Date of Award

Spring 2007

Access Restriction

Campus Access only research projects

Degree Name

Dual Degree in Master of Science & Master of Business Administration

Department

Systems Engineering and Leadership Program

School or College

Seaver College of Science and Engineering

First Advisor

Rachelle Katz

Second Advisor

Frederick Brown

Abstract

Up until recently, the aerospace industry, viewed supplier management as top-down: focusing solely on cost and not viewing the supplier as a partner. Traditional customer and supplier relationships had been adversarial in some cases, based mostly on price with no guarantee of a continuing relationship. Products were being delivered late, with poor quality, and over budget. A poor relationship was established between the buyer and seller. The supplier base has also been reduced by seventy percent since 1994, caused by the reduction in the defense budget, also known as the ""The Last Supper"" led by Secretary of Defense William J. Perry. The 'Cold War' had ended and DoD decided to reduce it's expenditures across the supply base, thus forcing companies to go out of business or be acquired by others. This reduction in the supplier base caused a fierce competition among the major aerospace corporations, all vying for the prime contract position. The supply base is only about one hundred thousand people scattered across a handful of system integrators and several key suppliers.

Today, government contracts encourage the teaming mentality in program execution; where the best technologies of different companies are being used to create a synergy that has never existed before. System Engineering is reaching it's apex in the changing procurement environment, integrating sophisticated preexisting and new systems to meet the demanding needs of the customer. Most aerospace companies were vertically integrated, building and integrating most of the spacecraft in-house. Suppliers and customers need to find different ways of doing business; because today's competitive pressures demand different results. Someone once offered this definition for insanity:

"Doing what you've always done and expecting different results"

A common goal established with teammates should be the current focus of the industry, which exhibits a horizontal type of organization/integration. Space programs today have up to seventy percent of their spacecraft being subcontracted; the paradigm of the vertical integration mentality is changing. The need for System Engineering is in greater demand than ever. The Subcontracts organization should be a critical member of the upfront phases of major programs alongside System Engineering, by contracting with competent suppliers and involving them early in the program lifecycle.

The current trend in the space industry is for large companies to focus on core competencies such as System Engineering at the prime level, and to outsource more design and manufacturing. Combined with the rationalization of the supplier base, this has meant that companies are increasingly dependent on key suppliers to continue providing competitive subsystems and subassemblies which incorporate advanced product and process technology. Suppliers in tum are reliant on their customers for information in order to innovate. In the past, Subcontracts were viewed as simply contracting out simple components and parts to credible manufactures/suppliers. In this respect, System Engineering must apply sound principles & management to ensure the needs of the customer are met.

This paper will identify the four phases of a subcontract and how it interacts with the program. The four phases will identify the critical tasks and activities to be performed by key cross-functional team members in order to manage a supplier effectively. Case studies will be presented, where poor performance was attributed to inadequate assessments and failure to recognize key tripwires. System Engineering tools and methodologies for supplier assessments will be discussed in detail with special attention to the Technology Readiness Level (TRL).

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