Driving the Integrated Global Supply Chain from the Top - Feature Article

WT: When you took on the supply management job, what in your background or experience at UTC was most useful?

Brittan: When they first suggested the job to me, I thought I had no relevant background or skills to bring to the job. After a few days, however, it occurred to me that there were some things I had. One was a good knowledge of the company. That may be a catchphrase, but what it means is knowing what works and what doesn’t work inside UTC. Somebody from the outside wouldn’t really understand what flies and what doesn’t fly. And that’s important, because knowing an organization lets you get traction early on.

WT: And traction is important?

Brittan: Traction early on is a necessary ingredient to selling a program internally. It shows you know what you’re about. Otherwise, you spend years figuring out what works and you may start off with something that is a loser from the start.

WT: One point of curiosity. Every major corporation that focuses on supply chain efficiency all but immediately realizes huge savings. The question is: why now? Why didn’t this effort get initiated 10 or 20 years ago?

Brittan: That’s an excellent question, and the answer is almost embarrassing. For years, corporations simply assumed that there was nothing much they could do about purchasing. It was market driven, and you paid whatever the price was. I think going with that was that purchasing was not a high profile field. The best graduates didn’t leave the best business schools planning a career in supply chain. There’s a psychology to it. Look at the way bookkeeping became accounting and then became finance; that changed who the field attracted.

WT: As an overview, you’ve made the statement: “The challenge to all companies is to continually lower the total cost of ownership of purchased goods and services.” Can you elaborate on that?

Brittan: You need to accept the implications of ‘total cost.’ At one time, when you bought a certain motor you focused on its price. Today, you want a motor that is in an assembly, manufactured with zero defects and delivered every four hours in the quantity you need to a particular point on your production line. That’s a very different proposition form buying motors on tablets and putting them in storage. When all you focused on was purchase price, you had to hire people to check and test those motors—you had stock people, inspectors, inventory people, materials management people and so on—and all of those people were part of your total cost of ownership. What we aim for today is to make the total cost of ownership less than what it was before.

WT: What were the skills you brought to the task?

Brittan: First of all, the biggest thing I brought to this arena was my financial background and focus on data and on data analysis. Data, yes, is relevant to a lot of things in business; it’s relevant to marketing, sampling techniques and so forth. But when I started, there was little data inside of UTC on supply management. For example, we didn’t have the cross-divisional data we needed to do a square one thing: to gain leverage.

WT: Can you give me a case in point?

Brittan: For example, we didn’t have cross-divisional data on the motors we were buying. We were buying $300 million worth of motors from 300 suppliers. You want to be in a situation where you know exactly what you’re buying, company-wide. If you have 100 suppliers of fractional motors, you want to go to them and say, ‘What are you going to give me for $50 million worth of business?’ Leverage is trading market share for price.

When we started, I didn’t know how many motors UTC was buying, or what kinds. And without knowing that, I didn’t know how to create the model for a new procurement organization. But once you have that information, you can create that organization and divide the total company spend into categories: aerospace, metals, plastics, motors, gears, bearings and so on. Then we can say to each group: ‘We want you to optimize the spend across the organization.’

WT: How do you rate the capacities of your suppliers?

Brittan: When you have 8,000 suppliers, it is prohibitively expensive to send people out to determine what sort of company they are, what their equipment is, whether they practice lean manufacturing and what their quality program is. But, with this correlative technology UPC uses, we can, remotely, gain an overall assessment of the supply base pretty quick.

Let me give you an example. You may have 180 machine shops supplying you; you don’t really want 180 machine shops. How do you know which to choose? You can get the sales per employee, the kind of equipment they have, their overall size, their location and all sorts of other data remotely. You take those reports, look at them, and begin to make pretty good assessments right there. And that’s what this correlative technology is.

WT: So, basically, you look at the correlates of supplier performance?

Brittan: Not just that. I’m simplifying here, but you can compare what they say with what they do. They might say they have lean manufacturing, but how do they launch a product into production. The might claim a certain physical organization of their plant, but if you know, say, their square feet and the number of rooms that have, you can judge whether that’s the case. When you think about things like ISO 9000 or Baldrige, these are largely self-assessments. But if you correlate the answers to 800 or 900 questions from various members of their different departments, you can make a pretty good assessment for yourself.

