Dresser-Rand manages supply chain risk
By William Atkinson -- Purchasing, 8/22/2007 2:06:00 PM
While many companies have become more cognizant of the importance of managing supply chain risk, few companies have introduced as many effective and coordinated strategies as Dresser-Rand in Houston.
The company engineers and manufactures rotating equipment, such as turbines, compressors and ventilators for the volatile worldwide energy markets.
One key to Dresser Rand’s supply chain risk management involves having global commodity strategies, which allow management to understand the source of supply and who the company wants as part of its "go-forward" supply base. "By having a global strategy, rather than local or regional, we are able to reduce supply chain risk," says Kenneth Marcia, vice president, worldwide supply chain management and process innovation. Dresser-Rand has global commodity teams for all of its direct and indirect spend categories, and these are managed by 10 commodity managers who cover the company's spend around the world. To ensure true global insights, these managers are located in North America and Europe.
While the company manages commodities on a global basis, it pays close attention to local and regional issues. For example, it makes sure that it has an appropriate and balanced mix of suppliers and clients in a given region of the world. "This allows us to create a regionally supported supply chain," explains Marcia. "We want to align our supply chain with our client base." This strategy helps to optimize the company's transportation and logistics costs, shorten cycle times, and better respond to client needs.
Another key strategy in keeping supply chain risk low involves developing a Lean supply chain. Dresser-Rand stipulates in its contracts that the suppliers must have Lean improvement programs in place. However, they aren't on their own in developing and implementing these programs. Dresser-Rand is aligned with the Supplier Excellence Alliance, which was created by the aerospace/defense industry about four years ago to improve the performance of the supply chain. "It helps suppliers implement the most advanced lean practices that are available," points out Marcia. Besides Dresser-Rand, members include Boeing, Lockheed Martin, Northrop Grumman, UTC, Honeywell, and Rockwell Collins. Having suppliers implement lean programs helps to reduce supply chain risk by reducing cycle time.
Marcia's responsibilities, as illustrated by his title, also help to mitigate risk, in that he is responsible both for supply chain management and process innovation. Process innovation includes lean, quality, and manufacturing engineering. "We have a strong matrix organization, so we have supply chain management directors and process innovation directors both on my staff and supporting our business leaders around the world," he says. Typically, then, the technical resources needed to support an appropriate supplier risk management system can more easily be deployed.
Another important key to supply chain risk management is staying abreast of the strength of suppliers, particularly their financial strength. To this end, Dresser-Rand works with Open Ratings, a firm that provides operational and financial information about global suppliers and uses this organization's reports to stay abreast of the overall financial health of the global supply chain. "There have been several situations where we have received alerts from Open Ratings, especially financial alerts, that have allowed us to conduct proactive interventions," he recalls.
Example: Dresser-Rand received an alert on a motor supplier. In response, it sent a team to visit the supplier that included the commodity manager and one of the lean experts. "The supplier was definitely under financial stress," Marcia says. "We worked with them through the situation." Ultimately, the supplier was acquired by another company and began putting a lot of process improvements in place. According to Marcia, the good news is that this supplier is now very solid.
As a result of this multipronged and coordinated supply chain risk management initiative, Dresser-Rand is beginning to see improved leadtimes in some of its key commodities. "We are also starting to get a better overall value proposition from our supply base, either in terms of improved delivery or total value, depending on the commodity," he adds.
For example, the forging and casting industry segments have been under pressure in recent years. By deploying a global commodity strategy, working on Lean with the assistance of the Supplier Excellence Alliance, and having Open Ratings continuing to report on these companies, Dresser-Rand is able to effectively manage potential risks associated with these two commodities. "We are now signing long-term agreements with some of these suppliers, which is giving us a better value proposition and reducing leadtimes," he concludes.
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