REDUCING SUPPLY CHAIN UNCERTAINTIES AND COMPLEXITY WITH DESIGN FOR EXCELLENCE (DFX)

REDUCING SUPPLY CHAIN UNCERTAINTIES AND COMPLEXITY WITH DESIGN FOR EXCELLENCE (DFX)

Kevin Krot is senior managing director, head of aerospace & defense, for SGS Maine Pointe. Kevin has more than 25 years of consulting and industry experience, with a special focus on the Aerospace and Defense sector, with deep experience in corporate strategy, supply chain management, and operations.

Chris Brumitt is managing director for the aerospace & defense sector of SGS Maine Pointe. He has worked within the business operations consulting industry for the past 34 years to help CEOs and senior management realize the acceleration and execution of significant strategic goals.

Complexity of design puts further strain on an aerospace and defense supply chain that is already suffering geopolitical, economic, ESG transformation, and talent pressures. Design for Excellence (DfX) has emerged as a systematic approach and crucial methodology for controlling complexity and achieving targeted objectives through cross-functional enterprise-wide collaboration early in the design process.
DfX has been defined in many different ways with no clear, unified, universally accepted definition. In this article, DfX encompasses four dimensions: architecture, operations, supply chain, and sustainment.

The Four Dimensions of DfX. SGS Maine Pointe diagram.
The Four Dimensions of DfX. SGS Maine Pointe diagram.

For DfX to be effective, all functional groups in an organization should be consulted and given a voice throughout the product development lifecycle. DfX and complexity management are powerful levers for mitigating today’s volatile market conditions.

Drivers of Complexity

The drivers for complexity are similar across most companies and industries. In a typical model, sales asks for additional versions to penetrate new markets, so engineers develop additional parts leading to additional product development and production costs, while supply chain and production are not consulted. These cost increases typically lead to rising supply chain costs and decreased sales volumes, which causes sales to look for new markets to penetrate – and the cycle repeats.

The situation at one aerospace industry giant demonstrates the effects when engineering, manufacturing, and procurement do not work together early in the development process. Sales had no clear understanding of customer needs and limited understanding of the true costs of various options, leading to complex requirements. Engineering created designs without getting supply chain input on supplier capabilities, availability, lead times, and costs. The question of whether to manufacture parts in house (make-buy process) was based on whether they could manufacture in-house, not whether they should. Manufacturing built parts that could be purchased for less than half the true costs. Sales was broken into various product lines which ran independently. There was limited communication or common language (taxonomy) between development teams across the business lines. Drivers of complexity for this organization included lack of collaboration, unclear lines of responsibility, limited understanding of true costs, lack of process and tools for architecture management, and unclear understanding of customer needs.

Companies need to approach DfX and understand the true cost of complexity by involving every part of the enterprise through the entire end-to-end supply chain – sales, marketing, finance, procurement, operations, and engineering – from the planning stage through fulfillment. They need to look at DfX and complexity control through a new lens of cultural change, optionality, technology, stressing cross-enterprise collaboration.

Achieving DfX through Cultural Change & Governance

When aerospace and defense companies recognize that the pursuit of DfX involves the entire enterprise, they take the first steps toward addressing cultural and governance issues such as accountability, collaboration, and information sharing. DfX has emerged as a crucial methodology for planning, designing, and manufacturing new products and improving existing products but is only effective when everyone within the enterprise engages – with equal seats at the decision-making table.

Elements of End-to-End Supply Chain Optimization. SGS Maine Pointe diagram.
Elements of End-to-End Supply Chain Optimization. SGS Maine Pointe diagram.

With a focus on breaking down silos and increasing cross-enterprise collaboration, DfX ensures that new and redesigned products deliver high ROI in procurement, operations, and logistics. To help break down corporate silos and increase governance, companies can use tools such as:

• A 3C assessment (capability, capacity, and cost) of current operations

• Operating model framework addressing organization, roles and responsibilities, systems and tools, processes, performance management, and capabilities and culture

• Change Ambassador Network to increase ownership of change and decrease resistance

• Common language and taxonomy adoption

• Value stream mapping

• Trackers, dashboards, and master schedules to monitor KPIs and metrics

• Data analytics to enable fact-based decisions

• Coaching and training.

