Lockheed Martin: Reducing the Gaps from Quote to Procurement

LockheedMartinProcessExcellence

Presentation

How Lockheed Martin reduced the gaps from quote to procurement by integrating fragmented information sources and automating processes

Presented by

Richard Daniels, Project Management & Planning Operations Supervisor at Lockheed Martin
Martin Levesque, Director of Professional Services at iDatix

Richard Daniels: I’d like to start just to give you a little bit of background about Lockheed Martin’s relationship with iDatix. We had the need to find an electronic work instruction solution, basically to prepare ourselves for increased rate reduction.

When I say rate reduction, I’ll put it in terms of units. Currently, for instance, on this particular product, we’re at two units per month. Our contractual challenge is to be at a rate of one per day, so significant increase in rate.

With that said, we were out actively seeking a solution to our electronic work instruction issue. We came across iDatix. Very early on in our dealings with iDatix, we realized there were several other issues that we could bring them on board with to help us resolve. Martin’s going to say a little bit more about that.

Martin Levesque: When we first met Lockheed Martin, specifically here at a facility here in Pinellas, Fla., like Richard was saying, we came across two real important issues.

One was coming from Lockheed Martin corporate, which was to develop and deliver an electronic worker instruction for the assembly process.

The second core piece was…Lockheed Martin, at the facility here in Pinellas, were asked to solve a particular procurement problem, specifically for cost variances from quote to delivery, and we’ll get into that.

As we were going through this discovery process with them, one of the key things that came up, which is going to be common across most presentations, was there was no real guarantee that information was flowing accurately and consistently between dependent processes, between persons, and both internally and externally.

With our analysis, we understood that there were selected modules that were implemented within the MRP, coupled with some manual processes and some external tools, such as Word documents and Excel documents that kind of helped glue the entire process together. It didn’t necessarily equal productivity and profit for the long term, especially for increased productivity, but it was something that really came to light to us.

We felt that our platform should solve both challenges at once. I’ll let Richard talk a little bit more about the current state and how we came to that.

Richard: As Martin has said, real early on we were going through this discovery phase, and as with all good process examinations, the first thing we did was to go map our procurement process as it was pre automation. You can see from this chart here, there’s a lot of people involved in this process. Along with those people, they all have their own documentation.

They all have their own method of communication, whether it be email, fax, or physically moving a purchase order or a piece of paper through the process from one person to the next. There’s a whole lot of manual intervention here, and you can imagine, it’s very easy to go lose track of any given piece of data or information at any one of these parts of the process.

We completed a joint mapping with iDatix, and you’ll see that we had about an 88 minute processing time initially and about a 10.3 day cycle time. Most of that was controlled by this one guy here, the senior buyer. He’s the guy that was directing and controlling the majority of this process of moving these things through the system.

The next step was to go take a look at our post automation flow. Immediately what we did was go and remove that one person, that single point of…I’ll call it a single point of failure, not through any fault of that person, but the amount of data, the volume of data that he was handling, it was an absolute risk.

By introducing iSynergy to this process, we were able to go remove the need for that single person managing all of these pieces of paper and different pieces of information. Our mapping bit at the end of this integration has brought us down to about 48 minutes from a processing time standard, and it was actually better than half our cycle time.

The biggest effect out of all this really was the impact of overall lead times.

What I mean by lead time is the activity that happens prior to a part coming into our facility. We’re a manufacturing facility. We have parts coming in. We have suppliers that are critical to our business, and then we have parts and assemblies going out again that are critical to our customers. Lead time is a two way street for us.

We are able to significantly impact our lead times with this reduction in cycle time. We’re able not only to react to our suppliers’ needs, we are better through the system able to react to our customers’ needs, as well. This is really the first step in our demands upon ourselves to go meet our rate requirements.

Just a little overview of seeing these things side by side here. We have pre automation and post automation. The impacts…This is being realized very early on. We’re expecting to see some significant changes here. Right now, we’re seeing a 46 percent reduction in processing time, a 49 percent reduction in cycle time.

I talked about our lead time. This is where we’ve really, really impacted our increased productivity. It’s a 46 percent increase. It’s really being driven behind the scenes by the ability to be able to react through reduced lead times.

Here’s a look at our overall business needs and functions. To show you where this first process that we’ve introduced affects all of our major functions, it fits in right here. As you can see, we’re impacting Manufacturing, Engineering, A/P, and on down the line, Shipping and Receiving. When we can effect change and impact our ability to be able to support those functions ultimately has an effect downstream on our ability to deliver parts in a timely fashion, on schedule and on cost.

Martin: Richard, when we first started sitting down together, we were really looking at just procurement, right? Even though you had a need for delivering information, worker instructions on the floor. The communication…It’s important to note that Lockheed Martin treats their facilities as their suppliers. You’ll hear Richard state that when he talks about the customers, he’s really talking about Lockheed Martin itself, corporate, the final assembly piece. They are the ones who are delivering the request for quotes. They are the ones that we are sheeting back information to get the awards to actually produce these parts.

