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National Aeronautics and Space Administration. SUPPLY CHAIN MANAGEMENT ANALYSIS FOR SPACE EXPLORATION. Michael Galluzzi NASA ESMD and Ted Bujewski AEROSPACE CORP. October 29, 2008 NASA Headquarters 300 E Street SW Washington DC 20024-3210. www.nasa.gov.

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  1. National Aeronautics and Space Administration SUPPLY CHAIN MANAGEMENT ANALYSIS FOR SPACE EXPLORATION Michael Galluzzi NASA ESMD and Ted Bujewski AEROSPACE CORP. October 29, 2008 NASA Headquarters 300 E Street SW Washington DC 20024-3210 www.nasa.gov

  2. Space Shuttle Program Active Flight Hardware Suppliers Distribution by State NASA Federal Fiscal Year 2007Obligated Budget Distribution by State Qualified (Active Flight) Supplier Count Distribution >$94,500,000 >$18,200,000 >$4,240,000 >$2,110,000 <$0,<$2,110,000 1 - 18 19 - 36 37 - 54 55 - 72 72+ Source: OMB Reporting Period: 09/30/03 to 09/30/07Revised on March 3, 2008 NASA Industrial Base Transition • NASA Human Space Flight (HSF) Industrial Base • 1,200+ Active Tier 2 Suppliers • NASA 2007 HSF Obligations were $7.8B • 4% of the Aerospace Industry • 20% of the Space Sector • Future NASA HSF Manifest lower than e.g. SSP • U.S. Aerospace Industry • Total deliveries estimated to hit ~$199B • Space sector sales will increase a modest 1.6 percent, or $605 million, to $39.2 billion over the next year

  3. NASA Exploration System Mission Directorate (ESMD) Supply Chain issues: • Impact on Industrial Base (IB) from Human Space Flight time gap • Ensuring supplier capabilities • Current SCM capabilities are not adequate to support the Constellation ConOps / Manifest • Spares are not an option • A dynamic interplanetary and integrated supply chain is needed for Lunar • Processes must be flexible and agile in order to adjust to economic, legislative, and technological shifts • Lack of government supply chain insight hinders ability to manage program risk • Government needs to ensure effective supply chain management • An ESMD Supply Chain Management implementation is a solution: • Reduces Costs of late TRL non-recurring and recurring indirect operations & sustainment • Minimizes Risks to safety, cost, schedule and IB viability *(given current budget and activity projections assuming ~2.2% inflation matched by like budget increases)

  4. Why Supply Chain Management (SCM)? Background What is Supply Chain Management? The integration of materials and information amongst Centers and Programs, suppliers, other govt. agencies, and international partners to plan, execute, and operate space programs with a common spare and repair philosophy in order to minimize system-wide life-cycle costs and risks while satisfying program level requirements How is SCM different from Logistics? • Embeds Technology Insertion in the Process • Production Processes –vs- Material flow focus • Integrated end-to-end • Greater supply base situational awareness • Focused on product life cycle management Reduces Cost (SCM impacts 90% of a Program’s recurring cost) Manufacturing processes –vs- material flow focus • Reduces proliferation • Part number and procurement duplication • Number of qualified suppliers needed • Cost of holding Inventory • Reduces unit and overhead cost with larger buys Integrated end-to-end, • Embeds Technology Insertion • JIT practices (Pay-as-you-go) Focused on Product Lifecycle Management • Enables collaborative forecast demand planning • Supports changing hardware TRL Reduces Schedule Risks (Suppliers account for 75% of Space R&D) Greater supply base situational awareness • Identifies risk of capability loss • 5 year gap for ~1500 Shuttle active suppliers Manufacturing Processes –vs- Material flow focus • Maps supplier capabilities to future requirements Integrated end-to-end • Embeds technology insertion • Allows for more flexible design characteristics • Improves manufacturing readiness levels Improves Reliability/Quality (Supplier health impacts reliability/quality) End-to-end integration, • Embeds Technology Insertion • Improves cross-program impact assessments • Cross Program/Agency DMSMS mitigation Manufacturing Processes –vs- Material flow focus • Enables supplier stability/viability forecasting Greater supply base situational awareness • Increases ability to address counterfeit parts • Increases ability to identify problem suppliers in a timely manner

