Lower Cost Country Sourcing
A Collection of Lessons Learned
The Call
 Your boss calls you into
his office and says:
We need to have
suppliers in Lower Cost
Countries - go get us
some.




What’s next??
Hope
Pray
Call 1-800-I need a supplier?
Agenda
 A Collection of Lessons Learned
from Several Companies Covering
 Upfront Issues
 Identifying Suppliers
 Qualifying Suppliers
 Managing Suppliers
UPFRONT ISSUES
Upfront Issues
 Sourcing product in a LCC is a long term
venture, not a quick win event
 It will take significant time and effort.
 Your approach must be different than
working with domestic suppliers
 Cultural Issues
 Language Issues
 Plan on developing and growing your
suppliers
Export Issues
 Know your Export Requirements
 International Traffic in Arms Regulations
(ITAR) and Export Administration
Regulations (EAR)
 Failure to follow the law can result in Civil and
CRIMINAL penalties
 If manufacturing to a customer drawing or
specification, make sure permission to export
the technical data and hardware has been
granted by the customer
ITAR - EAR
 ITAR is Controlled by the State Department
 The State Department web site provides
guidance and time estimates for the
approval process
 Double the estimated approval time to reduce risk.
 EAR is Controlled by the Department of
Commerce
 Guidance is available via their web site
ITAR - EAR
 If in doubt, contact/retain an expert.
 Failure to follow the law can result in Civil
and CRIMINAL Penalties.
Identifying Suppliers
Identifying Suppliers
Sister Businesses
 If other portions of your business are
overseas, leverage their regional resources
 Usually their suppliers will not work for you
if they are not in the Aerospace Industry
 Volumes
 Regulatory Requirements
 Industry Requirements
Identifying Suppliers
Sister Businesses
 Use the regional resources of
sister businesses to identify
potential suppliers
 They understand the culture
 They understand the
language
 They know how to find
suppliers in that region
Identifying Suppliers
Customers
 Leverage your customers
 Works especially well where the customer is
requesting “offsets” in participating nations.
 Cannot defer selection or management to your
customer
Identifying Suppliers
The Internet
 Use the Internet
 Look for suppliers who
make product similar
to the ones you want
to source
 They are tooled to make
the parts
 They understand the
requirements and
tolerances
Identifying Suppliers
The Internet
 Look for suppliers in regulated industries
(food, medical)
 These suppliers understand working in a
regulated environment
 These suppliers understand
working with tight
tolerances
 These suppliers often
times manufacture in lower
volumes
Qualifying Suppliers
Qualifying Suppliers
 Challenges
 Lack of understanding of Aerospace
Industry expectations
 Culture
 Language
 Do not take shortcuts in the
qualification process!
Qualifying Suppliers
 Use on-ground resources to fully determine
the Supplier’s abilities
 Conduct your own detailed AS9100 audit
even if they are third party registered
Qualifying Suppliers
 Fully determine the Supplier’s abilities
 Conduct a multi-discipline business
assessment
 Purchasing
 Quality
 Manufacturing Engineering
 Use the Baldrige Model to assess their
business processes and execution
Qualifying Suppliers
 Language will be an issue and may
impact how you transfer data
 Determine English ability of the staff
 Determine literacy of workforce
 If literacy is an issue, clearly understand how the people
involved with your product will be able to manufacture it
successfully.
 A possible solution is detailed pictorial work instructions
with minimal text
Qualifying Suppliers
 Perform detailed reviews to clarify your
requirements
 Detailed contract review
 Supplier Quality Manual
 Packaging expectations
 Documentation expectations
 Supplier management expectations
 Don’t Assume Anything
Special Processes
Qualifying Suppliers
Special Processes
 Special Process performance to Aerospace
standards is a major issue at most LCC
suppliers
 Most suppliers are not Nadcap accredited
 You will need to perform detailed audits with
your own or contracted resources who are
skilled in each special process
Qualifying Suppliers
Special Processes
 Do not delegate special process supplier
approval to your supplier
 Make sure they only use your approved
special process suppliers if they outsource
 Even if you are purchasing Black Box Product
 Until the special processors become Nadcap
accredited, plan on annual audits
 Do not underestimate the work required
 Make sure you capture this in your cost model
Qualifying Suppliers
Part Qualification
 Have pre-production samples made
 Run samples through full analysis, including
destructive testing if necessary
 Review the results with the suppliers
 Ideally at the supplier with the parts so
there is clear understanding of the issues
 Get detailed corrective action plans and hold
regular progress reviews
 Remember the distance - allow enough time
and budget for this step.
Managing Suppliers
Managing Suppliers
 If you do your work properly upfront, most of
the supplier management process can be done
remotely
 START SLOW!
 Don’t put a large volume in at one time
 High risk to you
 Delivery
 May swamp them
 Long distance – long recovery
 Quality
 Start small, work out the bugs, have a
success, and then build the volume
Managing Suppliers
 Build the relationship
 Plan how your companies
can grow together over
decades, not years
 Make sure both you and the
supplier wins
 Remember
 This is not a quick win, short
term game - it requires
long-term commitment to
get the desired results
Questions?