Commodity teams help Rockwell Collins take off

Purchasing Staff -- Purchasing, 4/2/2003

As a result of efforts of the enterprise sourcing team over the past 18 months at Rockwell Collins, purchasing has reduced costs up to 20% of some commodities, consolidated the supplier base and improved leadtimes 30%. Key to these efforts has been the use of commodity teams.

Decisions to name a team to manage a commodity are made by the supply chain steering team (SCST). The SCST is essentially a cross-functional governing body that oversees such supply chain processes as engineering, manufacturing, procurement and finance. Sponsored by the vice president of material and supply, the team's function is to direct supply chain management processes as well as drive the commodity team process.

Commodity teams are in place for such buys as semiconductors, printed circuit boards, passives, resistors, and capacitors. Rockwell Collins is in the process of putting together teams for the indirect goods and services and subcontract purchases. "The number of teams in play is fluid by plan," says Roger L. Weiss, senior director of enterprise sourcing, and a 15-year Rockwell International veteran. "We put together a team when we believe the commodity is critical to Rockwell Collins and we need to have a focus on it. We'll terminate teams if we believe the value isn't there."

Typically, commodities are selected based on size of spend or criticality of technology to the company. "We're basically a big job shop," says Weiss. "We build a lot of different things, but not a lot of any one thing." For example, Rockwell Collins has a fab processes commodity team for which there is no spend. This team monitors such processes for mechanical components as finishing (i.e., painting).

The supply chain steering team sets direction (goals and responsibilities) for the commodity teams. Each team includes representatives of procurement (from the site for which the spend is most applicable), application engineering and engineering. Each team has a leader (a voluntary position) and a mentor, usually an individual from the supply chain steering team, senior manager or leader within the organization.

The commodity teams meet monthly. "During the discussions, we encourage the teams to focus on strategic activities and stay away from day-to-day tactical duties," says Weiss. Strategic activities that the teams focus on during the monthly meetings include use of preferred supplier lists and preferred parts lists, quality levels, delivery levels, supplier performance and supplier relationships. Then, twice a year, the teams have opportunity to present progress on activities in these areas to senior management.

"At the end of the day, Rockwell Collins is looking for a very strong strategic supply base," says Weiss, of the purpose of the commodity teams. "We look to the commodity teams to link the industry and suppliers to internal design and manufacturing." Team involvement in the engineering processes varies by commodity: The mechanical team may be involved at the specification stage, while the ASICs (application specific integrated circuit) team may be involved in design review or development.

"When we address a particular commodity, we pull together a sourcing team," says Weiss. "Typically that team is the commodity team or a subset of a commodity team. So, decisions made by the sourcing team flow back into the commodity team's strategy." He adds that much of the strategic direction determined by a commodity team for a commodity is based upon the sourcing process and its outcome.

This process consists of six disciplined steps. The first involves the team's selection of the commodity grouping to be sourced; the second identifies the spend (What is Rockwell Collins purchasing? From which suppliers? How is the commodity currently being purchased?). The third step creates the sourcing strategy (What should Rockwell Collins be buying? How should the company be purchasing it? How should suppliers be selected?). The fourth calls for the building of a supplier portfolio that includes developing the RFP (request for proposal) and identifying total cost of ownership (TCO) opportunities. Steps five and six center on negotiation and implementation of the agreement and aggressive commodity management (ensuring that implementation occurs and that suppliers are working on continuous improvement), respectively.