Supply Chain Savvy

Posted on Aug 1, 2011 :: Features
Posted by , Insight on Business Staff Writer

Photo by Shane VanBoxtel, Image Studios

The numbers alone speak to the interest in taking part in one of the hefty military contracts centered in the region. When Marinette Marine Corporation held a small business industry day in early February in Green Bay, the session drew close to 500 registrants.

Marinette Marine is building a new class of fast, shallow-draft ship for the U.S. Navy called the Littoral Combat Ship. The next phase of the program will involve more than 200 subcontractors, some of them regional companies that supply materials or services. According to the recently formed North Coast Marine Manufacturing Alliance, the LCS project – which calls for up to 10 more ships to be built in this region – should mean about 1,000 jobs at Marinette Marine and another 5,000 jobs regionally.

Meanwhile, at Oshkosh Corp., its Oshkosh Defense division is churning out more well-protected vehicles for the military. One of its latest projects is the Family of Medium Tactical Vehicles – or FMTVs – with variants to handle missions like hauling or towing. Across all units, the company does business with 1,400 Wisconsin suppliers.

The scale of work is considered a big opportunity for companies of many kinds: component makers, providers of manufacturing services such as machining or welding, as well as services like painting, electrical or maintenance.

“It all depends on what the prime contractor chooses to keep in-house, but generally, the whole region will benefit by creating jobs of many types,” says Aina Vilumsons, executive director of the Wisconsin Procurement Institute, a non-profit organization that assists Wisconsin businesses with government contracting, and helped organize the LCS industry day event.

But becoming a trusted part of one of these supply chains isn’t easy. Those involved say it often requires a level of information sharing and mastery of supply chain processes that go beyond simply delivering a quality component on time and on budget. Case in point: with FMTV, component suppliers must adhere to a quality management process called Production Part Approval Process, widely used by major automotive companies. Under PPAP, suppliers must adhere to procedures for quality assurance.

According to Paul Gosling, vice president of global procurement and supply chain with Oshkosh Defense, FMTV suppliers are following PPAP. Gosling says that while many larger and mid-sized companies know PPAP, this level of procedural sophistication could take time to learn for a smaller company. The reality, he adds, is that government is requiring more process improvement from prime contractors, and that goal is pushed down the supply chain. “If I had to boil it down to a statement,” says Gosling, “we are moving from being product driven to process driven.”

Suppliers of many parts also may need to undergo a supplier assessment in which the prime contractor sends an audit team to the supplier site. While this may not be needed for off-the-shelf parts, it is typical for more critical materials.

Gary Lofquist, CEO of MCL Industries, a manufacturer of electrical assemblies based in Pulaski, says MCL has undergone such supplier audit visits as part of doing work for military contracts. MCL’s facility has attained the ISO: 9001 quality standard, which hasn’t been a requirement on past defense work, but has sped up the process because it establishes the way quality procedures are handled.

“If you are ISO certified, when their supplier quality people come through, it makes their job quicker and easier,” Lofquist says.

MCL hasn’t worked on the LCS yet, but has done extensive work on U.S. Coast Guard boats built by Ace Marine, Marinette Marine’s sister company in Green Bay. MCL also has done work for Oshkosh Defense. One requirement Lofquist says some suppliers may be unprepared for: people who handle engineering files must be registered under the International Traffic in Arms Regulations, or ITAR rules, which control who has access to military-related intellectual property. “There can be a significant amount of up front documentation,” says Lofquist of getting into defense sector work.
But in practice, finding ways to continuously improve quality or lower costs is a much bigger focus than any initial red tape.

“One of the things [major defense contractors] are driving to is to minimize inventory,” says Lofquist. “So as part of that, they are looking for suppliers who can deliver within a very narrow time window, and sometimes, that might require us to manage our suppliers differently.”

Lori Okrasinski, purchasing manager and small business liaison officer for Marinette Marine, agrees that suppliers must be adept at working with their upstream suppliers. “It’s going to be important that they have looked at their supply chain to make sure they are able to get the materials for their product in time so that they can get their product to Marinette on time,” she says.

Engineers at Marinette Marine and its suppliers work far in advance of production to collaboratively design components, as well as to develop work instructions for assembly and maintenance. Even small improvements on the time it takes to fabricate a component or in how packaging speeds up assembly can help a project, says Okrasinki. “Those small improvements will multiply as we progress through multiple operations on multiple ships,” she says.

MCL’s Lofquist says that despite some unique requirements such as ITAR, defense sector work isn’t that intimidating.

“At the end of the day, it’s all about understanding what their requirements are, delivering a quality product, delivering on time, and along with all that, looking for better ways to do things.”