Discover how Supply Dynamics helped a Fortune 200 Aerospace OEM use SDX to transform how they manage their supply chain and how they utilized material demand aggregation to achieve:
- 25% cost reduction on raw materials
- $45 million in projected savings over 5 years
- Improved management of over 700 sub-tier suppliers
SDX Success: How an Aerospace OEM Saved $8.5 Million in Less Than Two Years
A leading Original Equipment Manufacturer for Aerospace & Defense lacked visibility into the raw materials and off-the-shelf components that went into their finished goods. Their situation grew from three key problems:
- Outsourced more than 60% of the parts that went into their product, retaining no visibility into part/material spend with Tier 1- N Tier suppliers.
- Growth through acquisition meant they lacked ERP, PLM, and IT system commonality across business units – the right arm didn’t know what the left arm was buying.
- Needed a means of reducing raw material and part costs without jeopardizing healthy, stable supply chain stakeholder relationships.
Challenges from Lack of Extended Supply Chain Visibility
Our client had a plethora of challenges that arose from the lack of visibility into their extended supply chain, including:
- Inability to meaningfully impact the raw material component of total product cost (estimated 30-60%).
- No systematic means of leveraging common raw material spend across sites, sub-tier suppliers and business units.
- Inability to group parts by “part family” using common part characteristics (material type, manufacturing process, special processes, export control status, etc.)
- Raw material shortages that jeopardized on-time delivery or significant excess, obsolete and speculative raw material inventory.
- Absence of understanding related to hidden layers of the supply chain (Tier 2 - N Tier).
- Inability to collaborate with sub-tier suppliers (Tier 1- N Tier) on common raw material requirements.
- Proliferation in raw material types, sizes and specifications that drove enormously inefficiency and complexity.
- Inaccurate raw material forecasts and lack of leverage with raw material mills, distributors, and manufacturers.
Solution for Strategic Supply Chain Sourcing
Utilizing a combination of Part Attribute Characterization Services (PAC) and cloud-based, SDX Multi-Enterprise platform, our client transformed how the strategic sourcing team could execute on strategic supply chain improvements.
- Quickly obtain detailed, accurate and standardized bill of materials for more than 45,000 parts made by outside suppliers WITHOUT asking their suppliers for this information.
- Enhance communication with Tier 1-N Tier stakeholders.
- Negotiate “directed buy” agreements with raw material mills and distributors saving an average of 7-12%.
- Improve supplier negotiations by exposing all elements of part cost and consolidating common “part families” with fewer suppliers creating “Centers of Excellence” for certain types of parts.
- Monitor and enforce contract manufacturers participation in raw material supply agreements.
- Forecast raw material requirements and quantify the impact of price increases or decreases in real time.
- Standardize types, sizes and specifications of raw material used in their product.
Supply Chain Savings in Aerospace & Defense
Our customer achieved considerable savings with the SDX platform starting almost immediately, with most customers achieving a significant ROI in 6-12 months. They now have a single “system of truth” for all part and raw material data for the OEM, 700 sub-tier suppliers, 15 raw material distributors – without the need to replace or modify backend ERP/IT systems. They estimate they have saved $8.5 million in less than two years – and project savings of more than $45 million over 5 years.