1. 11 Supply Chain Management – ES4C9 Negotiation in the Aviation & Defence Sector BAE Systems, PLC. James Fairbairn 18/11/2013

2. 2 Introduction FTSE 100 Company Sale (2012) ~ £16.6 bn Gross profit (2012) ~ £1.37 bn 84,000 Employees worldwide Stock/Current WIP value ~ £665 m ~25,000 Suppliers worldwide FAME, 2013. Company report: BAE Systems PLC (UK) Limited [online]. Brussels: Bureau van Dijk [viewed 11 November 2013]. Investis.com, 2013. BAE Systems, 2013 Half year results [online]. http://bae-systems-investor-relations-v2.production.investis.com/ Accessed 11 November 2013http://bae-systems-investor-relations-v2.production.investis.com/

3. 3 Negotiation – Current state Challenges faced Contract winning Expertise & technology acquisition Specification adherence Process improvement in existing relationships Reliance on Government Contracts Impact Reputation Profitability Future contracts Financial performance linked to political climate Yousigma.com, 2013. BAE Systems PLC (SWOT Analysis) [online]. http://yousigma.com/comparativeanalysis/baesystemsplc.html Accessed 11 November 2013http://yousigma.com/comparativeanalysis/baesystemsplc.html

4. 4 Negotiation Style Dr Dawei Lu, MSc Supply Chain Management module

5. 5 Negotiation on two fronts Contract negotiation Utilising teams of in-house & external experts with both technical and in-field experience to define key points Analysing and proposing alterations to specifications Ensuring contracts provide value for both parties Secure Intellectual Property Rights Supplier negotiation Establishing trust Ensuring capability & capacity within schedule Satisfying security requirements Agree on roadmap to integration into chain & pull systems Utilise expertise in other business areas – further integration All-or-nothing scenarios can still elicit extreme responses

6. 6 Conclusions Quality as the primary driver restricts negotiation styles High value to supplying BAE Systems for suppliers Industry demands infer a high cost of failure Trust is a prerequisite to business Building long term relationships is key to improvement across multiple product lines Company negotiators hold most of the cards when dealing with suppliers, but a fully collaborative approach must be taken to secure quality, integrate companies into the pull-system and reduce waste throughout the entire chain

7. 17 Thank you for listening