China Restricts Supply of Components to Top U.S. Drone Maker

Leading A&D Enterprise Achieves up to 35% Savings While Improving Supply Chain Resilience

February 15, 2024

Case Study

Customer

A Fortune 100 and top 3 aerospace and defense firm

Challenges

Reduce part costs while improving resilience

Exiger Solutions

A Fortune 100 and top 3 aerospace and defense firm

Results

15% to 35% savings on the cost of parts, simplified and de-risked supply chain, preferential prices and service levels

A Visionary Customer

Ranked among the top 3 in aerospace and defense, this dynamic organization serves commercial, military and government clients worldwide across diverse business units. The organization itself is the result of multiple large mergers, the last of which occurred in 2020. Given the diversity of products delivered to their end customers, the organization manages an intricately complex and globally distributed supply chain.

A Challenge of Complexity

As with most large mergers, the new entity was conceived with lofty expectations of optimizing business operations and harnessing the synergies within the newly merged entity to achieve cost reductions. The supply chain teams were quick to see that competitors were centralizing their raw material expenditures, so they adopted this strategy both to achieve cost savings and to remain competitive.

As the teams were in the process of formulating strategies, the Covid-19 pandemic emerged, introducing new challenges to their operations. These challenges encompassed the abrupt closures of supplier manufacturing facilities and entire countries, as well as sporadic labor issues with specific suppliers and mills. The situation was exacerbated by record inflation boosting the cost of raw materials, placing immense pressure on sub-tier suppliers and depleting material availability.

As if the compounding effects of Covid-19 weren’t formidable enough, the “new normal” in the supply chain landscape, characterized by continuous disruptions, became firmly cemented with the onset of the European energy crisis.

Building resilience became a must-have element of the savings synergy initiative. This was now a Supply Chain Optimization program. At the heart of this transformation was the recognition that detailed and precise part-level data was paramount for success. Unfortunately, this data was inaccessible — either locked away in siloes or, in some cases, non-existent. Consequently, establishing a dedicated part-level data repository emerged as the pivotal enabling capability and top priority for the initiative.

Journey to Resilience

Recognizing the pivotal role of data in their mission, the customer partnered with Exiger and introduced a transformative process called Part Attribute Characterization. It delivers structured bill-of-material information using technical data packages as a starting point. It enables the documentation of parts, manufacturing processes, quality processes, quality and inspection processes, raw material inputs, and many other critical attributes necessary to facilitate alignment across a supply chain.

The initiative began with a focus on more than 80,000 machine parts, produced by more than 1,000 suppliers, representing more than $3 billion in annual spend. The first phase was focused on their Tier 1 supply base. They organized requests for proposal (RFPs) by part family with a focus on consolidating volumes in centers of excellence that spanned business units. This approach aimed at reducing the number of suppliers while expanding business volume with preferred suppliers.

“ We are now able to have partnership conversations with the first and basically the most important end of the supply chain, the mills and foundries, to make sure they have capacity to support our future growth.”

Director of Supply Chain

Building upon the successes of phase one, the team delved into addressing their embedded raw material spend. They gathered teams from across the organization to map the supply base, working closely with machine shops and forgers to understand where they sourced materials, how they procured them, their yields and expectations of service from distribution and mill partners. This data formed the foundation for this most strategic endeavor: the consolidation and global leverage of their raw material volume.

Their efforts identified more than 700 unique materials grades produced to conform to more than 1,000 specifications, encompassing a diverse range of materials, such as aluminum, stainless steel, nickel, cobalt and titanium. They established raw material supply ecosystems to support their Tier 1 suppliers and direct factories, beginning at the distribution level. For example, in India, they successfully reduced the number of suppliers from over 60 to just three.

Additionally, they consolidated their volume of core and key materials at the mill level, securing metals for the long term by directly engaging with mill partners. This approach was truly a game-changer.

In summary, the granular part-level information captured via Part Attribute Characterization enabled the customer to make significant strides in their Supply Chain Optimization journey. SDX then became the single system of truth for orchestrating the collaborative purchase of common raw materials. They focused on their Tier 1 suppliers, and then consolidated the purchase of common raw material volumes with best value mills and distributors. They also mapped supply networks below the Tier 1 supplier, gaining insights into where additional parts and materials were sourced. This allowed them to consolidate and leverage raw material volumes globally, thus simplifying their supply chain, reducing costs and improving their risk posture.

“Part-level information has been a big game-changer for us, not only to de-risk the supply chain, but to get our Tier 1 suppliers buying from preferential sources and at preferential prices.”

Director of Supply Chain

What’s Next

The journey isn’t over for this leading A&D organization. They continue to work on further consolidation, shrinking the cohort of suppliers across all tiers of the supply chain and addressing embedded spend globally. To date, the project has achieved about 60% coverage across their machining spend, and they will seek to drive this into the 90s as well as applying this approach to other categories of product spend. The Supply Chain Optimization initiative has forever changed the ethos of the organization to be one of sourcing supply chains, not sourcing parts.

The use of digital tools will remain essential to both expand the scope of their program. The Exiger technology will enable collaboration with key partners to improve the nature of their relationships, bringing data and visibility at the part level to discussions with the mills and working with distribution partners to portray the upcoming needs that are down the pipeline.