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Case Study

 

Lockheed Martin Aeronautics Revolutionizes Its Supply Chain

by Dave Hannon | insiderPROFILES

April 1, 2011

As a military aircraft provider, Lockheed Martin works with suppliers ranging from large technology firms to small, niche companies with limited IT infrastructure. In this SAP customer profile, Lockheed offers insights and tips on successful supplier collaboration, including a look at its decision to implement a portal-based environment in order to make access to its new SAP ERP system as streamlined for suppliers as possible.
 

Lockheed Martin Aeronautics Company — the business area at Lockheed Martin Corporation focused solely on building military aircraft — was at an IT crossroads. The success of its newly awarded contract to build the F-35 Joint Strike Fighter for the US Department of Defense, and the future success of its vast aircraft portfolio, hinged upon its ability to integrate its programs and effectively collaborate with a wide swath of global partners. Suppliers from all corners of the world would need to exchange information with Lockheed Martin’s buyers and logistics managers efficiently and quickly. Given that some of the company’s more than 75 legacy systems dated back to the 1970s, it was clear that a new level of efficiency would be needed across all of its sites and programs.

“The systems that we were operating, while robust, were not tightly integrated to support our business processes. They didn’t always communicate with each other,” says Chris Smith, OneAero Portal Lead at Lockheed Martin Aeronautics. “So the company faced a big decision: Do we try to enhance our existing systems to meet our business requirements, or do we take a step back, look at the big picture, and move to a more unified system approach?”

In 2006, Lockheed Martin Aeronautics decided to go the unified route and launched the broad OneAero project under which it would follow a phased approach (by aircraft program and plant site) to implement SAP ERP and various other SAP solutions, including SAP Supply Network Collaboration (SAP SNC). The SAP SNC application would be the key to integrating a broad set of global suppliers and partners and to helping the company cut costs in line with its biggest customer, the US Department of Defense.

But deciding to replace its legacy systems with SAP solutions was, in some ways, only the first step toward effective supplier collaboration. Another challenge remained: How would the global supply base access the new supplier collaboration solution quickly and easily? 

Lockheed Martin Aeronautics

Providing Suppliers with a Single Point of Access

The key to successful supplier collaboration is ease of use. At Lockheed Martin Aeronautics, as at most companies, suppliers range from large technology firms to small, niche companies in global markets with limited IT infrastructure. To make access to the new system as streamlined as possible for suppliers, the business decided to implement a portal-based environment to provide suppliers with customized access to the solutions they needed. 

“We wanted a single point of access — a gateway portal — for suppliers to be able to log in and collaborate with us,” says Smith. “And because our suppliers have certain manufacturing obligations and requirements, it is very important that they have access to certain aspects of SAP SNC to meet their contractual obligations.”

Lockheed Martin is no stranger to the value of portals. In fact, the company was a founding partner of Exostar, the aerospace industry portal that dates back to the dot-com boom of 2001, when portals and “marketplaces” popped up at every turn. Because of Exostar’s success, most existing Lockheed Martin Aeronautics suppliers (and aerospace suppliers, in general) either were experienced users of Exostar or were at least familiar with it. So it made sense to leverage that exposure by using Exostar as the third-party provider of the identity management solution for the external portal.

The project team designed its portal-based strategy so that user access would be simple and seamless, leveraging the existing Exostar industry portal as the front end. Now, when Lockheed Martin Aeronautics suppliers sign on to Exostar, they are given a secure information gateway all the way into the back-end SAP SNC application via SAP NetWeaver Portal. 

“After suppliers log in to Exostar, it appears as if they are within one system. They don’t have to move from one tool to another or sign in multiple times,” says Michael Palm, Senior Operations Engineer, who is focusing on the SAP SNC portion of the OneAero project.

Getting Suppliers On Board

By the end of 2010, 300 Lockheed Martin Aeronautics suppliers were accessing SAP solutions via the new portal system — with another 300 planned to come online by the end of 2011. That number represents about half of the suppliers that deliver physical goods to the company. When dealing with military and government contracts, the process of providing supplier access to internal systems is fairly stringent, so while the adoption curve may seem slow, 50% is an impressive rate.

The criteria for supplier selection for the program is based on several factors, including frequency, volumes, and value of shipments. (Some suppliers deliver up to 400 times per month at some facilities). Those suppliers that are not on the portal system continue to work under the legacy processes — with buyers managing more of the schedules and updating the SAP systems manually. However, the new system still captures the relevant data.

