Supply chain transformation

A major division of a U.S. defense contractor had grown through mergers and acquisitions. Purchasing operations were conducted in multiple buying and transaction locations – based on history rather than strategic or functional value. Although organized as a shared service, procurement had achieved limited integration. For example, the IT infrastructure was largely fragmented and required a high degree of manual transactions.

The organization was also impacted by government’s expectations for lower costs, reduced time to market, and lower risks. To reposition themselves in the changing A&D industry, their goal is to serve increasingly as a Mission System Integrator, with multiple alliances for program partnerships. This model demands increased strategic vision and supplier partnerships than their traditional buy/sell relationships.

Challenge
The immediate challenge was to transform the Supply Chain Management organization. The goal was to reduce costs, improve quality, reduce complexity, reduce cycle-time, and increase transaction automation.

To attain these objectives the organization faced steep challenges:

• Increase collaboration between the Supply Chain Organization and its internal customers, the large-scale programs, to deliver improved services
• Quickly transition the workforce so that employees were capable of more strategic roles with increased responsibilities

Approach
Following an assessment of the organization, the division formed teams with A.T. Kearney consultants. Because of staffing challenges, consultants performed much of the project day-to-day work while coaching their counterparts in new, more strategic roles.

The teams focused on organization design and capability, rapid IT standardization, processes and tools for customer and supplier collaboration, procurement training and coaching, and comprehensive change management & communication. Implementation included developing and transitioning to new of roles and responsibilities, skill assessments for many of the one thousand supply chain employees, and an integrated talent management approach.

Results
Overall, the Supply Chain Transformation program achieved 450% return on investment. The program surpassed targets for material savings on addressable procurement spend, increased automation and employee productivity, and achieved significant labor savings. Leaders don’t see an end for the transformation program. Rather it is the platform for ongoing improvements, including expansion beyond supply chain to the entire division, and as a transformation model to other businesses.