“Our initiative helped us find the proper sourcing balance to ensure the production support mission of Life Extension Programs and the enduring stockpile.” —Kurt Lorenzen, Director of Engineering, Honeywell FM&T
Supply Chain Execution and Sourcing
Rightsizing effort cuts $4.4 million in supply chain costs
Although Honeywell Federal Manufacturing & Technology (FM&T) manages and operates facilities for the federal National Nuclear Security Administration, the company in 2006 decided it needed to take a more agile, commercial approach to running the business. As part of that push, the unit of Honeywell International launched an initiative to rightsize its supply base.
Honeywell FM&T created a Supply Base Management team that included representatives from procurement, product engineering, and quality engineering. The initiative consisted of the creation of a new supply base management process, a strategic sourcing council, and a three-tier commodity team structure to manage all production parts and suppliers.
The team devised a three-step strategy to optimize supplier performance. A number of tools were developed to evaluate the supply base and easily identify and rationalize fringe suppliers. A monthly data summary, for example, aggregates data from multiple sources, creating a single document of supplier information. This gives Honeywell FM&T the ability to drill down to individual part numbers and derive signifi cant business performance management information.
This effort impacted supply chain processes and stakeholders, and drove continual improvement of supplier evaluation, selection, approval, supplier phase-out, and transition. The project, called Supply Chain Execution and Sourcing, also produced a preferred-partner process.
The venture supports the company’s environment of continual improvement and business excellence initiatives, such as ISO 9001 and participation in the Malcolm Baldrige National Quality Award program.
The Supply Base Management team has enabled Honeywell FM&T to deploy a more agile, integrated system for managing suppliers and supplier data that aligns with future needs and best business practices. Results of this effort included a 42% reduction in the supply base, a 9% increase in on-time delivery, and a 4.5% improvement in parts accepted rouble-free. Those results earned Honeywell a 2011 PM100 Award in the Supply Network Mastery category.
“Our Supply Base Management initiative helped us fi nd the proper sourcing balance to ensure the production support mission of Life Extension Programs and the enduring stockpile,” says Kurt Lorenzen, director of engineering at Honeywell FM&T. “The initiative helped us decrease the supplier base from 445 to 260, which improved on-time delivery to 96.7% and produced] savings of $4.4 million. And we estimate another $6 million in future cost avoidances.”