Dear Performing Suppliers - April 8, 2011
Why get certified anyway?
A little background…There are three key reasons why suppliers join SEA.
Performance – following the roadmap to adopt a world-class management system and accelerate
continuous improvement and performance.
Visibility – using their improvements to get more visibility with customers and potential customers.
Collaboration – collaborating with other high performing SEA Suppliers to gain competitive advantage in the supply chain
But do you have to get certified to take advantage of these three value equations?
No.
You can implement the SEA roadmap. It is a proven path for creating a world-class leadership system while placing more continuous focus on accelerating your performance improvement activities. No certification necessary.
You can get more visibility by improving your performance. We will make your registry listing visible on our SEA website and when you present your keynote at a SEA conference, we’ll video tape and distribute your keynote via SEA’s extensive media channels. Again, no certification necessary.
And you can certainly collaborate with other SEA suppliers without certification. Just attend our conference in June.
So what is the motivation for SEA Certification?
As you have probably already picked up – SEA Certification is voluntary – there is no customer that
requires it. SEA doesn’t require it unless you wish to conduct benchmark site visits or speak at customer conferences.
So certification appears to be a very personal and individual choice. When I speak to SEA suppliers who
are certified, there is always at the core a CEO who wants to establish their company as the best in the
industry. These CEOs want to be an industry leader by virtue of speaking at CEO conferences,
participating in supply chain summit panels, and being invited to speak at customer conferences as
representing the supply chain in the aerospace industry.
Why would you make something like this mandatory?
For CEOs who want to see hundreds of suppliers certified before they commit themselves to this path, I
would ask why do it then? Today there are only 8 SEA Certified Suppliers and another 4-6 that are within several months of being certification ready. Why wait until there are hundreds?
Should SEA Certification Be Mandatory?
Sometimes supplier CEOs say to us, “I’m going to wait until this becomes mandatory from our customer.” AS9100 is mandatory for most customers. So I guess that’s an example of how that works? We wait until our customer makes a world-class quality system mandatory and then we act?
This is definitely not the mentality of a SEA-certified supplier. SEA suppliers say, “We’re going to get
ahead of the curve and stay ahead of the curve. By the time our customer demands it, we could have
known what was needed and been implementing it for the past 2-3 years.” Building a business based on reacting to customer mandates doesn’t show up in any of the accepted books on management principles because it’s not a sound practice. Understanding changes in the marketplace and building a strategy to handle these changes is in the management books because it makes sense and most companies that have survived for any length of time are good at doing that.
How do changes in the aerospace and defense industries affect the need for SEA certification?
Let’s take a look at some of the more strategic and high-impact changes happening right now in our
industry.
Consolidation – our customers have decided that it is less expensive and more manageable to reduce the number of suppliers they deal with. In 2002, there were 50,000 U.S. aerospace suppliers. In 2009, there were 30,000. By 2017, we predict there will be 15,000. We’re not guessing. Automotive navigated the same consolidation. In 1986, automotive suppliers numbered 30,000. By 2003, only 5,000 were left.
High Speed Production – our customers using some of the best management consultants in the industry have discovered the source of almost 20% of their non-value-added cost for building a major aircraft or weapons system.
Of course it’s not like they were discovering this for the world. The Toyota Production System identifies
inventory as one of the most pervasive forms of waste or MUDA. In industries where large capital items are produced, an inventory of parts can reach the value of 2-3 aircraft sitting in the stockroom. The cost of carrying that inventory can be as much as 20% per year. There is no value to carrying inventory but in order to get rid of it, you have to reconfigure to build an aircraft in 4 days. That is what our industry and many others are doing. Just go watch CAT build tractors in less than a week. Order a BMW and discover that your car is scheduled for delivery in 6 weeks while every major auto manufacturer strives to build exactly at the rate of customer demand with no inventory. This is certainly a major driving force in our industry.
Cost Reduction – the reality is, when the DoD and the airlines are facing the budget cuts and economic conditions they face now, business will never go back to usual.
In 1976, the Viking Lunar mission took over 2000 people and $3b to accomplish. In 1997, the Pathfinder Mission with 320 people and $250M, accomplished much more with much less.
So the question is not whether we will reduce our costs. That ship has already sailed. We are simply
dividing ourselves into groups as far as our customers are concerned. Those who believe they can, and
those who believe they can’t.
When congress gave Boeing another twenty-five C17s in early 2000, they cut the selling price unilaterally by 25%. I spoke to Peggy Berry, VP of Purchasing for C17. Peggy showed me a list of suppliers highlighted red, yellow, and green. Green were those who had agreed to a 25% price cut, yellow were those who are 10% off, and red were those who weren’t moving.
What causes us to think that the problems our customers experience aren’t anything to do with us? Do we intend to be a member of the 1976 Viking team that said it couldn’t be done for less than $3B or the 1997 Pathfinder team who said it could?
The most important thing to know is that most of us have a cost of quality of at least 30% and whoever solves that problem first is going to win.
So one last time, why SEA Certification?
The only way to ensure that you’ll survive these kinds of changes is to set your sites on excellence and challenge yourself and others to achieve ever-improving performance. And that is why the SEA certification is important. It creates a goal and establishes a management system that demands excellence and continuous improvement.
SEA is a collection of best practices for managing a company in a way that demands continuing focus and attention to improving. The basic structure of the SEA Roadmap and certification is the same as the Baldrige National Quality Award criteria and process except tailored to smaller aerospace companies.
SEA certification is a beacon by which leaders steer themselves toward the goal of being competitive so
that their companies may survive while others don’t.
When you combine consolidation, high-speed production, and cost reduction, you can’t avoid the fact that business as usual or incremental improvement is not going to guarantee survival. If you plan to sell the company and retire at some point, then you need to work hard to increase the value of your company. You can’t escape the need to ensure that your company is worth more when you do decide to sell.
Feedback
How can we serve you more effectively through these reports?
Could you take a minute and copy these questions and send some feedback to me at michael@seaonline.org?
• What topics are of interest to you?
• What areas do you struggle most with in implementing the SEA Roadmap?
• What challenges are you facing in aerospace and how can SEA help?
• What is your feedback on this report?
|
Michael Beason
Chairman, CEO
Supplier Excellence Alliance |
