Original Date: 02/19/2007
Revision Date: / /
Best Practice : Supply Base Optimization/Integrated Strategic Supplier Team for CCAs
Raytheon’s Network Centric Systems implemented the Supply Base Optimization initiative that focuses on maximizing commodity technology while reducing the number of highest-performing suppliers for the commodity. The Integrated Strategic Supplier Team structure promotes best-in-class supplier performance while assessing supplier capabilities to match program requirements and a goal to lower total cost with improved quality and delivery by the approved suppliers.
To remain competitive and grow, Raytheon’s Network Centric System’s (NCS) Manufacturing Center in Largo, Florida, needed a lean, capable, and performance-driven supply base for circuit card assemblies (CCAs). NCS consists of 20 geographically dispersed facilities. When NCS began the Supply Base Optimization (SBO) project, they had 38 CCA suppliers providing products to all locations. Managing 38 suppliers was scattered, diluted, and inconsistent; in some cases it was discovered that several NCS locations managed the same CCA supplier, which caused numerous problems that included vast performance variations and redundant CCA capabilities. When CCA process or product improvements were made, they were product-specific and varied greatly from program to program. In addition, points of contact within Raytheon were location-based, resulting in multiple nodes of communication between Raytheon and its 38 CCA suppliers. With wasteful and time-consuming program-by- program management, it was difficult to improve supplier performance when managing such a large CCA supply base.
To solve this problem, Raytheon Largo created two unique groups: a Virtual Commodity Team (VCT) and an Integrated Strategic Supplier Team (ISST). The VCT was formed first, using cross-functional and cross-regional resources from Engineering, Supply Chain, Quality, Operations, and Program Leadership. The VCT’s goal was to assess the current state of CCAs and determine which suppliers were the most capable of performing at the highest level. The VCT then prepared an Approved Supplier List (ASL) for use on future programs. Some suppliers were categorized as “Approved with Restrictions,” meaning these suppliers could finish current business but would not be eligible for future business on new NCS programs; the remaining suppliers were deleted. Ultimately, NCS was dealing with only six VCT-approved suppliers designated as eligible for new business at all NCS locations.
The ISST for each commodity is organized to include membership from Supply Chain, Operations, Program Leadership, Engineering, Quality, and representation from other Raytheon NCS organizations. The ISST provides an NCS-level strategy for CCAs that impacts production, i.e., critical commodities. Raytheon Largo then took this concept a step farther and hosted process and relationship Raytheon Six Sigma diagnostic workshops at each of its six ASL supplier locations to identify opportunities for more process improvements. As a result, approved suppliers are now more involved and are part of the NCS team in the delivery of superior products. As an example of this, Raytheon invited its approved suppliers as partners to a DDG-1000 Design for Manufacturing meeting to assist in strategy and planning. ISST also utilizes an “Add/Drop” process so approved suppliers can be assessed for current performance and capabilities. This ensures that the ASL becomes a dynamic list, with Raytheon NCS constantly searching for best-in-class suppliers. Management of six CCA suppliers versus 38
The benefits of the SBO and ISST processes to NCS operations include:
ISST-promoted NCS-level strategy
Increased supplier rating of 96.5%, up from 85% in one year
Increased use of approved suppliers from 52% to 76%
Coordinated and consistent process improvements
Reduced points of contact with Raytheon and improved communication
Implementation of a predictive design tool that has reduced new design-predicted defects-per-million opportunities from 1062 to 428
Implementation of 24 best-value test strategies
Similar strategies rolled out with the printed wire board commodity
Planned implementation of the ISST process on distribution, power supplies, and other commodities in 2007
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