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Mission-Critical S&OP

Raytheon enhances integration, inspires learning, and boosts the bottom line
  • Elizabeth Rennie
July/August 2016

Raytheon Integrated Defense Systems (IDS) has 28 locations worldwide producing weapons, sensors, and integration tools that support mission-critical areas including air and missile defense; land- and sea-based radar; naval ship operating systems; command, control, communication, computer, surveillance, reconnaissance, and intelligence systems; and other advanced technologies. In addition, IDS offers air traffic management solutions, sonars, and torpedoes. Its broad international and domestic customer base includes the US Missile Defense Agency, US Armed Forces, and the US Department of Homeland Security.

For aerospace and defense companies such as Raytheon IDS, market and global economic conditions have caused significant shifts recently. Sole-sourced, fixed-priced, and cost-plus-development contracts have been waning, and more international contracts are coming up for bid. As a result, the Tewksbury, Massachusetts-based company began competing with firms in China, France, and Germany. To improve their ability to respond and win, leaders recognized a need to transform their supply chain business from a transaction-oriented function to a true competitive differentiator that would fuel business growth.

New developments

Supply chain executives at Raytheon IDS identified several objectives, including the expansion of a continuous-learning culture, achieving lower annual operating costs and optimal affordability for customers, and better integrating business and strategic supply chain planning. This is the foundation of the organization’s sales and operations planning (S&OP) program, so the lack of alignment was causing volatility and difficulty in managing long-term forecasting.

To overcome these obstacles, the Raytheon IDS supply chain team implemented an S&OP initiative that would improve productivity, advance execution, and sustain profitable growth. “We simply created a vision for the S&OP team and process,” says Josiah Brown, Raytheon IDS manager of S&OP. “IDS executes to a plan that balances supply and demand, is synchronized with all functional areas, and aligns the business plan with the operations plan.”

In the spirit of bolstering the learning culture throughout this undertaking, employees also were given the opportunity to earn an APICS Certified Supply Chain Professional (CSCP) designation. “CSCP epitomizes our commitment to continuous education that we can leverage to bring improvement to our supply chain model,” says Andy Brayton, Raytheon IDS director of planning and global logistics. “It gives everyone a common understanding and consistent terms and meaning that allow us to apply principles to our unique set of challenges.”

Brown explains that CSCP was specifically important in Raytheon IDS’s implementation of S&OP because supply chain management is an end-to-end process that links and integrates cross-functional activities. He says the APICS CSCP gave him and his colleagues a “mastery of supply chain management best practices” and distinguished Raytheon IDS to its supply chain partners as having specialized, high-level knowledge and skills. “The APICS body of knowledge provided us with the tools we needed to successfully implement a robust S&OP process into our DNA,” he adds.

Brayton adds that CSCP is teaching supply chain professionals to look at the supply chain from a broad perspective. He now sees the people on his team as true industry experts.

Inner workings

A six-step, tiered S&OP process was tailored to Raytheon IDS’s make-to-order supply chain model and instituted on a structured monthly calendar. The first step involves leveraging integrated business tools. Employees executed a major data-gathering effort, recognizing that the sources of information are the underpinnings of a successful S&OP process. Contributions for this data set came from demand forecasts, demand commitments, demand plans, operations resources, constraints, and supply and demand strategies. Each contributing piece of data contained supporting financial information, resulting in a new monthly effort that supports ongoing S&OP.

“While Raytheon IDS maintains strong foundational business systems and tools, the maintenance of the data has proven challenging,” Brown explains. “However, the S&OP process has bubbled up critical areas for improvement and allowed the various functional areas to set forth critical master data integrity governance efforts and initiatives surrounding the many facets of data inputs to our systems, resulting in more accurate supply and demand and capacity planning.”

The second and third parts of the process involve supply and demand planning. Here, forecast demands; potential sales; and actual demand, supply, inventory, and backlog come together to form the basis for the fourth phase—risk mitigation. Risk mitigation meetings provide an opportunity to discuss capacity constraints and resource requirements as well as develop action plans to mitigate supply and demand imbalances.

RaytheonThe last two steps begin with the pre-meeting. Team members work together closely to re-plan based on actions from the risk mitigation meeting in order to resolve issues without executive input. Also, the group prepares recommendations to the executive team for the final stage of the process, which is the executive meeting. At this point, the executives are presented with a broad understanding of supply and demand issues as well as the recommendations set forth by the managers from the pre-meeting.

Communicating the benefits

During this initiative, team members identified an S&OP manager, who launched the new process at Raytheon IDS by engaging all business functions—most importantly, the leaders of finance, supply chain, program management, quality, operations, and business development. The S&OP manager also set a vision for success, thereby helping leaders see S&OP as an avenue to effective business management.

Selling the benefits of this aligned plan was an essential element of the S&OP team’s efforts. It was vital for all stakeholders to understand that robust S&OP

  • balances demand with supply at the aggregate volume level
  • establishes relevant policy and strategy for both volume and mix
  • displays information in dollars and units for profit planning and asset management
  • is synchronized with all functional areas
  • aligns business and operations plans
  • enables executives to view the business holistically.

S&OP has matured into a well-established process at Raytheon IDS, exceeding the business-level goals for key performance indicators such as contract obligation on-time delivery—which has reached 99 percent—and master schedule line loads with adequate lead time—which hit 100 percent. Additional benefits were seen at all levels of the organization, as managers recognized a need to break down walls among the functions and eliminate barriers separating supply chain partners.

The business also has gained increased forecast accuracy, achieved significant lead-time improvements, and leveraged spend through strategic sourcing initiatives. Raytheon IDS’s integrated enterprise resources planning system and strong simulation modeling software also add integrity and agility, enabling employees to process data more efficiently.

In addition, internal and external supply chain partners now benefit from output and forecasts from the S&OP process, providing more predictability, visibility, and information sharing. The new S&OP initiative is driving cross-functional collaboration, data-driven decision making, higher levels of accountability, and proactive approaches to supply and demand issues. Employees have adapted a culture that is focused on delivering the highest standards of performance, quality, and affordability.

Raytheon IDS leaders see implementing this initiative across the company as a key opportunity. Other divisions have begun to adopt the S&OP process, which is making it possible to maximize linked enterprise-wide data with a consistent S&OP cadence and methodology. Brayton and Brown say this represents a significant opportunity, as consistent inputs lead to greater outputs.

“One of the key challenges we faced was creating one cross-functional version of the truth,” Brayton adds. “Now we have a common and agreed set of data. We are no longer discussing what the data says, but how to best solve the challenges it represents.”

Elizabeth Rennie is managing editor for APICS magazine. She may be contacted at editorial@apics.org.

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