As part of those dependent processes, we also added Accounts Payable to this, because it had a direct impact. The quotes, the POs, the invoices that we were feeding, the parts that we were receiving, the shipping documents that we were receiving, all being integrated and collected into one system for eventual completion and delivery back to final assembly.
I’ll just speak to this here real quickly. The core objectives that you’ll find in most of these solutions should be pretty similar. However, in this case specifically, the one person at a time processing, this sequential way of working, this unilateral way of working, is what really was slowing down the process.

By having a platform where you can have multiple eyes on the same problem, working from different angles to solve it quickly and effectively…This information access, this single point access, to not only data that exists in unstructured formats, such as Excel spreadsheets, and Word documents, and various other formats, as well as structured information that exists in their MRPs and ERPs…Harnessing that information, data and documents into one system is really what glued the process together.

As Richard was saying, that senior buyer being able to manage volume and variety of information, being able to see it in a quick snapshot what decisions he needed to make, what distribution decisions he needed to make quickly and effectively in order to meet those rate demands, were core. I’ll let Richard speak to the final piece, which is compliance.
Richard: Thanks, Martin. Compliance…I’ve already mentioned that our business is wide ranging. Not only are we feeding our internal Lockheed customers, but we’re also supplying national and international customers and government, so compliance is of the utmost importance to us.

What iSynergy does for us is give us a total and absolute, accessible, auditable trail. Audits are paramount. It’s paramount that we’re able to pull information together to support our audit needs for all of our customers whether they be governmental or corporate.

Compliance is in requirements that are fed down to us from all avenues. This information is all able to be stored within the system. It’s readily available. Even to the department level, we can allow our managers to go pull their own individual reports from an audit perspective in order to support our overall audit needs. It’s totally focused information. It’s the availability that makes the system so useful and usable for us.

We’re going to listen to Richard talk a little bit about what they refer to as “completing the circle.”

Completing the circle for them meant that the requests for quote that were coming in, the data that was being captured, the data that existed both outside of the MRP, that existed in spreadsheets, master data sheets, product data sheets, also existing outside of the MRP, needed to come back some way into the procurement process in a quick and easy fashion so that those buyers could act on that data and not duplicate work, and not delay any kind of processing times that would affect rate.

For thinking about Lockheed Martin as a customer, feeding a request for quote into this process, where Contracts is grabbing it, working with Engineering to develop a master quote spreadsheet. What I mean by that is where they’re going out to their suppliers and saying, “We have a project to build 30 X. What will these parts cost us”? Then putting in the quantities and prices, and also the methods by which they’re quoting, whether it’s a long term agreement, whether it’s an individual quote, or if it’s a last price paid, all of this data is still existing outside the system. We’re really trying to help bridge that gap.

It’s important to note that this is a process that is so ingrained into their culture that it was too hard, too quickly…Here’s the key thing, they only had three months to do this in order to meet rate demands. They couldn’t change the entire culture and change their MRP system in order to incorporate this data, so they needed a solution that would help bridge this gap permanently and keep the process moving effectively.

The only time the data got back into the system was when the actual quotes were awarded by the customer. Now you can imagine as the quotes are awarded, if I’m thinking of the MRP, the only thing that’s traveling through here is the parts order. The buyers are only receiving parts orders. There’s no relationship between the parts, and the parent assemblies, and the price they were quoted at. What happens is these parent assemblies, with these unknown quotes, the buyers are now forced to recreate this quote process, therefore duplicating it, so you have a new quote out for the same parts.

What was happening at this point was the financial analyst, after review of everything that’s been completed…From quotes to delivery of the actual assembly, there was a cost variance. I want to let Richard talk a little bit about the impact of that cost variance.

Richard: The cost variance is so important, particularly these days, to the bottom line. The cost variances that we were experiencing, they had the ability to negatively…Because we’re quoting parts more than once, we may have accepted business at a particular cost, and now we’re having to re quote. There’s a potential for a quote mismatch.

Now we’re putting even more challenges on ourselves internally after winning the work to go meet our budget, to go meet our customers’ cost requirements. Now we’re able to price once, our quotes are way more accurate, and we’re able to go deliver on our agreements and deliver on our budgets without as much undue stress on the system and our customers. It’s been a plus all around.
This chart here is also a great example. We talked a little bit about the need for change and how uncomfortable change can be at times. This is a great representation, just to show you how iSynergy is functioning outside of our existing processes.

When you’re not imposing on people a complete process change, it enables them to absorb these new systems much more readily. They’re still working within their system, but now we’ve got this partner system that is doing a much better job of maintaining our documentation and our process control.

Martin: We were thinking about, “How do we solve this problem without revamping our processes’ other systems”? Which was at great expense to them, by the way…Was to develop a mechanism that was going to extract the data out of these Excel databases, if you will, that contained all this pertinent information and re inject it back into their processes through our system, through our iSynergy solution and through workflow.

Now where the parts and their parent assemblies were unknown, are now known. Where the quote quantities, and prices, and methods for quotes were unknown, are now known. We were removing all of this duplicate effort, all of this miscommunication happening between Engineering and Contracts and Procurement. Basically, completing the circle so that the cost variance was effectively disappearing.
Now, as Richard was stating, it really puts them in a better position to have consistent and constant contractual obligations met over the lifespan of their processes.

