By Geoff Fein
Since bringing together all of its shipyards under one roof, Northrop Grumman [NOC] Shipbuilding has pulled together its supplier base under a single vice president to further drive savings and efficiencies at its facilities.
What the company is trying to do is buy with one face whereas before Northrop Grumman Shipbuilding might have gone out there as two or three different entities to try and use that to its collective advantage, Scott Stabler, vice president of Supply Chain for Northrop Grumman Shipbuilding (NGSB), told Defense Daily recently.
“The thing that we are trying to do with supply chain management is to take advantage of the portfolio of ships that we have and to try and do material in a very positive way for our business,” he said. “We think that putting the demand signal together gives the marketplace a bigger opportunity to look at and gives us, I think, a better approach for approaching them as well. That’s really the fundamental of it.”
At a recent speech in Philadelphia, Mike Petters, president of NGSB, said the sector spends more than $2 billion annually for materials and services with the supply chain community.
Maintaining a healthy supplier base, especially when the Navy isn’t buying a lot of ships, has been challenging, Petters noted.
The recent announcement that NGSB would stop work at its Avondale, La. shipyard in 2013 with the delivery of the USS Anchorage (LPD 23) and USS Somerset (LPD 25), coupled with the decision to explore strategic alternatives for all of the company’s shipbuilding efforts, will enable Northrop Grumman to better align its portfolio with the Navy’s priorities, Petters said Aug. 12.
“We are only at the beginning of this process, but we believe it is a positive step forward with continued opportunities for our supply chain community,” he added.
Stabler said NGSB is trying to think more about a shipbuilding portfolio. Part of that effort will mean looking for redundancies in the supplier base. “We have absolutely been able to consolidate the orders.”
The goal, he added, would be standardization of components and standardization of systems.
“We have scratched the surface of that. We have a fair amount of work to do. Part of the challenge is you have to pay that back inside the lane of any given program that you want to apply a standard solution to,” Stabler said.
Most programs and most program managers say they are all for standardization if they get to be the standard, he noted.
“What we are trying to do is a way to leverage the scope of the buy. In the longer term, how do we buy fewer similar part numbers,” Stabler said. “We have been taking a look at that on a commodity by commodity basis. We’ve got some case wins.
“We’ve looked at commodity areas where there is already a lot of similarity and looked at what a common spec might look like without going to a lowest common denominator solution,” he added.
For example, he cited an effort to use a LPD-17 spec fan coil on an aircraft carrier.
“We were looking at how do we standardize, at the part level, to where we can use a common part or spec across multiple ship classes. We believe we are on the verge of putting a fan coil unit which was previously approved for LPD use onto the aircraft carrier,” Stabler explained. “We think that makes sense because you are not paying for an additional set of approvals to do that, additional set of software or first article tests. You are using something already developed and approved and by virtue of the fact you are doing that you are able to increase the volume of the buy so it’s a win for multiple perspectives if you can find that standard solution.”
Still, trying to neck down to fewer parts that can be shared across platforms, is a tricky business, he added. “It’s harder than I thought it would be. As a former program manager I used to look at it and say, ‘this looks a lot like that over there. Why are we buying two different things?”
There are a lot of complicated reasons why it is difficult, Stabler noted.
As challenging as it might be to find common components and achieve parts standardization, Stabler said NGSB isn’t giving up.
“We do think there’s an opportunity there, but it is harder to convince the engineering community than I thought it would be. We are constantly looking to the marketplace, who quite frankly know their specific component or system better than we do, to help surface the opportunities,” he said. “We have had some wins on a case by case basis but we haven’t had as much success as I thought we would have.”
The thing the company is leveraging most today is its ability to go to suppliers that were common to all three shipyards and look for master pricing agreements that were reflective of all of the buy that Northrop Grumman made.
“We have done a couple lately with several of our key valve suppliers where even while the specs haven’t been perfectly aligned, there is enough similarity the suppliers could approach the raw materials source at once and they could plan their supply to us over a longer period of time,” Stabler said. “That gives them stability in their business and it gives us better pricing and greater confidence in delivery and quality.”
NGSB has had success with consolidated buys of like components. “That’s the first big step the company has been able to take as a combined supply chain organization and really try to buy like things as opposed to exactly like things, Stabler added.
And NGSB is paying keen attention to ensuring the health of its supplier base, he added.
Although parts obsolescence is an accepted part of the defense business, shipbuilding in particular doesn’t have the luxury of turning to multiple similar parts vendors, when one supplier closes shop.
“We are trying to be very much aware of our supply bases health. We do a semi annual top to bottom assessment of our supplier base, where we are looking at not just the stuff we look at routinely in terms of quality and delivery but really trying to understand their financial health and trying to make sure we don’t get surprised,” Stabler said. “We are going to have suppliers that gracefully exit the marketplace no doubt about it and while we’d like to think we see those coming, or that the suppliers are going to hold up their hand and do that in an elegant way, it is not unprecedented for us to pick up the pieces after the fact.”
One example of the impact component obsolescence can have is when General Electric [GE] opted to get out of the ship reduction gear business.
NGSB was able to go out to the company’s Marine Systems in Sunnyvale, Calif., and reconstitute that capability for the aircraft carrier, Stabler noted. “It does take time, it does take investment, it does require that new supplier to come on line and see a business case where perhaps the last supplier didn’t.”
Another form of obsolescence is technological obsolescence, Stabler added.
“We have circuit cards and software and unique proprietary things that may not be available. We are trying to look out ahead on that issue as well. In some instances we are trying to buy ahead, in advance of need, to support those requirements, he said. “That’s another challenge for us as we build ships and control systems around particular technology, making sure we’ve got the supply there to support not only new construction and trials but through-life operation on behalf of the Navy as well.”