10 Identifying Suppliers

11 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

12 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

13 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

14 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

15 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

16 Qualifying Suppliers

17  Challenges  Lack of understanding of Aerospace Industry expectations  Culture  Language  Do not take shortcuts in the qualification process!

18 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

19 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

20 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

21 Qualifying Suppliers  Perform detailed reviews to clarify your requirements  Detailed contract review  Supplier Quality Manual  Packaging expectations  Documentation expectations  Supplier management expectations  Don’t Assume Anything

22 Special Processes

23 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

24 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

25 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.

26 Managing Suppliers

27  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

28 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

29 Questions?

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