Innovation: Technology breeds improved communication

News source: Purchasing.com

Tools encourage early supplier involvement
By David Hannon
Purchasing September 1, 2005

In addition to the innovative sourcing and supply chain management strategies in place at Rockwell Collins, the material and supply organization has effectively leveraged technology and software to streamline supply, improve supplier quality and relationships, and drive spend to preferred suppliers.

Perhaps the technology with the greatest impact is the supplier portal. According to Phil Krotz, director of Lean Supply, the material and supply organization started work on the portal in 2003 by first gathering input from its Supplier Alliance Advisory Council, a group of 17 top suppliers in various commodities. Krotz says members of the council provided feedback on everything from the "look and feel" of the portal to the "kind of information they'd like to see and the frequency of that information."

With an idea of the functionality their suppliers wanted, material and supply looked at the tools available on the software market but didn't find anything that suited its needs at the time. So the team decided to develop the portal tools internally, using its SAP system as the backbone. "We decided to use an off-the-shelf solution for the portal framework, which does the log-in, identification and authentication functions," says Sam Slingluff, a commodity specialist closely involved in developing the portal, adding that the individual modules were developed in-house.

The first functionality targeted for the portal was the efficient exchange of technical documents and information between suppliers and buyers. An E-Drawings tool allows suppliers to log-on to the portal and access large technical drawings online instead of via e-mail or a CD, which significantly streamlines the RFx stage.

To further streamline the RFx functionality, an e-RFQ application was developed that searches the ERP system for contracts that are coming up for bid six weeks out and sends alerts to suppliers to bid on them through the portal. Once a predetermined number of competitive bids are received, the system evaluates the bids and can automatically send a purchase order to the winning bidder or let a buyer evaluate the bids before making an award.

The Supplier Scorecard module on the portal provides data on each supplier's quality and delivery performance. Suppliers are sent an e-mail every month with the data including current scores as well as six-month averages to help identify longer-term trends. "They see their total score up front and if they want to, they can drill down into individual lots that there was a problem with," explains Krotz.

The Order Status application lets the highest-volume suppliers see all their open orders and confirm delivery dates, push-out dates, split orders and change quantities. That data is delivered directly from the SAP ERP system in near real-time. "All the information the supplier inputs or changes goes directly into our SAP system so our buyers get the information real-time," explains Slingluff.

A forecast tool lets suppliers see Rockwell's future demand expectations for the items they supply and plan appropriately based on the forecast.

The number of suppliers on the portal has grown as the functionality of the portal has advanced. The first year, there were 280 or so suppliers on the portal—today there are more than 1,300 suppliers, most with multiple users. Krotz notes that the primary focus of the portal to date has been on the direct commodity suppliers, but says, "We're looking to include indirect suppliers, although it's more difficult to include indirect goods and services in a portal environment."

To determine the future direction and functionality of the portal, suppliers have been invited to develop a "value stream map"—a map of where the portal is now, where it should be in the future and the steps in between. "With that, we've laid the groundwork for the next three years' development and set functionality goals," Krotz says.

Product development
Internally, Rockwell has also developed an innovative tool that helps bridge the gap between buyers and designers in selecting parts and suppliers. Historically, Rockwell had used an internally developed system called the Global Component Information Systems (GCIS) as a central repository for part numbers and suppliers. But as the emphasis on Lean processes grew and the goal was to push more of its spend to preferred parts suppliers, a more advanced tool was developed to help designers select parts from preferred suppliers.

The Impact tool is based on i2 Technology's framework with some customized Web utilities to let users gain quicker access to part information. The key to the system is that "preferred" suppliers are not designated as such based solely on price—the material and supply organization consults with commodity teams in assigning an overall score to each supplier based on a combination of variables.

"A designer can input the attributes of a certain part and there may be 20 parts in our system that fit that description," says Scott Wagner, director of application engineering. "But the Impact tool lists them based on our scores to show designers which parts and suppliers we prefer based on those business rules."

The result has been positive—when given a choice, designers do select the preferred suppliers based on performance as well as cost, especially when designing new products. (Wagner says it is more difficult to drive parts to preferred suppliers for existing designs).

But perhaps more important, the Impact tool has improved the relationship between engineering and supply—something any CEO or CFO would be happy about.

"We conducted a survey with engineering after the tool had been out about a year asking if they liked the sorting of results to see what parts were preferred," Wagner says. "The results showed 65% of engineers polled viewed it favorably. And 45% said the tool reduced their reliance on application engineers when selecting parts. The need for application designers is not going away, but the role of that position is changing to focus on more strategic issues."

Beyond the basic component selection capabilities, the Impact tool has been integrated with the ERP system which facilitates a "BOM healthiness check." The system can evaluate a bill of materials for the percentage of preferred vs. nonpreferred suppliers on the BOM or review for component obsolescence. Rockwell releases about 600 printed circuit-board designs a year. To establish a baseline when the Impact tool first went live, Wagner put 45 of those designs through the tool. "We found about 74% preferred parts being used and 24% nonpreferred," he says. "We did it a year later and saw a 5% improvement in preferred parts."