Rockwell Collins builds on success
One year after receiving Purchasing's Medal of Excellence, the material and supply operation at Rockwell Collins takes steps to become more strategic.
By Susan Avery -- Purchasing, 10/19/2006 2:00:00 AM
To mark Rockwell Collins' five-year anniversary as an independent corporation, Clay Jones, chairman, president and CEO, rang the closing bell at the New York Stock Exchange on July 11. Pleased with what the company's accomplished, Jones says it is well positioned to continue its success well into the future.
One of those accomplishments belongs to the material and supply operation. A year ago, the material and supply operation at Rockwell Collins was already good enough to win Purchasing's Medal of Professional Excellence. Not one to rest on his laurels, Roger Weiss, vice president, material and supply, has taken steps to make the operation even more strategic, positioning it to play an even more important role in the company's future growth. The role relies heavily on the success of its supply chain.
Rockwell Collins is a growing company. Sales of its communications and avionics systems to both government and commercial customers are projected to rise to $3.85 billion by the end of its fiscal year on Sept. 30 from $3.45 billion. It is the fourth consecutive year of double-digit growth. Next year, revenue is projected to increase to $4.2 billion.
“We are truly dependent on our supply chain to make that happen, to continue to grow at the rate we've been growing,” says Weiss, a member of Purchasing's editorial advisory board. “Programs driven by the government and commercial industry are forcing us to become more supply chain focused. We simply can't do everything in-house.”
One of the commercial programs that the company has focused on is the Boeing 787 Dreamliner project, to which Rockwell Collins is providing $3.5 billion worth of products and materials over the life of the program. As part of that focus, Weiss says, “We have pulled more subcontractors into the equation and leveraged suppliers' development capabilities more than we ever have in the past. And it's only the tip of the iceberg. Boeing and Airbus will be counting on us to bring more value to the table for their new narrow body programs.”
For Boeing's part, the aircraft manufacturer has cut its supply base from 3,800 to just 1,200 suppliers. As a result, Steve Schaffer, vice president of global partners for Boeing Commercial Airplanes, has asked suppliers to deliver higher level subassemblies and systems solutions directly to the plant floor in an effort to remove costs from the value chain. This way, Boeing can offer the market more competitive airplane pricing.
Strategy
“When we received the Medal we were becoming more enterprise-focused,” says Weiss. “We were leveraging our own sites, processes and systems and becoming more proactive and more total-cost focused, taking more than price into account when making sourcing decisions. We continue to refine that.”
Weiss says that the material and supply operation is still not as proactive as he'd like it to be. “We know of issues earlier, but we are still reacting to them.” Like many companies, Rockwell Collins had to work through the hurricanes of 2005 as well as a mishap at the facility of one key supplier. The material and supply operation was able to react to the latter incident more quickly than its competitors, giving it an advantage in securing a source of supply of a critical component.
“As we go forward, we are more global, more predictive and instead of total cost, our focus is on value creation,” says Weiss, pointing to his company's contributions to the Boeing Dreamliner 787 as an example of value creation. “We have a two-pronged approach, to take the cost down, but also to leverage our suppliers to create more value for Rockwell Collins in the marketplace.”
The material and supply operation is looking more to new sources of supply in other regions of the world. Low cost, however, is not the primary focus of the search. Weiss and his team look for opportunities to do more business that will help open these regions to new markets for Rockwell Collins. They look for suppliers capable of providing new technology or lower cost, while ensuring that they are not extending themselves too far.
Material and supply is more predictive than it had been in past. Before, if a hurricane hit, it could be three weeks before Weiss and his team realized the impact the event would have on the business. “It would have taken us a long time to collect all the information we needed to do that,” he says. “Now we are capable of projecting the path of a hurricane and determining which suppliers potentially could be in jeopardy and the implications for our business. But that just means that we are reacting more quickly than before.”