How did we succeed?

Well, we did a pretty simply. Like I was saying, we’re grabbing this unstructured data. Were also grabbing the data that’s in their MRP or their JDA systems. This critical information is being fed back into an electronic form. And the electronic form is that single point of decision making. It houses all the pertinent information they need, plus any of the documentation that they would need to make that decision. Both data, represented from various data sources, and documentation in one system.

That is then presented to the buyer, automatically through auto assignment. The senior buyer doesn’t have to go through an assignment process anymore, and it’s in a logical queue so that the workers can see what items are up in what priority order. They can also sort this work and act on this work to get it delivered and ultimately fulfilled.

Another important part, and I’ll let Richard talk about this, but these PDS documents. These product data sheets, extremely important piece of documentation. It comes from Engineering. It is basically a specification for how the parts are supposed to be built, how their suppliers are supposed to build them.

This was automatically fed and associated to the requisition, so that when a buyer was looking at the requisition, he had the PDS with him. When he was going to submit this quote back to, sorry, submit the req back to the supplier to be fulfilled, there was no doubt that it was going to be the correct one. I’ll let Richard talk a little bit about that.

Richard: Where this is really important to us is, we potentially have a customer that may need a different version of the same part, and we use these product data sheets, these PDSs, to feed that information to our suppliers. If this data is not fed in a timely fashion, and is not matched up with the proper PO, we potentially have an incorrect parts coming in and going out to our customers. So not only are we able to control these PDSs, to make sure they go to the right place, to the right order. We also have revision control laid in there so that we can monitor and make sure that we’ve got the proper version, proper revision of each of these documents coming along with any of our requisitions.

Here we’re looking at, just an overview of our automation. You can see across the top there…That’s a broad range of our processes are being affected here. Below that, you can see the different pieces of documentation, whether they be electronic, or paper, or what have you. All of those different pieces of information, documentation, data, specifications, whatever they may be, they’re all focused together within iSynergy. It makes it a totally clean and accessible system, not only for the managers of these departments and processes, but also for the users, whether they be assemblers on the shop floor, or all the office folks processing the requisitions and purchase orders.

What we did was…The solution really removed a lot of the risks that we had in our processes, as they were, most of which were really communication breakdowns. Those breakdowns happen across departments. They happen inter Lockheed. We’ve been able to eliminate those by just focusing all of our information and making that data available to anybody that is deemed to be a user. We can now guarantee delivery, and that our requisition and quote information is accurate. The contracts manager is not searching around again for the [inaudible 22:15] person who handled that particular requisition. That is now available to him. If there is any deviation at all, it’s readily available, it’s totally visible.

We talked about the PDSs already, and the removal of the risk of the incorrect revision being applied to a particular part for any given supplier. We’re also ensuring that our procurement process was able to react and take action and move forward, without having to go back and search for documentation that was perhaps produced initially on an initial quote basis.

And then obviously, that financial exposure, I talked a little bit about that earlier. The bottom line is everything today, no matter what business you’re in. If you can eliminate some of those, or any of those variances, it’s going to have a positive impact to your bottom line and your ability to meet your customer budget.

Martin: Finally, what we gained out of the system…Of course, this long standing issue, I think it was a five year problem for them. Completing the circle, how do we do that without engaging the MRP, without revamping all my processes? How do we do that? That was one of the things that really came to light. It wasn’t even really the primary thing that you’re after. It was just something that came as a benefit to the implementation. Of course, as we’ll see here in the next segment, providing a visual indication of developing bottlenecks, this is something that had to be sourced out.

Somebody with feet on the ground, either having to go on the production floor to look for bottlenecks, or identify them through conversation, emails…You can imagine all of the multiple mechanisms that that could go by, to identify where the issues were surfacing. Then, this ability to gather multiple sources of information into one document, and you can imagine if you have ten buyers, all buying parts from the same vendor without proper communication, the supplier may receive ten different requisitions just by Lockheed.

These were some of the things that we help solve for them, and ultimately reduced that cost variance and improved their rates. Final point on our presentation here is the implementation timeline. Like I said, they only had three months to do this work, because the contracts were coming. They had to increase rate. They knew that the typical implementation for some of these BPM systems that we’re looking at was in excess of that timeframe. With just a few of our resources, myself included, we were able to tackle these problems simultaneously and deploy them simultaneously to provide the biggest impact. That’s about it.

Richard: As Martin said, some of these implementations can be tough to swallow, but this was totally seamless. The way that iSynergy was integrated to our existing processes was a big advantage to us, and there was really no disruption to business as we know it, as usual.

Demonstration of Solution

Subscribe to Our Blog

Related posts

How to Keep Audit Fees at a Minimum and Increase Record Compliance
iDatix is now DocuPhase - A New Generation of Document Management and Process Automation Software
Digitizing the Invoice Approval Process to Turn AP into a Profit Center
From Procurement to Payment, Creating an AP Automation Process Your Top Execs Want
    

 

Comments