When new suppliers first log in to the system through Exostar, they are put into a training mode, which doesn’t provide full access to the solutions. These suppliers are given training and materials, and then a formal documentation must be prepared before the suppliers can be approved for full access.

“We want to make sure that anyone accessing the tool knows exactly what they need to do,” says Jesse Kell, OneAero Supplier On-Boarding Lead. “For security reasons, we have to verify that users have gone through the training materials before we can process the paperwork to give them full system access.”

To help with onboarding, the project team hosts bi-weekly user forums where suppliers can get specific questions answered and share ideas and tips supplier-to-supplier.

“The forums allow us to show that we’re listening to suppliers and that we are changing the system based on their feedback,” says Palm. “There may be a case where the system works as designed but, from a usability standpoint, may not be streamlined. So we take that feedback and develop enhancements to make the tool and our suppliers more effective.”

In addition, a team of super users within the Lockheed Martin Aeronautics supply chain organization — who served as usability testers prior to go-live — now serve as front-line support for both internal users and suppliers. And to ensure the benefits of its investment are realized, the OneAero team tracks which suppliers are logging in and how often they use the new solutions.

Lockheed Martin Aeronautics

Supplier Collaboration in Action

A portal in itself is only a gateway — the real value lies in the access it provides. In this case, portal users can gain entry to the SAP SNC application, through which suppliers can update purchase order information (such as delivery dates), manage more of their inventory control process, update external repair milestones through work order collaboration, and access business intelligence reports. And most importantly, because SAP SNC is part of Lockheed Martin Aeronautics’ integrated SAP environment, when suppliers update their information, the changes are reflected throughout the entire system.

An important goal of the OneAero supplier-facing solution was to reduce some of the buyers’ workload and give suppliers more responsibility for managing their own schedules and inventory. In the new system, suppliers have access to demand trend data from Lockheed Martin Aeronautics’ back-end systems, allowing them to adjust inventory and shipping schedules accordingly. Additional supplier benefits include the ability to track every change made, compare the history of changes, and view when goods have been received by Lockheed Martin.

“For instance, if a supplier updates the delivery date on a schedule in SAP SNC, that information flows from the central repository onto the actual purchase order to show the updated date,” says Kell. “The buyer managing those purchase orders doesn’t have to copy that information from an email or transcribe it from a phone call.”

Another example of how SNC streamlines buyer-supplier operations is the use of advanced shipping notifications (ASNs), which suppliers use to provide data such as a shipment’s ship date, tracking number, or serial number. When the ASN is published on SAP SNC, both buyer and supplier have visibility into the same information.

Also, suppliers can see when an ASN status goes from “published” to “goods received,” eliminating any confusion about when the goods arrived — which is important because, in many cases, suppliers are paid based on when the goods are received. All of the historical data is housed in the back-end system as well, allowing for improved reporting capabilities on supplier performance.

Lockheed Martin Aeronautics

Lockheed Martin Aeronautics OneAero team members (L to R):  Michael Palm, Senior Operations Engineer; Jesse Kell, Supplier On-Boarding Lead; Chris Smith, Portal Lead; Shaan Parvaze, Portal Development

Key Lessons Learned

Smith says companies considering moving their supplier collaboration processes from legacy systems to an integrated ERP-type landscape should first outline exactly what data would touch the system, before moving to any kind of system design. “Because we planned to capture the same fundamental information with the new system, it was easier for us in a way,” he says, adding another somewhat intuitive but often overlooked lesson: “The scope and scale of your system should reflect the size of your supply base.”

Despite the advantages and benefits of moving to an integrated system, it’s likely that both suppliers and internal users will push back a bit. Palm advises to help alleviate these concerns with a consistent flow of communication, which includes describing the system’s benefits, the training requirements, and the level of priority the new system represents to the company. If suppliers don’t get the message that the new system is a top priority, they may put training on the back burner.

According to Kell, in order to get buy-in both from buyers internally and from suppliers externally, you must be prepared to think like a salesperson. “We developed documents that highlight a small subset of benefits relevant to those suppliers or internal users — providing extra information to help them make more intelligent decisions,” he says. “And by doing that, we are realizing the benefits.”

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