IE 466 Concurrent Engineering

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• IE 466 Concurrent Engineering
• Sourcing
• and
• Supply Chain Management
• Presented by
• Bill Lindquist and Felicia Lim
• Ingersoll-Rand Company

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Topics

• Evolution of Supply Chain Management
• Overview of Supply Chain Management (SCM)
• Market Forces and Emerging Trends in SCM
• Whats Hot in Supply Chain Management?
• Suppliers and Sourcing Functions in Product
  Development
• How can engineers be valuable in these areas?
• (Live Testimonials via Teleconference)
• Reference list of magazine sources and websites

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Evolution of Supply Chain Management

• Pre-1980 Clerical/Transaction Focus
• 1980-1990 Price/Quality Focus
• 1990-2000 Inventory/Productivity Focus
• 2001 Strategic Focus
• using the firms supply function as a
  competitive tool
• Evolution not yet complete

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Overview

• What is Purchasing?
• An organizational function that is responsible
  for acquisition of required materials, services,
  and equipment.
• What is Procurement?
• An organizational function that includes
  specifications development, value analysis,
  supplier market research, negotiation, buying
  activities, contract administration, inventory
  control, traffic, receiving, and stores.

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Overview

• What is Sourcing?
• The process of identifying sources that could
  provide needed products or services for the
  acquiring organization.
• What is Strategic Sourcing?
• An on-going analysis to evaluate the right mix of
  products and services, determine the appropriate
  suppliers and terms and conditions to balance
  cost, quality, and risk.

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Overview of Supply Chain Management

• What is Supply Chain Management?
• the identification, acquisition, access,
  positioning, and management of resources the
  organization needs or potentially needs in the
  attainment of its strategic objectives

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Overview of Supply Chain Management
Strategic Contribution to the Firm Low
High

• Traditional Purchasing
• Process Orders
• Bidding/Negotiation
• Expediting/Tracking

• Procurement/Sourcing
• System Efficiency
• Plan Volumes
• Cost Management
• Leverage Buying Power

• Supply Chain Management
• Shape and influence the supply market and
  inbound chain
• Analyze and suggest supply opportunities/options
• Provide the firm with access to what it needs
  but cannot develop
• New revenues are as important as cost savings

1970s 2001 and beyond
Timeline
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The Supply Chain
Shared Information and Processes
Suppliers Suppliers
Assembler
Suppliers

• Issues
• Inventory
• Visibility
• Communication
• Collaboration
• Overlap
• Conflicting Objectives

LogisticsProviders
Distributors
Customer
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Market Forces and Emerging Trends in SCM

• Greater emphasis on communication and
  collaboration
• Global competition and global sourcing
• Transportation improvements eliminating the need
  for regional sourcing
• Integrated systems are being procured instead of
  parts and services
• Transformation from piece-price to total-cost
  solutions
• Auctions and market exchanges on-line
• Drive towards making products commodities where
  possible
• More outsourcing allowing a focus on core
  competencies
• Outstanding quality is expected and not a
  discriminator

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Whats Hot in SCM?

• Web-based procurement tools
• E-Procurement
• Third-party auctions
• Consortiums for buying leverage
• Buyer and seller exchanges
• Outsourcing
• Third-party logistics (3PL) providers
• Use of Integrators and Distributors
• Supplier Relationship Management
• Strategic Supplier alliances
• Collaborative design
• Supplier managed replenishment
• On-site supplier representatives

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Case Study

• Improved on-time delivery from 45 to 95
• Reduced of department working on tactical
  issues from 99 to 29
• Inventory reduced from 30 days of supply to 10

• Cessna
• Problem areas
• supplier on-time delivery
• redundant inspection and rework
• price and cost escalation
• fragmented organization and strategies
• Solution
• Integrated Organization Structure/Process
• Sustaining Production Strategic Sourcing New
  Product Development
• Automate repetitive tactical activities
• Implement Six Sigma and VE/VA programs
• Supplier rationalization and development
• Include suppliers in design, manufacturing,
  e-business and product support
• Strategic Make vs. Buy process

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Case Study

• Inventory reduced 25
• Costs of Purchased Goods reduced 10
• Supplier quality levels improved from average
  of 10,000 PPM to 48 PPM

• Harley-Davidson
• Problem areas
• Poor relationships with suppliers
• Lack of coordination with Engineering
• Sporadic quality problems
• Weak product development
• Solution
• Restructure Purchasing operations
• Dedicate half to product design and half to
  development
• Co-locate Engineers with Purchasing
• 80 of Purchases concentrated in 70 suppliers
• On-site Supplier Representatives

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Importance in Product Development

• New Product Development Teams
• Suppliers participate in design reviews to ensure
  feasibility of design based on capabilities.
• Sourcing function is responsible for supplier
  identification, cost containment, and managing
  lead time constraints.
• Value Engineering/Value Analysis (VE/VA)
• Sourcing function evaluates products, initiates
  improvements with engineering and suppliers to
  increase function while decreasing cost, and
  manages implementation of improvements.

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Product Development Tools Used in Sourcing

• Design For Manufacturing (DFM)
• Collaboration between engineering and
  manufacturing functions prior to design release
  that ensures that the product design meets
  manufacturing capabilities and considers ease of
  manufacturability.
• Failure Mode Effects Analysis (FMEA)
• Risk assessment process during the design phase
  that evaluates all potential failure modes, their
  effects on the products performance or quality,
  and develops control plans to reduce these risks
  of failure.

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Engineers in Sourcing and SCM

• Brian Grev
• I learned that sourcing is more than just
  purchasing. It involves strategic alignment of
  supply chains, supply chain management,
  negotiation tactics, and more. Through my
  projects I have become more informed about
  different manufacturing processes forging,
  stamping, deep drawing, screw machining,
  injection molding, fine blanking and more. I
  have also developed relationships with suppliers
  that will continue to benefit my projects.
• Jessica Rosenberger
• While at my current assignment I have been
  involved in many diverse projects. I have
  participated on the supplier development council
  for a new product that will change the way the
  golf car industry does business both internally
  and externally. My primary responsibility is the
  design, implementation, and documentation of an
  integrated supply program which has resulted in
  cost reduction and inventory reduction,
  contributing not only to our business until
  goals, but also to the goals of IR.

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Engineers in Sourcing and SCM

• Mihyar Mohamed
• I see this as an opportunity to pursue a
  career that rewards you for your technical
  background, while at the same time allowing you
  to use skills in personal interaction,
  relationship management, and strategic thinking
  that are all necessary to excel in this field.
• Craig Smith
• My assignments have gone beyond buying and
  purchasing widgets. I have been involved with
  teams that find, select, and manage business
  relationships that enable IR to strengthen its
  position in the marketplace. The business unit I
  work for does very little manufacturing, so the
  sustainable growth of the business depends
  heavily on new product launches and service
  initiatives. Therefore the sourcing team works
  very closely with the marketing team and takes on
  a much more important role in the strategic plan
  of the business unit.

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References
Strategic Supply Chain Management James P. Morgan
and Robert Monczka
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