The M777 lightweight howitzer | Photo: BAE Systems
Say you work for a company with a revenue of over USD 26 billion in 2017. And you’re in charge of spending USD 12 billion, sourcing materiel from suppliers every year. Paul Smith is remarkably composed for someone who has to do exactly that for BAE Systems.
Paul Smith, Chief Procurement Officer, BAE Systems
The international defence and aviation giant held its first Supplier Summit in India two weeks back — and a week before DefExpo 2018 — scouting for suppliers from among 70 Indian companies to feed into their global supply chain. StratPost sat down with him during his visit to find out how his company looked for potential suppliers and why the selection of these suppliers was independent of Indian orders.
Smith has been working on supply chain operations for over 20 years. “I’ve had a couple of key experiences. One is developing a supply chain within a given country or for a location or a given product — over 20 years of my career in supply chains and operations. I’m pretty close to the 20th anniversary of my coming here, so — since 1998,” he explained.
Smith is clear about the requirement his company would like Indian suppliers to satisfy and executing the USD 221 million offset contracts for the Indian Army order for 145 M777 ultra lightweight howitzers is only a small part of their global supply chain requirement. “Our plan for supply chain is to develop a large number of vendors here and capability here in India – part of which is going to support and feed the offset requirement,” he said. BAE Systems has evaluated around 40 Indian suppliers ‘to join the global supply chain of the M777’, according to the company.
My responsibility as Chief Procurement Officer is procurement across all BAE. We buy about USD 12 billion a year of materiel from outside vendors.
“Our goal is to increase the supply chain here in India and to develop suppliers here — it could be small vendors, very small vendors, larger vendors — but develop the capability of the suppliers here in India to ultimately create a supply chain here in India that can support different items,” explained Smith.
Supplier discovery over 20 years
If I think back to when I first came to India that was the harder thing — just to identify the vendors. The flow of information is very different from 20 years ago — it’s much easier to initially identity them — the targeted vendors that you have in a given space.
According to Smith, the challenge in discovering suppliers is in identifying their strengths and matching them to BAE Systems’ requirements.
“The harder part comes — is there a match for the amount of business we’re going to have, and when, and the nature of the technology of our equipment,” he said.
Smith also says volumes of work can only be achieved if suppliers can work on a variety of equipment, explaining, “That’s vital because that gives you the option of having the critical mass with the critical amount of work that is enough for the vendor to have some type of level production — various pieces of equipment, versus something that’s something for one month and then nothing for other months.”
That’s the only way you’re going to get the volume and the sustainability is that ability to work on components for different programs.
How BAE Systems selects suppliers
BAE Systems follows a standard process for selecting suppliers and ensuring quality.
“Do they have all the basics when it comes to — so that gets you your ticket to entry or your supplier code or gets you on our supplier master file. Then you have to qualify on a particular component or process that whatever your POs are or whatever your goal is. So that could involve non-destructive testing, destructive testing extra checks — it could involve shipping a component or an item to a different location and having them test it within BAE. And that gets your your initial qualification, which then says, ‘Hey you’re capable of making this component'” explains Smith, adding, “Then the other thing we do is, as you make the items month-after-month, year-after-year, there’s a presence that we maintain to make sure and ensure that the quality is maintained over time on the product,” he explained.
Partner 2 Win
BAE Systems instituted a supplier performance measurement program called Partner 2 Win a year and a half back.
“One of the things that we’ve launched globally that helps monitor that — we call it Partner 2 Win. We launched this globally 18 months ago. It measures the suppliers on just quality and delivery. We have a reward or a label — so if you’re a 100% in delivery and 100% percent in quality, you’re gold and then there’s a label for silver and bronze — those are good. And then you have yellow and red for those that are below what our goals are,” explained Smith.
It’s a mutually consultative exercise informed by numbers. “It’s a data-driven approach. They get a monthly scorecard. A supplier has the opportunity to say ‘Hey, that’s not really a quality issue, that’s your issue — I really was on time, you have the wrong date’. Once it gets up and running, you have a monthly scorecard that goes back and forth between the two companies and you see how you’re measured,” he said.
BAE Systems intends to launch this program in India, as well.
“Ultimately we’ll have some of the key strategic suppliers in India as well. With the first couple of vendors that we have, we will roll that out next year,” said Smith.
“So if I’m a supplier in India ultimately you’d be able to get a score card every month that says am I 100% delivery, am I 98%, am I 100% on quality. And the advantage to that vendor doing well in that is huge, because that’s something that’s understood globally so that easily could lead to more business for them. It’s part of our evaluation process, strategically, if we want to continue with that vendor, so it’s a fair way to do it,” he explained.
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