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5 Universal Best Practices That Help in Trying Economic Times

Posted 04-26-2010 at 11:46 PM by 95th Annual
This afternoon, three distinguished presenters – two of them past J. Shipman Award winners* – presented their session, “5 Universal Best Practices That Help in Trying Economic Times”: Susan K. Modeland, CPSM, C.P.M., CPIM, enterprise supply chain project manager for Goodrich Corporation; R. David Nelson*, C.P.M., senior partner at Fenix Group International, LLC; and Robert A. Kemp*, Ph.D., CPSM, C.P.M., president of Kemp Enterprises.

All three presenters contended that economic security in the supply chain comes from a keen application of risk management and risk mitigation strategies.

First, Kemp began the session by painting a picture of the future business environment – one characterized by continuing economic uncertainty; increased global risk; and increased pressure for total cost management, cost reduction and risk mitigation or elimination.

Picking up where Kemp left off, Nelson spotlighted his five universal best practices to ensure risk mitigation and improved economic security.

1) Formally agree on and select a specific supplier or suppliers for specific products or services.
Then, Nelson recommends, sit down with each key supplier to secure its agreement to:

• Supply you with the goods or services with open book (which he called “hugely competitive”), and for the cost standard or should-cost.

• As necessary, accept supplier development engineers and product engineers. “We want these suppliers to be the very best in their industries because it helps ensure our own competitive advantage,” he explained.

• An annual meeting with your senior leadership team to review in detail a business plan for the next three years, as well as the previous year’s actual results. In the past, Nelson has reviewed 47 items and looked three years in advance as part of this process.

• 100-percent quality and delivery (with your supply management team’s help as needed).

• Develop and maintain the most competitive and highest level of product engineering in your field, with your help as necessary.

2) Cost Management — Suppliers should agree to work with your organization’s engineering function to develop competitive products at new-model concept time, as well as to create and document ideas for cost reductions/savings during the manufacturing cycle.

3) Lean Supplier Development Engineers — Suppliers should accept, learn and implement lean (TPS) in both manufacturing and office processes.

4) Early Supplier Involvement — Compliance with this dynamic means suppliers agree to work together with your company’s product engineers and procurement professionals at the concept stage. Nelson called this the “single most competitive” practice to remove costs and increase profit.

5) Customer Satisfaction — Suppliers should agree to be measured on – and expected to maintain – high levels of satisfaction for customers, internal customers and stakeholders. (“If they don’t know how to maintain [these levels], they’ll be slipping down the slippery slope, no matter what,” Kemp asserted.) To further this practice, Nelson also promoted the idea of supplier awards programs.

For Modeland’s part, she broke down the enterprise risk management program at Goodrich Corporation, a defense and aerospace supplier whose suppliers are – understandably –extremely risk-averse).

She also discussed one of the supply chain management group’s critical actions: to develop strategic change processes from the existing set of current best practices (her passion) in supplier development.

Modeland organized the task to accomplish this objective, acting as its project manager. In the process, 24 supplier development best practices were identified as part of a supplier development roadmap. Among these were:

• Quality performance indicators — act as driver metrics to a supplier's quality ratings.

• Scorecards — gauge quality, cost, delivery, continuous improvement (CI) and communications. “We want these to be a tool for interaction with our suppliers,” she told attendees. “So, if something bad happens with one of my supplier’s, it’s nobody’s fault but my own.”

• Approved Supplier List (ASL) — in progress; Goodrich-wide.

• Rate readiness capacity — on-site evaluation of a supplier's capacity and resources to support a program, pre-production.

All these best practices appear to be paying off. As Modeland pointed out, Goodrich’s top two enterprise risk management issues in 2008 (supply chain interruption and supply chain capacity) fell to no. 8 and off the top 25 list entirely, respectively, in 2009.

“Clearly, these risks are being managed,” she concluded.
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