Original Date: 10/10/2005
Revision Date: / /
Best Practice : Integrated Supply Chain Transformation
Raytheon Integrated Defense Systems began a transformation process in 2004 to establish a new Integrated Supply Chain capability aligned with the company’s mid-term goal to become a Mission System Integrator, leading to an overhaul of the organizational culture and processes geared from supporting a product to a system or a mission. Key changes significantly altered the existing supply chain and the relationship of the Integrated Supply Chain Cross Business Team with the other business entities within Integrated Defense Systems. Changes were made to achieve efficiency, effectiveness, capability, and capacity through customer-focused management and significantly altered traditional supply and material acquisition functions within the company, resulting in an integrated, collaboratively focused approach to achieve efficient end-to-end supply requirements that are aligned with Raytheon’s vision.
In 2004 Raytheon Integrated Defense Systems (IDS) initiated a major Integrated Supply Chain (ISC) transformation (termed Transition #1) in its management and organization to realign its supply chain from one based on a product/customer focus to one based on a system integrator customer focus. Transition #2 will move the IDS Supply Chain to a Mission Systems Integrator customer focus during the next four years. The refocus of its supply chain function was driven by the evolution of customer requirements and significant inputs from Raytheon’s major internal customers. Current support was insufficient in providing the value needed to maintain its competitive position as a major Department of Defense (DoD) weapons and combat systems provider. The previous Raytheon Supply Chain organization was focused on yesterday’s products and was not aligned with the company’s ultimate goal to become a mission system integrator.
This introspection led to a commitment from senior leadership to transform the Raytheon IDS ISC from a culture characterized as activities-based, entitlement-based, internally and individually focused, stove pipe, chain-of- command and reactive. A new culture would be characterized as one based on results, accountability and collaboration with a focus on value and being proactive and customer-focused. Key objectives of the transformation involved were focused on collaborative solutions, subcontractor partnering, performance excellence, material acquisition, business partnering and integrated logistics. A new ISC organization was established and elevated to a Cross Business Team (CBT) in the organization hierarchy. Functional groups within ISC were established and staffed with personnel equipped with the skill sets needed to achieve the company’s vision for this supply chain transformation. Members from five functional areas (Performance Excellence, Finance, Human Resources, Information Technology, and Engineering) were included as members who not only reported to the vice president of ISC, but also to their respective vice presidents to enable the significant shift in supply chain and CBT collaboration efforts.
With a focus on achieving efficiency, effectiveness, capability and capacity (E2C2), the new ISC organization began its quest for collaborative solutions through engagement with Integrated Product Team (IPT)/Business Development, alignment of the supply base with the technology road map, achieving alignment with mission innovation, and aligning new skill sets to meet future capabilities. Other elements of transformation included establishing agreements with suppliers to achieve new capabilities and capacity in this early engagement phase. Excellence in subcontract management focused on competency models, training and development, skill and talent infusion, process consistency, value metrics, and customer-focused management. Tools were identified and developed to assist in achieving these key attributes.
The ISC transformation focused on effectiveness and efficiency in products management. Significant material acquisition gains were achieved through an increase of more than 40% in electronic connectivity with the supply base via Fast Exchange, electronic data interchange, and manned terminals. ISC began establishing long-term agreements with its business suppliers and partnering with suppliers who met the requirements of Raytheon’s vision, enabling IDS to achieve a 40% reduction in manual transactions in material acquisition.
Re-engineering of Product Management functions eliminated unnecessary activities and included the expanded use of systems and tools. The restructured organization was decentralized, given combined roles and responsibilities, and personnel were aligned with Operations and Business area teammates.
IDS Integrated Logistics also reorganized to consolidate Transportation Warehousing and Material Handling under the director of Integrated Logistics. Inbound Lean Material flow strategies were employed with Power Track, with selected support functions outsourced to improve efficiencies with MTrak.
Raytheon’s transformation to the ISC resulted in a customer-focused team. E2C2 enablers have improved performance and customer relationships. Solutions have been driven by anticipating customer needs through early strategic involvement and aligning people skills and capabilities with business needs.
During Transformation #1, IDS established the new ISC foundation through Strategic Partnering and Connectivity (Figure 2-4) and continues to build on that with Performance Management processes and Seamless Integration using tool sets selected to facilitate the achievement of these processes. Raytheon IDS will implement Transformation #2 in 2006, focusing on the two top levels of the pyramid to complete the building blocks of the ISC and achieve mission assurance.
Figure 2-4. Strategic Partnering and Connectivity
For more information see the
Point of Contact for this survey.