Cycle Time Reduction through Integrated Supplier Networks: Overview and Introduction

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Lean Aerospace Initiative

Plenary Workshop

Cycle Time Reduction through Integrated Supplier

Networks: Overview and Introduction

March 31- April 1, 1998

Presented By:

Kirk

Kirk Bozdogan Bozdogan MIT

MIT

Research Sponsored By LAI Research Sponsored By LAI

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Initiative

Focus

l

Kick-off today’s theme: Cycle time

Kick-off today’s theme:

Cycle time

reduction through integrated

supplier networks

l

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Initiative

Cycle Time Key to

Competitive Advantage

SOURCE: Clark,Ellison,Fujimoto and Hyun (1995)

MONTHS TO FIRST ENGINEERING PROTOTYPE, JAPAN vs US, 1990s 4.6 2.7 7 . 8 2 . 9 0 1 2 3 4 5 6 7 8 9 10 11 12 13 US JAPAN

(Months before first prototype completion)

Drawing Release Prototype Build

1 2 . 4 5 . 6

Focus on auto industry benchmarking results covering 1990s Focus on auto industry benchmarking results covering 1990s

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Initiative

Integrated Supplier Networks

Critical to Cycle Time Reduction

SOURCE: Clark,Ellison,Fujimoto and Hyun(1995)

Japanese auto suppliers delegated greater design responsibility (“Black Box” components)

SUPPLIER ROLE, JAPAN vs US, 1990s

58% 39% _55% 30% 6% 12% 0% 20% 40% 60% 80% 100% US JAPAN

(Percent of total procurement costs)

Suppliers'-Proprietary Parts

Black Box Parts

Detail-Controlled Parts

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Initiative

Major Lessons from Auto Industry

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l Early supplier integration critical to sustainedEarly supplier integration critical to sustained

competitive advantage

– Shorter cycle time

– Faster introduction of new technology

– Continuous improvement

– More rapid market response

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l Key success factorsKey success factors

– Fewer first-tier suppliers

– Strategic supplier partnerships

– Major supplier role in design (“black-box” parts)

– Up-front design/process integration

– Close communications with suppliers

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Lean Aerospace

Initiative

Aerospace Industry

Learning Lean Lessons

Major producer of complex airframe structures achieved

significant performance improvements by using lean principles Major producer of complex airframe structures achieved

significant performance improvements by using lean principles

Month

s

REDUCED CYCLE TIME (Order-to-Shipment, months) 36 12 0 5 10 15 20 25 30 35 40 1989 1997

Percent of all supplier

IMPROVED SUPPLIER DELIVERY (Dock-to-Stock) 0% 75% 0% 10% 20% 30% 40% 50% 60% 70% 80% 1989 1997 shipments 1989 1997

REDUCED SUPPLIER DEFECTS

7.10% 2.90% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% Rejections as % of all

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Initiative

Before

Before AfterAfter (1989)

(1989) (1997)(1997)

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l Redefined business mixRedefined business mix

– Commercial sales as % of total sales 48% 92%

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l Reduced supplier baseReduced supplier base

– Number of direct production suppliers 542 162

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l Improved procurement efficiencyImproved procurement efficiency

– Procurement personnel as % of total employment 4.90% 1.90% – Subcontracting cycle time (days) 13 7

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l Improved supplier quality and scheduleImproved supplier quality and schedule

– Procurement (dollars) from certified suppliers 0% 75% – Supplier on-time performance (% of all shipments) 76.4%* 83.0%

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l Established strategic supplier partnershipsEstablished strategic supplier partnerships

– Procurement (dollars) under long-term agreements 0% 95%

NOTE: *Refers to 1991 NOTE: *Refers to 1991

Key Practices

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Initiative Early Supplier Integration:Early Supplier Integration:

Results from Other Case Studies

Arm’s length; interfaces totally defined and controlled

Collaborative; but constrained by prior workshare arrangements

Collaborative and seamlessly integrated, enabling architectural innovation Virtual Team w/o boundaries Prime Key Suppliers Subtiers

“Old” Approach “Emerging”

Lean Prime Key Suppliers Subtiers “Current” Lean

Collaborative with rigid organizational interfaces Prime Key Suppliers Subtiers Rigid vertical FFF interfaces and control

•Case studies demonstrate significant benefits: more than 30% cycle time

reduction; 40%-60% cost reduction; significant quality improvements

•Major benefits stem from architectural innovation in product development •Case studies demonstrate significant benefits: more than 30% cycle time

reduction; 40%-60% cost reduction; significant quality improvements

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Initiative

Introduction to Today’s

Briefings

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l Chrysler: Rethinking the Supply ChainChrysler: Rethinking the Supply Chain

– Prof. Jeff Dyer, Wharton School, U of Pennsylvania

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l Cycle Time Reduction with Part SynchronizationCycle Time Reduction with Part Synchronization

– Tom Shields,LAI

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l Three Dimensional Concurrent EngineeringsThree Dimensional Concurrent Engineerings

– Prof. Charlie Fine, LAI (Sloan School)

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l Key Characteristics Maturity ModelKey Characteristics Maturity Model

– Basak Ertan, LAI

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l “Customer and Supplier Integration Across the“Customer and Supplier Integration Across the

Supply Chain”- Summary of Implementation IPT

Workshop Results

Workshop Results (February 12-13, 1998) (February 12-13, 1998)

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Lean Aerospace

Initiative

Introduction to Today’s

Briefings

l Chrysler: Rethinking the Supply Chain

l Cycle Time Reduction with Part Synchronization

l Three Dimensional Concurrent Engineerings

l Key Characteristics Maturity Model

l “Customer and Supplier Integration Across the

Workshop Results (February 12-13, 1998)

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Lean Aerospace

Initiative

Introduction to Today’s

Briefings

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Lean Aerospace

Initiative