Ben Franklin is credited with amazingly astute quotes that might be found on the desktop of any modern day supply chain management (SCM) professional.
“A penny saved is a penny earned.”
(A SCM team negotiated a six percent up-front discount, saving Dresser-Rand $78,000.)
“Time is money.”
(A SCM team worked together to eliminate multiple delivery obstacles on a turbine shipment to ensure on-time delivery and payment.)
“Diligence is the mother of good luck.”
(Two SCM team members developed a new source for an impeller process, reducing costs by 20 percent.)
Indeed, the supply chain management team working closely with our internal and external stakeholders has saved pennies resulting in millions of dollars of savings, made money by saving time and conducted due diligence to streamline countless processes.
Over the last decade, we have adhered to the goal of developing an efficient global supply chain to bolster our own internal capacity. In fact, our business model requires strong, enduring supplier relations with globally competitive companies for its success.
Today, we strive to remain flexible and agile in meeting the unique needs of our clients.
How Dresser-Rand’s Flexible Manufacturing Model Works
We leverage the capability of our combined internal footprint, and our external supply base to meet client commitments. This model, known accordingly as a flexible manufacturing model, “flexes” our capacity by having qualified suppliers available in lieu of adding internal manufacturing capacity through increased capital investment in our property, plant and equipment. The advantage to us is that we can maintain a more stable workforce year-round and through the inevitable energy cycles, and focus our investments on those processes or technologies that are truly core. We then use the external “flex” capacity of our qualified suppliers during periods where our equipment is being used at full capacity.
Relationships Are Key
In order to maintain a reliable and sustainable supply base, it is imperative to promote and maintain strategic relationships with key suppliers. In turn, we view our suppliers as an extension of our internal manufacturing capabilities and we strive to treat key suppliers in a manner consistent with that principle. By qualifying suppliers in each category to the highest levels, we have shifted the customary transactional focus to a more strategic focus.
Working strategically with our suppliers allows us to better understand their capabilities as well as elements of their cost structure and their tolerance to embrace innovative new technologies. The close management of a supplier relationship provides the basis for reducing costs that benefit not only the supplier but also Dresser-Rand and its shareholders.
Communicate for Results
As part of the close strategic relationship we hold with our suppliers, communication is essential. As we would expect to communicate with an internal employee, we believe that each supplier needs to have a clear understanding of targets, expectations and assignments.
As such, the SCM team developed a scorecard system to communicate critical performance information to its suppliers. The scorecard is comprised of metrics that communicate performance against a specific target. Over time, the team has expanded this process beyond a few critical suppliers while improving the performance metrics through collaboration with the suppliers and our own internal support groups. (i.e., Supplier Quality, Finance, Manufacturing, etc.)
Additionally, we hold quarterly business reviews with our key suppliers. These reviews provide the opportunity to share performance results, share and plan for increased needs on either side, and develop solutions for specific challenges.
Control Cycle Times
In successful SCM practices, time is always a critical factor for maximizing profit. As we strive to meet client and market demand with high quality products and shorter delivery times, our Americas Operations SCM teams work with their stakeholders to ensure we can deliver products and services within desired cycle times at competitive costs. The huge focus on cycle time reduction across the company, not just in SCM operations, immediately helps us become more agile.
Our SCM team has been actively involved in several cycle time initiatives with our reciprocating and centrifugal compressor and steam turbine product lines. These initiatives are driven by those components on the critical path. Without improvements, the overall cycle time of their respective parents (units and/or aftermarket assemblies) will remain unchanged. Activities have included: stocking of raw material by suppliers; forecasting and reserving capacity; joint design improvements; supplier process improvements; pull/kanban arrangements; vendor-managed inventories; and alternate sourcing decisions.
In other areas, our category managers for direct material, major buy-outs and auxiliary systems are actively working with the value analysis/ value engineering team and our client-facing teams to develop and implement improved tools that highlight the various costs and cycle times of associated solutions. We have made terrific improvements within the last couple of years on tools in this area; for example in the last nine months we’ve updated data around castings, forgings, machining, motors, etc. and are continually working on additional visibility to our proposal development teams. Further to this, we are partnering closely with our stakeholders to ensure we are working on those priorities directly aligned with creating the most value for our clients.
Across many departments at Dresser-Rand the fact-finding, data-driven initiatives the supply chain management group focuses on can be summed up by another wise thought, courtesy of Benjamin Franklin, “an investment in knowledge always pays the best interest.”