For the past 20 months, the Aerostructures team of Goodrich Corp. has been working with Grainger Integrated Supply (GIS) to reduce inventory levels of MRO items at some of its facilities.

In the first year of its agreement with GIS, Aerostructures has reduced costs associated with buying and inventorying MRO (maintenance, repair and operations) items by more than $3 million.

"Purchasing and holding inventory of consumable manufacturing supplies is an enormous cost," says Robert A. Grochala, purchasing manager for indirect materials and services, Goodrich Corp. "If we can envision a process in which we don't have to hold inventory, yet we can have the product delivered to point of use to support manufacturing, then we have eliminated an enormous amount of cost."

Working with John Foulk, director of supply chain management for Goodrich, Grochala has responsibility for purchasing indirect consumable materials, capital equipment, services (construction, consulting, contract labor) and computer hardware and software (including custom software) for the Aerostructures business. His customers are in the company's manufacturing operations, facilities maintenance, information technology, engineering, finance and human resources functions.

The largest of the Goodrich businesses, Aerostructures operates through 10 manufacturing and service facilities around the world. It manufactures and provides aftermarket maintenance for nacelles (an enclosure on an aircraft for an engine or sometimes for the crew), thrust reversers and related commercial and military aircraft components and structures. Also within the Aerostructures business group is an aircraft maintenance repair and overhaul services business, Aviation Technical Services. Other Goodrich business groups are Landing Systems, Engine and Safety Systems and Electronic Systems. Goodrich is headquartered in Charlotte, N.C.

At Goodrich, purchasing is decentralized. Each business group buys direct and indirect goods and services to meet its own requirements. Yet while there is no centralized operation overseeing the purchasing activities of the businesses, the groups do share best practices and increasingly consolidate buying of common items.

Aerostructures purchasing strategy for MRO is "just-in-time, point-of-use delivery of supplies by the manufacturer or distributor." Says Grochala, "Our goal is zero MRO inventory held onsite except at the point of use, coupled with direct delivery of replenishment stocks to the point of use by the manufacturer or distributor." For example, a supplier of perishable tools delivers cutters and drills directly to a facility's machine shop. (Traditionally, purchasing would have ordered the material, received it, put it into stores, pulled it out of stores and delivered it to the location where it was needed.)

The key, Grochala says, is for suppliers to deliver to point of use and for purchasing not to see the unit price of the product grow dramatically.

Previously, Aerostructures purchased its MRO items in bulk "because the unit price was less and for some reason in the back of our minds we excused the carrying cost as being part of the process," he says. Goodrich used onsite commodity cribs supplied by focused volume purchasing agreements controlled by an inventory management system. The system was predicated on purchasing in batch, holding inventory and issuing to manufacturing in batch.

"What we are doing now is challenging that thought pattern," Grochala says. "We are looking at the unit price of an item delivered to the point of use as opposed to the purchase price to inventory, then seeing if we can align with strategic distributors or integrators such as Grainger to help us develop a point of use strategy and implement it."

After an extensive evaluation process that lasted more than eight months, a cross divisional team of purchasing managers selected Grainger Integrated Supply as the Aerostructures group's integrator.

The team developed an RFI (request for information) to pare down the list of potential suppliers to those that fit Goodrich's decentralized purchasing structure. (At this point, the team expanded to include some maintenance personnel.) It selected Grainger on its overall strength and capability based on such criteria as financial strength, purchasing capability, management strength, process control, experience and history. More specifically, the team chose the supplier for its ability to provide a range of services from simple catalog ordering to onsite integrated supply. (Integrated supply is a term used to indicate the outsourcing of the indirect materials procurement process.)

Goodrich entered into an Enterprise Sourcing Agreement (ESA) with W.W. Grainger in 2000 for the supply of manufacturing and maintenance consumables to all its operating units. Grainger Integrated Supply provides integrated supply services to Aerostructures locations at Chula Vista, Calif.; Riverside, Calif.; Foley, Texas and Arkadelphia, Ark.; and to a Landing Systems location at Tullahoma, Tenn. These services include product sourcing and purchasing, inventory management and reduction, material item data identification and description, point-of-use ordering and delivery support. Goodrich pays GIS an annual fixed fee for its services.

Grainger Industrial Supply (which is a separate entity from Grainger Integrated Supply) provides industrial material supply services to Aerostructures and other Goodrich divisions.

"Partnering with Grainger, we challenged them to achieve the point-of-use supply model," says Grochala. Traditionally, integrators purchase inventory and hold it onsite for distribution.

Working with a second tier of suppliers (like Grainger Industrial Supply), "GIS helps identify products contained in the stores, eliminate and push them back to the distribution network," he says. "They also are setting up the scheme by which we trigger the materials to point of use and are establishing the point of use delivery system." GIS places orders for the MRO items. Using its MRP system GIS determines need for a product, and handles orders for spot buys, requisitioned by Aerostructures employees. This process is being transitioned to Goodrich's SAP system.

This strategy helps to eliminate inventory and carrying costs associated with inventory. The $3 million in savings achieved in the first year of Goodrich's agreement with GIS are a result of product cost savings, process savings and inventory reductions.

Grochala measures supplier performance on a monthly basis. Specifically, he looks at piece price variance savings (new price compared to previous price paid), inventory reduction/elimination and fill rate performance (shortages).