  5. The Modern Evolution of Supply Chain Management Management Focused on Enterprises features Supply Chain Post World War II 1960 Cost Management MRP 1980 Integrated Logistics MRPII 1990 SCM WMS MES ERP PDM – Outsourcing Supplier integration DMSMS APS SLEP Six Sigma PLM Collaborative Planning 2000 Integrated SCM e-SCM CRM e-Procurement e-Fulfillment RT-SCM SC CEM SCM M&S IMN “Supplier City” • Inventory Control, PHS&T • Total Cost Management • Logistics Centralization • Customer Service • Operations Optimization • Logistics Planning • ILS with external functions • Supply Chain strategic planning • Strategic, Tactical & Ops Supply Chain Management • Collaboration & Integration • Strategic Alliances • Adopting new Technologies • e.g. extranets, Applying lean concepts • Information sharing • Business Intelligence • Internet applications in SCM • SCM integration, synchronization • Supply Chain Optimization • Real time • “True” Integration • Events management • Stochastic optimization • Low logistics management authority • Decentralized logistics operations • Higher logistics mgt. authority • Enhanced logistics functional integrity • Centralized logistics operations • Computer applications • Integrated logistics functions • Supply chain planning • Total Quality Management (TQM) • Just-In-Time (JIT) • Supply chain networking • Benchmarking • Reengineering • Integration of SCM and TQM • Internet applications • Enterprise agility • Extended and virtual enterprise • Networked supply chain • Internet applications and .coms • Applying IT in all facets of business • Economy of Scope • Responsiveness • Performance driven • Knowledgeable workers • Many Suppliers • Low level of trust • Weak and long-term relationships • Few Suppliers • High level of trust • Cooperative relationship • Long-term relationships • Selective suppliers • Full level trust • Shared risks/rewards relationship • Short-term relationship Mass Mfg Lean ‘92 ‘94 ‘96 ‘98 Agile/Virtual ‘03 ‘06 Legend PLM – Product Life Cycle Management SCM – Supply Chain Management ILS – Integrated Logistics Support PLM – Product Life cycle Management ERP – Enterprise Resource Planning APS – Advanced Planning and Scheduling MES – Manufacturing Execution System WMS – Warehouse Management System SC-CEM – Supply Chain Collaboration & Events Mgt. RT-SCM – Real Time Supply Chain Management PDM – Product Data Management PHS&T – Packaging, Handling, Storage, Transportation DMSMS – Diminishing Manufacturing Sources PLM – Product Life cycle Management CRM – Customer Relationship Management

  6. The Value Proposition • “Nearly 75% of the system operations and sustaining recurring indirect costs are influenced or determined during system design”. Forrester Research • The vast majority of Space Shuttle operations costs are indirect recurring • “Non-recurring indirect costs associated with sustainment and space systems support cost reductions of upwards to 35% can be achieved by integrating the material and information flow” SAP • Example: As a result of poor low demand planning. “Average electronic obsolescence cost mitigation for minor and major engineering cost is $100K to $400K” DMEA / ARINC • “By improving asset management the Aerospace Industry can realize a reduction of up to 18% of recurring cost” SAP • “~35% of an Aerospace support contractors spare parts inventory are duplicate with a carrying cost ranging from $4,500 to $23,000 per line item” Aberdeen Group • “Without supplier / industrial base integration and information sharing, only 40% to 50% of shipments will be delivered on time” MIT Lean Aerospace Initiative Study

  7. Demand Management Sustaining Infrastructure O&M Cost Schedule PLM ERP Program Interface Supplier Mgt SAP R/3 Logistics Work Control Repair Cost PDM Configuration Mgt Requirements Mgt Assets Are we locked into business as usual? How dynamic is the future state? Present State Linear, push manual practice Future State Circular, self-renewing process Demand Supply 10% is what we see…results… and all that “other processing stuff” where the time and money is…90% what we don’t see 10% Direct Visible overlap of operations Shaping demand Embedded technology insertion Probabilistic planning optimization Accepting demand New technology an exception Deterministic optimization

  8. ESMD SCM Initiatives • Current Projects and Activities by NASA ESMD • Assessment of Supply Chain Management software applications and processes • Product Lifecycle Management • Supplier Relationship Management • Product Data Management • Enterprise and Material Resource Planning • Operability Simulation and Modeling • Supplier Economic Indicator Model • Supplier Mapping to include assets, data and organizations • Integrated Manufacturing Network / “Space Commerce Network” • Expected results • Lower Lifecycle Costs • Collaborative Forecast Demand Planning • Process embedded Technology Insertion • Enhanced Long-term Operability • Coordinated obsolescence mitigation • Minimize proliferation of process and parts • Supplier liquidity • Lean and agile manufacturing • Process standardization and reduced process complexity • Reduced indirect touch labor and fixed cost

  9. The Future Supply Chain of Human Space Flight

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