Original Date: 07/25/2005
Revision Date: 09/12/2006
Best Practice : Preferred Supplier Program
Northrop Grumman Electronic Systems developed a robust, proactive Preferred Supplier Program that led to increased performance and operational efficiency by both Northrop Grumman Electronic Systems and its suppliers, with improvements noted in the areas of technical, cost, schedule and delivery, and quality. The Preferred Supplier Program helped the company form partnerships with its best suppliers and reduced its supplier base by approximately 25%.
Northrop Grumman Electronic Systems (NGES) is focused on procuring required products from preferred suppliers in key technology and commodity areas for production requirements that support customer deliverable products. In early 2003, NGES developed a Preferred Supplier Program as a strategic tool designed to identify and recognize high- performing, best-in-class suppliers in key technologies and commodities that support those core products important to NGES product needs. In establishing the Preferred Supplier Program, NGES is ensuring that performance and operational efficiency are increased at both NGES and the supplier’s facility in the areas of technical, cost, schedule and delivery, and quality.
NGES has built long-term partnerships with its suppliers through optimization of the supplier base. This optimization helps ensure “best value” source selections to lower risk for both NGES and the suppliers, to increase leveraging opportunities for NGES, and to increase the proportion of procurement dollars spent with preferred suppliers. This initiative is being integrated throughout the 26 Electronic Systems sector locations. One of the goals of this program is to drive down the supplier base by approximately 25% per year through 2009. Another goal is to institute this program across the entire Northrop Grumman Corporation, not just the Electronic Systems sector.
In order to become an NGES preferred supplier, a supplier must attain and maintain an acceptable business assessment relative to technical capabilities, cost reduction and avoidance practices, organizational stability, and industry leadership positions. This program begins with a self-assessment process by the perspective supplier, an evaluation by the NGES commodity design teams, and a further evaluation by the customers of the suppliers’ products.
Rigid criteria for becoming and remaining a preferred supplier has been established and has been clearly communicated to the suppliers. Information regarding NGES preferred suppliers is communicated across the sector via the Preferred Supplier Website. The Website serves all functional organizations as a repository for preferred supplier profiles, quality and delivery performance information, lessons learned, socioeconomic business profile data, and more. NGES holds annual Supplier Conference Award Profile symposiums to recognize and honor suppliers that have attained and maintained Preferred Supplier status. In 2003, only 103 suppliers out of more than 10,000 were recognized and honored.
NGES has benefited from its Preferred Supplier Program by: Developing a formalized and measurable supplier selection tool
Achieving technology and business forecast sharing with its suppliers
Gaining insight into marketplace trends and product development efforts
Implementing quantifiable performance measurement tools
Launching a formalized supplier feedback tool
Serving as a risk-reduction tool in the procurement area
Achieving significant results in improved program execution
The Preferred Supplier Program has resulted in a win-win partnership between NGES and its suppliers that has led to operational excellence and improved performance for all parties.
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