These processes and tools find the areas where functions and business units overlap and where they diverge; establish a common language and taxonomy to bring uniformity in the definition and understanding of KPIs, metrics, and values; provide the leadership and knowledge the workforce needs to meet their objectives; and provide executive management with timely, reliable data that improves governance, control, and accountability. For DfX to succeed, it needs a supportive and sustainable culture that understands and is committed to complexity management.

Achieving DfX by Enabling Optionality

DfX is constrained when the supply chain is constrained; that is, when the company fails to fully analyze its options and evaluate their risks and costs. For example, shifts in consumer and government demands have become more difficult to predict at the same time that suppliers have become more reluctant to take on lower volumes. By using standard or identical parts across multiple projects and reusing modules or subsystems, DfX reduces the number of supplier tiers, increases the volume handled by the prime suppliers, makes it easier to pivot with customer demand, and prevents the accumulation of legacy inventory that no one wants. With complexity management, suppliers will be more attracted to working with the company, which increases the company’s buying leverage.

For example, when determining which suppliers to work with, procurement might meet with all suppliers to explain the company’s current and future needs, evaluate the ability of each supplier to meet those needs, and listen to suggestions by the suppliers themselves, as well as the suppliers’ suppliers. By leveraging its spend, a company can drive cost reductions and begin win-win negotiations.

Achieving DfX through Technology Enablement

Engineering is core to mission of most aerospace & defense companies, and important for maintaining their identity as agile technology companies. The pace of change and proliferation of digital applications requires a thoughtful approach to establish a clear adoption path and drive meaningful impact in an evolving landscape. Technology is the key enabler, but only a fraction of the challenge; implementing digital engineering with business strategy alignment, change management, capability building, process development and adherence, customer engagement, supply chain interfacing, and performance management is equally critical.

The potential benefits of utilizing technology include improvements in efficiency, throughput, quality, and consistency from planning and forecasting through delivery. Digital engineering can promote the objectives of design for excellence and help reduce complexity if approached with reference to the end-to-end supply chain.

Supply chain optimization must come before automation. Automation alone cannot fix a process that is already rife with bottlenecks, inefficiencies, and regulatory compliance issues. In fact, layering automation on top of a misaligned process can bring production to a halt. Total Value Optimization (TVO) examines planning, procurement, operations, and logistics for opportunities to create value throughout the supply chain, identifying areas where automation will lead to increased EBITDA, growth, and profits. Once processes are optimized, the benefits of a manufacturing management operating system (MMOS), procurement management operating system (PMOS), and similar methodologies can be fully realized.

By the same token, advanced data analytics must precede the technology of supply chain simulation, which creates a twin of the end-to-end supply chain. The simulation bolsters DfX by sending a proposed option, change, or innovation through the simulation first to expose the associated risks. To build an accurate simulation, the company needs timely, reliable data; here is where collaboration, universal KPIs, and information sharing are critical.

An accurate simulation demonstrates how one alteration could affect the entire plan-buy-make-move-fulfill supply chain and how well it aligns with the company’s and the customer’s needs. What is the benefit and ROI of a proposed innovation or additional customer option? What are the risks and rewards of changing suppliers? How will new standards or regulations affect procurement, logistics, and operations? What is the true cost of added complexity? The answers to questions like those point the direction to greater excellence and less complexity throughout the supply chain.

Conclusion

The ability of DfX to manage complexity and the benefits of reduced complexity are known. When complexity is left unchecked, companies may find itself constantly renegotiating with suppliers, retooling machinery, and adjusting its supply chain without ever delivering on time or on budget. Complexity weakens the resilience of its supply chain.

DfX through an End-to-End Supply Chain Lens. SGS Maine Pointe diagram.
DfX through an End-to-End Supply Chain Lens. SGS Maine Pointe diagram.

By approaching Design for Excellence through an end-to-end supply chain lens, the C-suite gains control over complexity. That approach ensures that the full product life-cycle requirements and supply chain impacts are considered for each innovation, change, or potential event. As DfX and complexity management take hold, aerospace companies are better able to contain costs and risks and increase profits throughout the supply chain.