Product Development: Material and supply joins design teams
They're helping improve sourcing and pricing in the early stage
By Paul E. Teague -- Purchasing, 9/1/2005 2:00:00 AM
Early in the development of the U. S. Department of Defense-funded Joint Tactical Radio System (JTRS), Rockwell Collins engineers saw a figurative yellow caution light. Their procurement colleagues on the team reported that some of their suppliers might not be the best choice. They had not been working out well on other projects, and their prices had gone up. Procurement showed them a list of other suppliers who were likely to do a better job. Result: The team avoided the pitfalls of working with suppliers, who for a variety of reasons, might not be up to the job.
Just another day at the office for the Rockwell Collins product development teams. Similar scenarios play out regularly at the avionics and communications supplier, where engineering and procurement work side by side on the largest, most complex projects.
"Purchasing is a core member of Rockwell Collins commodity teams, which are responsible for identifying preferred sources as well as components and technology for new product development," says Nan Mattai, senior vice president for engineering and technology at the Cedar Rapids, Iowa-based company.
Adds Scott Wagner, director of application engineering: "Their involvement shortens development time and keeps us out of situations where we have to change suppliers midstream in a project."
Purchasing is increasingly becoming a fixture on product-development teams in several industries. In companies ranging from motors-and-drives supplier Baldor to test-equipment manufacturer Instron, procurement works closely with engineering, weighing in with advice on suppliers and alternative design possibilities. Recently, IBM produced a study showing that corporate executives are turning to procurement to improve the bottom line.
No wonder.
Approximately 70% of a product's cost is determined in the design/ development phase, says Rockwell Collins' Mattai. And, she adds, "material accounts for approximately 50% of product cost."
Mattai says the company uses a Decision Point process that tracks the progress of every product development project. Purchasing's involvement usually begins at the requirements-capture stage, which is early in the bill-of-materials identification/development. Part of the process involves commodity teams meeting regularly with suppliers. Additionally, a Supplier Alliance Advisory Council provides, among other things, information on market conditions and feedback on supply chain activities. Finally, using its own criteria, the company categorizes suppliers three ways: "Maximize," "Minimize," and "Maintain." The "Maximize" suppliers are those who regularly meet the company's criteria for quality and on-time delivery.
The entire process of aligning procurement with product development was critical in the JTRS program. The project, for which Boeing is the prime contractor, is to develop a family of software-programmable tactical radios that will provide the armed forces with voice, data and video capability. "It will allow the armed forces to communicate through a single-radio system," says Wagner. Rockwell Collins and BAE Systems, with the help of Harris Corp., were charged with developing the ground vehicular and airborne systems for the U. S. Army. The program greatly benefited from early involvement of purchasing, says Mattai.
Procurement, as part of the commodity team, provided information and guidance to preferred technologies and the suppliers supporting those technologies, she asserts. Purchasing staff also helped in prototype development and in reducing cycle time through use of service agreements, procurement cards and other tactics.
Says Mattai, the result has been improved source and component selection, reduced engineering change orders and better pricing through leveraged spend with fewer suppliers. Procurement's goal, she says, "is to increase their involvement in all activities."
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