Restructuring Advisors

BAE Systems – Armored Division

Client: BAE Systems – Armored Division
Industry: Manufacturing – Government Contracting
Region: Midwest
Size: Large Multinational
Expertise: Crisis Management & Operations Improvement

The Challenge

BAE performs large-scale crisis manufacturing for the U.S. Military. The company was awarded a $500 million contract to produce a new line of armored vehicles. The project entailed providing the entire cabin armor package for the “Mine Resistant Ambush Protected”, or MRAP, wheeled vehicle. The vehicles were needed for deployment in Iraq and Afghanistan to protect our war fighters from the devastation created by the IED bombs being used by the insurgents. The contract called for 1,184 vehicles to be produced and delivered within a period of seven (7) months. Producing an average of 169 vehicles per month was a daunting challenge but when coupled with starting from a vantage point of having built less than 5 prototype units, the challenge seemed overwhelming.

Failure to meet the delivery schedule would result in two significant negative outcomes. First, there were severe monetary penalties that were included in the original contract. Second, future contract awards were at stake. If the company delivered on time, the chance to gain more business was good. Fall short of meeting the delivery schedule and the company was virtually guaranteed of not receiving additional contracts.

Our Actions

Jim Burritt, founder of Restructuring Advisors and Senior Consultant Kirk Fansher with extensive expertise in supply chain management and government contracting experience led an engagement to provide crisis management for strategic sourcing and supply chain management. Our initial goal was to identify the top 25 – 30 parts and/or suppliers where manufacturing issues could cause delivery delays thus putting BAE in a potential breach of contract scenario. Once the critical parts were identified, we undertook the following initiatives:

  • established primary and back-up sourcing capabilities;
  • met with each of the suppliers to create a build-out plan;
  • monitored the activities of the suppliers;
  • reported to BAE and the suppliers on a weekly basis regarding the status of the supply chain;
  • and assisted with any other supply chain issues that BAE identified as problematic throughout the program.

Our responsibilities included:

  • Monitoring key suppliers volume production schedules;
  • Identifying alternate suppliers for key product requirement where the primary was unlikely to meet production schedules;
  • Acting as liaison between BAE production and procurement departments and selected key suppliers to ensure their material was being delivered in the specified quantity, at the specified time, at the specific production cell, and with the conditions (orientation, packaging, etc.) specified for efficient material handling;
  • Developing management reporting tools that provided status updates on all critical items;
  • Implementing feedback and communication systems both internal and external that allowed for critical communications to and from key suppliers.

Our team knew that the project would require a distinct forward-looking approach to managing the supply chain. To that end we needed to build planning and communication tools and systems where issues would be identified weeks ahead of when they would cause production delays, so that corrective action plans could be developed and alternative strategies could be implemented. The methodology we used as a baseline for our systems included the following:

  • Mr. Fansher and colleagues initially visited each key supplier to evaluate their ability and capacity to meet their volume production schedule. The team developed a checklist that was used to generate quantitative and qualitative data from which a rating was developed describing the supplier’s ability to meet schedule requirements;
  • The team also developed a supplier dash board for each key supplier which was monitored daily and updated to include data such as:
    a. Schedule risk: red – yellow – green
    b. Performance to schedule: run chart
    c. Back log of raw material at supplier: sets on hand
    d. Finished goods inventory at supplier: sets on hand
    e. Key problems at vendor
    f. Alternate suppliers: list by name and location
  • Fansher performed site visits with key suppliers based on their dash board rating and established priorities with BAE to ensure the overall project remained in green, or, on schedule status.
  • The team monitored the ability and readiness of alternate suppliers periodically by phone or with site visits as required.
  • When a key supplier moved from green to yellow status, Fansher provided recommendations to BAE for corrective measures which ranged from operational improvement actions specific to the supplier through bringing the alternate supplier on board.
  • Throughout the process our team made recommendations for material presentation at the production cells based on Lean principles, observations of how the BAE production associates used the materials and by involving their engineers and production staff in material presentation discussions. We then relayed material presentation decisions to the key suppliers for implementation. Fansher and team followed up to ensure the suppliers were performing material presentation as planned.

While our system identified numerous problems along the way,the design of our forward looking systems allowed us to manage the issues before they became a crisis on the production line. Early identification and implementing backup plans eliminated delivery delays and all associated fines and/or penalties.

The Results

BAE delivered all 1,184 MRAP vehicles within the contract delivery schedule. Beyond the supply chain management role, throughout the course of our engagement the Restructuring Advisors team were able to identify over $2.1 million in direct costs savings thus improving the bottom line results. Since the initial contract award, BAE has been awarded supplementary contracts to build more than 1,300 additional vehicles for the U.S.