NPI and the future challenges confronting the Global A&D Supply Chain
At Verify we are are in the unique position of interacting with almost all levels of the Aerospace and Defense supply chain. As part of our commitment to our customers and the industry itself, Verify produced a whitepaper aimed at uncovering the future state and challenges in aerospace and defense.
I sat down with Alan McIntosh, president & COO of Verify to discuss the whitepaper
Whitepaper interview: June 25th 2019
HANK:
So Alan what was impetus behind creating this white paper?
ALAN:
We care passionately about our Aerospace and Defense Industry. Given our unique industry insight, we are eager to contribute.
I believe our industry needs more thought leadership on the challenges the supply chain is facing right now. The supply chain is certainly stressed.
HANK:
So what is causing these stresses in our industry?
ALAN:
Firstly, ongoing (dare I say chronic) problems with New Product Introduction – NPI.
When you see data on new product introductions – that up to 90% fail. That is truly remarkable. Now this does not mean that 90% of the product fails … it means the NPI process failed. For example – we did not get to a place we thought we were going to get to both on time and on budget. Likely due to one or more of the 4 Re’s – re-design, re-work, replace, or reschedule. We may finally get to a place where we have quality product but we will not get it on time and we will not get it on budget.
SO that’s remarkable and I think that’s kind of hidden and we’re accepting the fact it’s not working and we’re going to go into repeated NPI situations that continue to not work.
Secondly, the major changes to the compliance landscape and flow-down across our industry related to security, information assurance, and to a lesser extent – privacy. Most of the supply chain is uncertain on how to proceed – and from what we hear most of the supply chain is likely non-compliant or even ready for compliance to these evolving requirements.
HANK:
… and what is industry doing about NPI and Compliance?
ALAN:
In terms of NPI, there has been good work done on Advanced Product Quality Planning (APQP) and Production Part Approval Process (PPAP) with the introduction of AS 9145. Most major aerospace manufacturers in North America are in the process of adopting and invoking AS 9145 across their supply chain.
However, from what we see and hear our industry is not ready. This is a major investment. It needs to be planned. We are also worried that we are starting to see varied interpretation on the standard from customers – similar to what we saw with AS9102 on First Article Inspection.
In terms of Compliance, there is a lot going on including Executive Order 13556; DFAR 252.204-7012; FAR 52.204-21; and NIST 800-171. However, it seems less than coordinated. Does the supply chain really understand what they are signing up for? Is there clarity at government level? How do we measure readiness and compliance? Is there a benchmark on time and investment?
HANK:
I noticed that the white paper refers to the SPM activities so can you expand on that more and how you got the data?
ALAN:
There are there distinct sources that we use to establish our data.
Firstly, Verify performs Supplier Performance Management services all over the world. In 2018, we visited suppliers more 340,000 times across 53 countries. That’s a lot of touch points. That is a lot of data. That is a lot of insight.
Our second data source is our annual survey of all Verify contacts across our industry. This allows us to analyze and trend feedback on subjects such as customer supplier relationships, on-shoring and off-shoring trends, negative impacts in performance, and performance improvement initiatives.
Our third data source is our Interviews with key people across the supply chain. I think for this year we interviewed about 50 to 60 people and got their opinions
What is interesting is how consistent the three data sources are – which helps us considerably to establish firm conclusions.
HANK:
So from what I hear you’re combining real industry performance results from the supply chain and combining that with survey and interview feedback.
ALAN:
Right. In terms of the industry performance results, we conduct a global root cause analysis of all reported defects and summarize the top three casuses of defects.
HANK:
Could you share the top three?
ALAN:
Absolutely. In reverse of order of occurrence they are – Inadequate Supplier Qualification, Ineffective Requirements Flow-Down Management, and Incomplete Part or Process Qualification. If we could eradicate all three – we could reduce the number of defects by 80%.
HANK:
I notice that each of these causes occur at the earliest stages of the SPM lifecycle.
ALAN:
You are right and this then is the basis of our primary recommendation within the white paper. VERIFY firmly believes more proactive emphasis and effort is needed at the Supplier Qualification, Requirements Flow Down, and Planning and Product Qualification phases of the SPM Lifecycle.
HANK:
Is there any concern with disclosing confidential information?
ALAN:
No. We take our contractual responsibilities very seriously. Our customers own their data. We will not share any of our customer’s data with any other party – without their express permission. The information we share in the white paper does not include any customer, supplier, contract, product, and project details whatsoever.
What we do share is the anonymous aggregate of that information so we don’t have to disclose supplier name but we can aggregate fail rates, late deliveries, and create really useful information that indicates that the supply chain is not performing as well as it should.
HANK:
I noticed that the aggregated defects rates impacting delivery and quality were at 3.9% and 3.2% respectively. Is that getting better or worse?
ALAN:
It is not yet trending better. I like to say on average 2 out of every 50 parts are late and 3 out of a hundred parts are wrong.
We do not believe we will see significant improvement until we improve the supplier selection process, product qualification and planning.
HANK:
Is that starting to happen?
ALAN:
Yes. Verify is working with many of our customers on capacity and capability assessment programs, managing product site transfers, and APQP / PPAP readiness assessments, training, and pilot programs.
HANK:
Switching topics, it seems like the relationship between the customer and the supplier is improving…what do you think has led to that?
ALAN:
I think what is driving a better relationship is opportunity. Suppliers want to see the horizon where they can be successful on an ongoing basis. Customers like a supplier that is willing to invest in the future – in capability and in technology. I think that is something that’s bringing suppliers and customers closer together.
I think it is also commonly understood that the supply chain is too large, and customers have too many suppliers because obviously the more suppliers you have the more difficult it is to manage them
Customers are also looking for suppliers to invest in new programs, most recently NPI and so that bring us back to one of my original points as to how important NPI is.
So if the customer and supplier are supporting investment, let’s have them invest in something that’s effective. That’s why I believe APQP can be huge for the aerospace industry. And that’s of course why verify has been making significant investments into APQP and PPAP with our new technology [platform, training programs, and a global subject matter expert team including our indomitable APQP leader Shana Deering. We are all really excited about that and what it means for our industry’s future.
HANK:
Are there any other looming challenges on the horizon?
ALAN:
You know we stuck our neck out a little here. We included data on skilled labor shortages and global uncertainties.
In terms of skilled labor, we have seen a considerable reduction in the number of qualified resources that we’re screening per open position over the last 8 years. I do not have the data in front of me right now, but I think if we go back to around 2010 we had on average 8 to 9 qualified resources for every open position whereas last year we went down to about 3 or 4. What does that tell you?
Part of it is obviously the high employment rates we see right now. However, I think other key factors are our aging workforce and the continued insufficient investment and societal recognition for Science, Technology, Engineering and Mathematics (STEM).
We need to see more leadership from government and industry. We need to see an increase in apprenticeship and mentor-ship programs.
HANK:
… and what’s your position on global uncertainties?
ALAN:
I do not believe there has been enough said about the dangerous rhetoric – and how that affects cross border customer supplier relationships. I have worked and built business across all three major industrial continents. I am a globalist who believes we need to make the world smaller. Let’s focus on improving trade cooperation – with common and fair rules recognized everywhere. I believe both the world and the supply chain does better when we effectively communicate and remove barriers.
HANK:
Alan thanks so much for taking the time to provide your insights and industry experience. Really looking forward to the release of Verify’s next white paper.
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Hank Hagedoorn is the Director of Business Development for Verify Inc, a global Supplier Performance Management company headquartered in Irvine, CA. For more information and to received a copy of the whitepaper please contact verify : send request to Marketing@vscnet.com