lower cost country sourcing

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 1-800-I need a supplier?

Agenda

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

UPFRONT ISSUES

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

Identifying SuppliersSister 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 SuppliersSister 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 SuppliersCustomers

Leverage your customers Works especially well where the

customer is requesting “offsets” in participating nations.

Cannot defer selection or management to your customer

Identifying SuppliersThe 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 SuppliersThe 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

Qualifying Suppliers

Qualifying Suppliers

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

Perform detailed reviews to clarify your requirements Detailed contract review Supplier Quality Manual Packaging expectations Documentation expectations Supplier management expectations

Don’t Assume Anything

Special Processes

Qualifying SuppliersSpecial 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 SuppliersSpecial 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 SuppliersPart 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.

Managing Suppliers

Managing Suppliers

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

Questions?