WT: With the emphasis on supply chain efficiency, what have you learned about your suppliers?

Brittan: The answer is: we’ve learned a million things. But summarizing, I’d say the most important thing is that we learned to learn about our suppliers. When we first started this, suppliers were just things that were out there and that delivered stuff to us because purchasing had ordered it based on something drawn up by the engineers. Now, we realize how important they are to the success or failure of our company. When I say ‘we,’ I’m not talking just about the supply management aspect of the corporation; I also mean the line managers of the company.

WT: Would it be fair to say that corporations know less about their suppliers than about their customers?

Brittan: Oh, yes. Absolutely. But, I would add that that’s a situation that no longer prevails within leading companies.

WT: You pose the question to a supplier: ‘What can you do for us for $50 million in business?’ What can you do for them?

Brittan: When you place $50 million in business for aerospace gears or aerospace bearings with a single supplier, the result is that you’ve entered into a long-term agreement with that supplier. At UTC, we are moving to lean manufacturing in our factories. Lean manufacturing won’t work unless our suppliers can deliver on-time, zero-defect products to the flow line in an orderly way. As you start spreading your flow line, you realize that you don’t want your suppliers to deliver discrete parts; you want modules. In auto parlance, you want a dashboard, not a speedometer. You are asking your suppliers to do more and more. In auto terms, the dashboard assembly-person is going to be buying the steering wheels and the speedometers and everything and integrate in their plant.

WT: In a sense, the supplier does the procuring for you?

Brittan: Yes.

WT: In short, you need suppliers to be as well organized as you are. How receptive to that are they?

Brittan: Obviously, the answer is mixed. The smart ones are very receptive, and others are receptive but don’t know how and others are not receptive at all, they’re just lost.

WT: In all of this, how important is the backing of people higher up?

Brittan: It’s critical. It’s critical. Whatever new practice may seem obvious to you, that doesn’t make them obvious to others. When you change anything, you break a few eggs. You need the support of people on top. But the fact was this: at UTC, supply chain involves 60-70 percent of total company costs. And when you make a significant difference in costs, it shows up. That’s a big advantage internally.

WT: Characteristically, supply chain improvement initially harvests a lot of low-hanging fruit? Won’t those returns diminish over time?

Brittan: Absolutely not. The reason I love my job is that it is constantly changing; the priorities change; new things are always on the horizon. We started out by working at gaining leverage, as buyers. Then we worked very hard at gaining leverage on the non-buyer side. That yielded a lot of savings. Next, we started pushing hard on lean manufacturing, which requires that our suppliers go lean. Leaning out the suppliers is going to take a tremendous amount of cost and time.

WT: Based on your experiences to date, what advice would you pass along to someone just now getting the job parallel to yours in another organization.

Brittan: The first key word is data; you have to have data or you’re dead in the water. Next, you have to put together a good organization; you have to have good people.

WT: Everybody wants ‘good people.’ But what are the skills that characterize good people in today’s supply chain world?

Brittan: At one time, someone in procurement would go out and buy against the information available in a materials buyer’s report. Today, we want suppliers who can deliver on-time zero-defect products to you.

WT: Does the job require more people skills?

Brittan: Yes. It’s one thing to go down to your own shop floor and tell somebody to do something differently; you’re both members of the same organization. But, it’s a much different thing when you walk into somebody else’s company and tell them they need to move this machine over here, and that machine over there, and, by the way, the storeroom has to be moved because it’s right in the middle of the flow line. Bear in mind: most of our suppliers are not publicly-traded corporations; they own themselves, and they have an owner who is used to running his own show. So social skills are very important.

WT: But is there a conflict there? One reason people go into business is so they can run their own show. Do they see you as trying to take something away from them?

Brittan: No, they don’t. If you explain rationally that this is what they need to do for their own good, most people will do it. But that means you have to present yourself clearly; you need to have the logic and in most instances it has to be something you yourself are able to do. So, that’s one difference about the future of supply chain: we’re going to have a large number of our people out in the suppliers’ world. In the past, we had a handful; in the future, we’ll have several hundred.

WT: Where would you like to be three years from now? What’s the major challenge to getting there?

Brittan: We will not succeed as a corporation unless we have a supplier base that is as lean as we are. And creating that will take time, a tremendous amount of effort and the reallocation of resources.