Weiss says that to be more predictive and have a risk mitigation plan in place is akin to asking his team to look into a crystal ball. “We find that it's going to be a significant advantage to us because we can then start tying that back to our business and understanding where we need to focus our time and attention so that Rockwell Collins does not see any disruptions,” he says.
So Weiss is putting his energy into further training and developing his team, and making sure that material and supply's processes and systems are robust and work for as many situations as possible so that they are managing exceptions only. “I will hang my hat on it time and again that information flows are critical to supply chain success,” he says. “If we have the right information flows and systems and processes set up to react to that, it's what will differentiate us in the future.”
Tactics
Phil Krotz, director of Lean supply, says that all the key strategies the material and supply operation had in place when Rockwell Collins received Purchasing's medal have served them well. The team's efforts to lower inventory levels continue to be successful, he says. They've also reduced shortages by 30%, helping to ensure an ample supply of material to the company's facilities across the U.S.
Automating procurement activities have helped offset business growth: Material and supply has not had to add resources in the past year. “We let our processes and systems do the tactical work,” he says.
In fact, the team now is concentrating its efforts on more strategic activities. For example, Kevin Meyers, senior director of enterprise sourcing, is working on the organization's planning processes.
“We believe that if we focus on our material planning processes up front that we will be able to reap further benefits in asset management and inventory, as well as have a more stable supply chain,” says Krotz. That involves more discipline and integration with the company's marketing and sales organization.
Use of the material and supply team's supplier portal, www.supplycollins.com, has increased from 25,000 visits per month a year ago to more than 40,000 today. More than 1,700 suppliers have signed on to use the portal, which encompasses more than 95% of the company's direct spend.
The team has automated more than 75% of the company's procure-to-pay process, resulting in another recognition: Rockwell Collins received the R. Gene Richter award for leadership and innovation in supply management in the technology category at the annual Institute for Supply Management conference earlier this year.
The team also is more focused on containing costs and strategic sourcing. In an inflationary market with rising raw material and energy prices, they've been able to maintain and slightly decrease the company's cost structure, Krotz says. They've taken a new approach to sourcing, now looking at, for example, an entire display system rather than a single component. “We establish teams to identify cost drivers within the system and work with our supply base to look at value engineering or other avenues that we could perform to lower our overall costs,” he says.
As director of Lean supply, one of Krotz's responsibilities is supplier development. He's taking the company's Lean initiatives a step further, by deploying Six Sigma techniques with suppliers. “With our Lean tools, we're creating flow and looking to reduce variability in those processes so there's very little variation in, say, performance or size or parts as they are being produced.” This will help to further reduce costs.
The material and supply team has created a supplier dossier, or what Krotz calls a one-stop shop for supplier information. Developed for Rockwell Collins employees who work with suppliers, the dossier contains data gathered from www.supplycollins.com, the company's SAP system and supplier information available through Dun & Bradstreet. Says Krotz, “The better informed you are when dealing with someone the better the result.”
They're also developing a dashboard that displays performance metrics so that first thing on Monday morning Weiss can get a reading on the health of the business and determine what he and the team need to do to meet their commitments to the corporation. Now, quality and delivery metrics appear on the dashboard with inventory and purchase price variance measures to be up and running shortly. The dashboard consists of three levels, with the first providing a summary of the four measures. Levels two and three provide a deeper dive into the data.
“The benefit is that now we are all looking at the same metrics, calculated in the same way, from the same data sources,” says Krotz. “In the past, we had to reconcile data and make sure that we pulled it in the same manner from each location. The dashboard is going to help us manage business-critical metrics on a more proactive basis.”
To that end, the material and supply operation continues to work to ensure that each of the company's locations is up and running on SAP. Facilities on the West Coast not already on the system are expected to be up later this year and early in 2007. The team is working to integrate systems of the company's recent acquisitions, including its purchase of the visual systems business of Evans & Sutherland which has locations in Salt Lake City, Orlando and the U.K.
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