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IA Supply Chain Meeting EPT Indirect Materials / Casting Project. John Reis January 15, 2008. Indirect Materials Management Enablers. Focused Effort Hire commodity manager specifically for management of indirect materials Data Focused
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IA Supply Chain MeetingEPT Indirect Materials / Casting Project John Reis January 15, 2008
Indirect Materials Management Enablers • Focused Effort • Hire commodity manager specifically for management of indirect materials • Data Focused • Condense UNSPSC code library to reduce entry errors and improve analysis efforts • Support provided by GMDC to cleanup up historical data • Initial site visits / surveys • Provides insight into each location’s current state, supplier preferences, relationships, any unique situations, etc. • Unveils opportunities for multi-site leveraging • Contract Management – central database is key • Quarterly EMR Indirect Team Meetings • Excellent forum for discussion of indirect materials management across the corporation (best practices, RA opportunities, spend visibility, etc.)
FY06 MRO/Capital ($000) Data sources include: Exhibit 123/A Exhibit 137 Exhibit 168 • Customers as MRO Suppliers • Motion Industries • AIT, Kaman, Independents • Sales: $200M+ • No RA’s, Quid pro quo • Affects several Categories • Industrial Supplies • Misc. MRO • Cutting Tools Purchases: $79,900
Indirect Plan by Commodity • Capital • FY08 plan is $24.5 million • RA opportunity: 12% (average, based on historic data) • Used equipment is a spot-buy • 50% savings on average • Often overrides plans to buy new equipment • Site-specific in most cases, cannot be combined with other facilities • AR for Project 21 offers several opportunities, as do facility improvements
Indirect Plan by Commodity • Utilities • $14.6 million/year • RA opportunity: 5% (distribution on deregulated utilities, differs by state) • Historically managed by individual sites • Looking to manage regionally where possible to increase leverage • Considering inclusion of other EMR sites • Investigation of payment method underway (Oracle AP vs. P-card)
Indirect Plan by Commodity • Cutting Tools • $10.7 million/year • Partial RA opportunity • Distribution portion of spend • On spend not available from MI, AIT, etc. • Progress is being made to establish EPT pricing agreements from manufacturers • VMI with consignment prevalent within organization, creating a new breed of reverse auction • RA’s in plan: • FY08: Grinding wheels, indexable inserts, $310k
Indirect Plan by Commodity • Freight • FY08 spend is $14.4 million • RA opportunity: 7% (air freight) • Timing is an issue • Minimum weight requirement not always met • Managed at EPT level • EMR Prime Carriers are preferred method
Indirect Plan by Commodity • Industrial Supplies • $10.2 million/year • Main area of interest by Motion Industries • Misc. MRO • $7.6 million/year • Commodity is still being evaluated • Includes support services currently being auctioned such as lawn mowing, snow removal, HVAC maintenance, etc. • Some interest by Motion Industries • FY08 RA plan includes $2.3 million
Indirect Plan by Commodity • Metal Scrap Sales • $1.8 million/year • RA opportunity: 100% • Regional commodity • All sites are running annual events • Temporary Labor • $1.2 million/year • RA opportunity: 100% • Past successes at other EMR divisions • Working closely with site HR representatives to understand spend and market
“Supplier Analysis” for Indirect *Dollars in $000’s
“Supplier Analysis” for Indirect Top 20%: $18M - 9 Suppliers
“Supplier Analysis” for Indirect • Restrained • Includes big-ticket items such as: • Suppliers as Customers $5.7m • Insurance $5.5m • Surcharges for direct materials $5.5m • Outsourcing $4.5m • Regulated utilities $4.1m • IT & Telecom $3.9m • Corporate travel $3.5m • Corporate credit cards $2.9m
FY08 DPO Improvement Plan • Various utilities ($3M) • Immediate/Net 1 5th/1st Prox. [0.65 total days] • Requires review of invoice date and EFT capability • Temporary Labor ($1.7M) • 27.6 days 80 days [1.27 total days] • Laundry/Uniform Service ($270k) • 50.2 days 80 days [0.23 total days] • Supplier cleanup • Several suppliers with multiples sites/different terms
Indirect Materials Using Oracle Proposed Data Stream New data source
Indirect Materials Using Oracle – Benefits • Inventory can be managed in-house through max/min settings • P-card purchases can be reduced with the use of automatic PO’s • Items in Oracle should be on-hand at all times • Automation of ordering process is possible • Visibility of purchase data is greatly increased • Spend management is enhanced • Leverage opportunities are better recognized • Data is accurate, easy to access and immediately available • EPT is able to adopt best practices developed by other EMR divisions
Strategic Goals • Data Cleanup • Reduce UNSPSC library • Establish item description format • Clean up Oracle supplier database • P-card Management • Revise user manual, update rules for use • Review “big-ticket” items for possible fee pass-throughs • Leverage Improvement / Supplier Consolidation • Utilization of Oracle Punchout • Development of “best practice” procedures for RA process
Project Overview • Involved Spend: $2.1M • Moving 900+ Grey Iron Casting Patterns • Project Timeline: 1 year • Driven by Supply Chain Improvement • Inventory Improvement • Cost Savings • Logistics Simplification • Aligning Supply Chain to Operation Strategy • Supplier Rationalization
Important Steps • Award supplier • Empower qualified Project Manager • Define pattern move • Develop move plan (What, Where, When, Who, How) • Involved all Stakeholders • Both Suppliers • Materials/Operations • Present at both suppliers to supervise moves • Creative approach to Part approval • Maintain regular communication with all parties • Monitor quality and delivery performance
Project Manager • Focused on single project • Must have knowledge of casting process, pattern making, pattern rigging, and machining • Must have the authority to make decisions • Project Manager must have working relationship with supplier
Part Approval • On-site part approval at Supplier • Hired Engineering Students to conduct part approval evaluation to print • Supplier’s Quality Manager supervising effort • Spot checks by EPT engineering
Other Considerations • Incumbent wanted the patterns moved • Moving to Known Supplier • Casting process alignment • Negotiated with Incumbent to include the metal flow paths. • Vast # of Patterns • Less Art/More Science • Prioritized order of work • Low volume patterns won’t be approved until first order