Original Date: 07/25/2005
Revision Date: 09/12/2006
Best Practice : Supplier Logistics
Northrop Grumman Electronic Systems has reduced both transportation costs and standing inventory and has improved delivery information from vendors by using a third-party logistics vendor. This vendor controls the timing and the method of shipment based on the purchase order’s delivery schedule. The suppliers are provided with an electronic means for communicating their activities and for printing shipment documentation locally.
Prior to 2002, Northrop Grumman Electronic Systems (NGES) buyers placed orders with delivery requirement dates based on the best information available to them at that time. Suppliers made delivery date promises based on the best information they had available. New data became available that affected both need and delivery dates, but it was difficult to influence what had already been started without management by the buyer and the supplier. When products became available, decisions had to be made by either the buyer or the supplier as to shipment of the available components. This decision process was different in each instance and affected the speed and the cost of delivery. Inefficiencies and inaccuracies resulted from accompanying information that was either typed or handwritten and through part counts that were conducted manually.
NGES currently uses a Supplier Logistics System designed to plan, organize, and control information and product delivery to meet customer schedules at the right time and price, from Purchase Order (PO) launch to closure in inventory. Key elements of this system are Supply Chain Management (SCM), Supply Chain Active Tracking System (SCATS), and Receiving and Inventory Management.
SCM is a web-based, third-party system provided by Global Logistics Village (GLV) that controls delivery date management. PO information is sent to GLV every two hours, and PO acknowledgment by suppliers (including delivery confirmation or supply best available date) is facilitated via a PC with Internet access and a printer. SCM can also provide technical assistance to suppliers through human intervention and has visibility and reporting capabilities available to both NGES and vendors.
SCATS is a transportation management system that is also a web-based, third-party system supplied by GLV. SCATS allows financial leveraging of freight volume where GLV negotiates transportation costs with providers and arranges delivery methods based on component availability and requirement dates. NGES no longer arranges for transportation, tracks shipments, manages missed deliveries, or processes payments in accounting. This is all done by GLV along with the elimination of early receipts and providing consistent bar coding to aid in component identification, improved receiving, and enhanced inventory accuracy. GLV also provides supplier visibility of NGES receipts to reconcile exception reporting (shipped vs. received) and expedite supplier payment.
NGES has used SCATS for two years. To date, combined past-due deliveries have been reduced from 40% to less than 15% and annual transportation savings of $2 million have been realized. The services provided by GLV have allowed NGES personnel to concentrate on inventory accuracy and cycle counting to improve kitting efficiency.
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