Winning and Keeping Business

1. Winning and Keeping Business Tendering Masterclass Course 17th January 2011 Ian Burns, Head of Supply Chain, BAE SYSTEMS Submarines

2. Contents • Submarines • Astute Class Submarines • Successor Deterrent Programme • BAE SYSTEMS Submarines Supply Chain Spend • Supply Chain Management Model • Key Differentiators between suppliers • Local Suppliers • Bidding for Work • Keeping Work once you win it • 21st Century Supply Chain (SC21) • Supply Chain Relationships • Supplier Forums • Supplier Performance Management

3. Submarines • The most complex product in the world, operated by few nations and designed and built by far less • Putting up to 145 men in the most hostile environment for 3 months, living next to a Nuclear Reactor surrounded by weapons • 15 – 20 year Design and Build Programmes • 7 – 9 year Build Programmes • Well in excess of 1 million parts per Boat • Over 50% of the cost of a submarine is externally procured products and services

4. Astute Class

5. Astute Class • Astute Class Submarine Programme – 7 Hunter Killer Attack Submarines, c. 7,000 tonnes each • HMS Astute - Delivered and in service • HMS Ambush - Launched, leave Barrow December 2011 • HMS Artful - Full submarine in Build Hall • HMS Audacious - Units in Build Hall • HMS Agamemnon - First units in Build Hall • HMS Anson - Long Lead Materials ordered • HMA Ajax - Long Lead Materials during 2011

6. Successor Deterrent Programme

7. Successor Deterrent Programme • Submarine provides the Nuclear Deterrent of the UK operating an unbroken 24 / 7 / 365 patrol • 4 off Submarines at c. 16,500 tonnes each • 150m long • Crew of c. 145 • Concept Study from 2007 to 2010 • Collaborative approach with a joint team from MOD, BAE, Rolls Royce and Babcock Marine, supported by Electric Boat (a US Submarine Builder)

8. VRP Post SDSR Level 0 Programme Main Gate Sep 15 Stage 1 Entry April 2011 Cut Steel Sep 16 1 2 3 4 Launch Dec 23 Exit Barrow Feb 25 5

9. 2006 – 2010 BAE Submarines Supplier Spend North America & Canada = £53m / 3.5% Sub-Contracts £84m Europe = £68m / 4.5% Indirect £375m UK = £1,407m / 92% Direct £1,069m Total 2006 – 2010 Supplier Spend = £1,528m

10. Spend by Region

11. Integrated Supplier Management System Fragility Study Supplier Performance Review (SPR) SC21 Supplier Management & Development 3 / 6 monthly supplier reviews Collaborative contracting arrangements Category Management Supplier Forums 2 Year Improvement Plans

12. Key Supplier Differentiators • Those with current sustained high performance (this beats a history of previous good performance which in turn beats a promise of future good performance) • Those who engage in live and meaningful Continuous Improvement activities • Those who demonstrate real engagement with the opportunity, but not an over or under reliance on it • Those who demonstrate a “can do” attitude – positive “glass half full” people • Those who demonstrate Innovation and can embrace Change

13. Local Suppliers • Being local is NOT a differentiator per se • However being local should allow you to offer a service advantage • We are tasked with sourcing the most effective solution regardless of geographic location • I would like to see a healthy and divergent local supply base but the impetus for that must come from you • I would not like to see a local supply base too reliant on BAE SYSTEMS – that is not healthy for your business and our funding streams can be disrupted by political considerations

14. Bidding For Work • Understand who the key BAE Engineering and Procurement people are with regard to your products or services • Be sure to fully sell your capabilities in advance of any bidding • Show yourself to be competent, competitive, flexible and innovative • Try to judge the likely success criteria weightings in advance – Cost, Schedule, Service etc. • If you decide not to bid then an early advice of this with a sensible rationale is important (if you want to retain the option of bidding for future work) • For high value and / or long term arrangements expect a robust and challenging selection process

15. Bidding For Work • Timely submission of a comprehensive bid is crucial • No surprises culture is crucial • If you are likely to face strong competition on the bid or cannot meet the full scope, consider bidding with a partner or as a consortium • However if you do this ensure you have thought it through and can credibly demonstrate how this entity will work and who is responsible for what

16. Keeping Work Once You Win It • Do what you said you would • Constantly have a precis of performance to date at hand • Sell yourselves and what you have achieved – don’t assume it is self evident • Issues can and do occur it is how you deal with them that matters – early communication and proactive action is a must • Understand our perspective (just as we should understand yours)

17. Keeping Work Once You Win It • Always offer proactive suggestions for improvement or issue recovery • Inexcusable to miss a delivery date without pre advising • If in doubt check – don’t make assumptions • Demonstrate ability to constructively challenge the specification and requirements to help reduce cost and / or lead time • No surprises culture is again crucial • We should have the joint objective of reducing the selling price whilst increasing your margin – cost reduction is NOT a zero sum game for you

19. standardise processes • remove duplication and hence reduce costs • modernise business relationships • improve communications and collaboration • increase efficiency and simplicity • increase innovation to be successful as an industry we will need to: - Why is SC21 necessary? • current situation: - • disconnected, fragmented supply base • non standardised processes, waste & duplication (i.e. metrics, auditing) • business relationships are often poor • the interests of different parties are not aligned

20. SC21 – Scope 1. accreditation: need to remove repetition, and unnecessary duplication 3. relationships: need for better end-to-end communication and collaborative planning initiallySC21 will implement 3 action streams to drive early transformation and improvement 2. development and performance: need increased efficiency and remove waste 4. innovation 5. through life capability management 6. new business culture

21. Category Management • Category Management is a method of grouping similar spend to deploy maximum leverage • Every equipment we purchase belongs in a Category and every Category has a Category Manager • They are tasked with fully understanding the marketplace for their Category and jointly working with Engineering and Operations to secure the optimum sourcing route • Promotes cross functional working and allows significant improvements to be delivered – removing or improving poor suppliers, improving engineering solutions, generating economies of scale etc. etc.

22. Supply Chain Relationships • Particular emphasis is placed on working productively with SME’s – over 40% of our Forum Members are SME’s • Lean Manufacturing and Lead Product Development training and after course support offered • SC21 Continuous Improvement engagement – 55 events in 2010 • Ad hoc support offered e.g. supporting overseas sales campaigns, advising on facility relocations etc. • Early payment of invoices when appropriate and strong advocates of on time payment (a message we stress to others at our supplier forums) • Advance ordering where appropriate and feasible to help maintain throughput and skill base • Diagnostic work to help suppliers improve their management of sub tier suppliers

23. Supplier Forum Hierarchy Key Supplier Forum Submarine Supplier Forum Continuous Improvement Forum General Forum Local Supplier Forum return

24. Supplier Management • How do you manage your sub tier suppliers ? • Do you really manage them at all or do you intervene when you have an issue ? • Do you know how healthy they are ? • Do you have a plan B in place for critical suppliers ? • We work with our key suppliers to understand how they manage their sub tier supply chain

25. Jan 2008 Dec 2008 Nov 2010 Dec 2009 Supplier Performance Review