lower cost country sourcing a collection of lessons learned
TRANSCRIPT
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Lower Cost Country Sourcing
A Collection of Lessons Learned
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The Call
Your boss calls you into his office and says:
We need to have suppliers in Lower Cost
Countries - go get us some.
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What’s next?? Hope Pray Call 1-800-I need a supplier?
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Agenda
A Collection of Lessons Learned from Several Companies Covering Upfront Issues Identifying Suppliers Qualifying Suppliers Managing Suppliers
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UPFRONT ISSUES
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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
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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
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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
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ITAR - EAR
If in doubt, contact/retain an expert.
Failure to follow the law can result in Civil and CRIMINAL Penalties.
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Identifying Suppliers
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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
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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
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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
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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
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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
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Qualifying Suppliers
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Qualifying Suppliers
Challenges Lack of understanding of
Aerospace Industry expectations Culture Language
Do not take shortcuts in the qualification process!
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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
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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
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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
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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
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Special Processes
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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
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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
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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.
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Managing Suppliers
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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
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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
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Questions?