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Original Date: 02/19/2007
Revision Date: / /
Information : Material Planning and Strategic Commodity Management
Raytheon’s Network Centric Systems Manufacturing Center in Largo, Florida, has implemented an improved material planning and strategic commodity management system to better align procurement groups and reduce duplication of effort. Creating a new material planner position to coordinate all commodity purchases has saved money, reduced production time, and increased productivity throughout the plant.
Raytheon’s Network Centric Systems (NCS) Manufacturing Center in Largo, Florida, initiated a new material planning and strategic commodity management methodology in June 2006 that reduces cost and saves time. Raytheon Largo began this process by creating a Materials Planning group to centralize all commodity ordering. Material planners now approve purchase requisitions based on a wider view of plantwide commodity needs rather than on a per-program basis (Figure 3-3).
Prior to implementing a centralized Material Planning System (MPS), all purchases were made and aligned by individual commodity needs while production control was aligned by program. As a result, various programs within Raytheon Largo ordered their own parts, causing many problems for Raytheon buyers whose job it was to make all purchases. It also created problems for product control. One of the biggest problems was that many small requisitions would be created for the same parts at different times for various programs throughout the plant. As a result, Raytheon Largo was not able to leverage quantity purchases from vendors and had little visibility into opportunities for commodity bundling. Lack of a consistent material planning strategy across programs led to duplication of efforts within supply chain functions or items “falling through the cracks.” Raytheon also had no clear way to determine who generated a requisition if problems developed with the order.
Raytheon Largo realized cost savings after implementing centralized material planning and the Material Planning group. Raytheon’s estimated saving in excess of 380 hours a month is only one part of this success story. By combining master scheduling, logistics, production control and procurement, the Largo facility has realized additional benefits that include a savings of $2.5M from centralized material planning. As the central hub that communicates with all groups, the Material Planning group now facilitates clear lines of communication between programs and procurement and increased negotiation leverage due to supplier bundling and horizon buying. Planners now check if enterprisewide agreement options are available prior to approving requisitions. Raytheon’s enterprise agreements save time and money by leveraging Raytheon’s buying power.
In 2005 use of enterprisewide agreements were at 5%; in 2006 use rose to 19.8 %; and the goal for 2008 is 30%. Raytheon’s material planners are now considered subject matter experts in material strategies throughout the plant, with responsibilities that include:
Serving as the focal points for supplier-managed inventory (SMI) initiatives
Spearheading point-of-use implementation to further facilitate SMI/supplier-owned inventory opportunities
Auto-release for appropriate items so that no requisition is generated, reducing the cycle time of the purchase order process
The success of centralized material planning and the introduction of material planners also allow each functional group within Raytheon to place more focus on its core competency. Procurement has more time to negotiate with vendors for better pricing; MPS has more time to load and manage new business; and Production Control has more time to manage the flow of material on the shop floor.
Figure 3-3. Material Planners Streamline the Process
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