An Interview with Dana Nickerson: What you Need to Know About Component Supplier Management and How to Spot Future Opportunities - July 21, 2015
/For manufacturing organizations treating a large number of parts, component supplier management is a critical discipline that directly impacts costs of goods (CoG) and cost of quality. Dana Nickerson has a long rich history in this space, both as a practitioner and consultant.
Martin:
Give us a little background on yourself and the activities you have been involved in.
Dana:
My primary role right now is President of Noëtic Data and Plural Technology Companies. Noëtic Data provides product data structuring services and Plural Technology provides product lifecycle management development and implementation services.
My background is as a PLM strategist working for various management consulting firms such as CIMdata, Booz Allen and Accenture. I have also worked in large industrial companies in the appliance, computer technology and aerospace industries in helping them to implement PLM.
Being both a management consultant and employee of large industrial companies has provided me with a unique view of how to develop Information Technology that provides value by furthering a company’s objectives and the challenges of deploying the strategy in a large company. Finding the standardization sweet spot for PLM is absolutely essential. Value generally increases with standardization provided by PLM. However, too much standardization will stifle creativity and reduces value.
Martin:
Dana, describe for us this whole idea of component supplier management?
Dana:
Component supplier management is a specialty under supply chain management. It was first used in the late 80’s early 90’s by a company called Aspect Development. The idea was that people in procurement needed a process and tool that could help manage the components that needed to be purchased. Companies wanted to standardize on components so they could be reused, purchasing could be aggregated and inventory reduced. Aspect Development grew to be quite large and was eventually acquired by I2.
A component supplier management process and tool generally sits between the engineering and procurement groups. The purpose is to enable the procurement organization to define standardized components that then can be selected by engineering. It helps the organization to reduce costs by employing techniques that maximize the reuse of components.
Martin:
Then, who sets these standards for the components?
Dana:
Usually the standards are set as a combined effort between procurement and engineering. Engineering sets the requirements for performance and dimensional characteristics and procurement defines the supply chain characteristics such as minimum delivery times, transportation costs, etc.
Martin:
Are there governing standards available that provide this information as well?
Dana:
At a very high level, there are standards set by government regulatory agencies and standards bodies. But there are many internal standards as well. Companies use these standards to improve efficiency and reduce cost.
Martin:
As you describe this idea, what would you characterize are the key challenges in this process?
Dana:
The objectives of engineering and procurement can vary. The objectives of procurement are to reduce the costs of components. The objectives of engineering are to deliver quality products at a specific cost. And there is a constant tension between engineering, who is defining a set of components that they feel are going to meet the quality and performance standards, and procurement which is defining a set of components that are going to meet their cost objectives. And those two objectives are not necessarily aligned.
There is a way through those challenges. And that is making the knowledge or information about those components detailed, available and transparent. When that information is widely available to both organizations, then the tension tends to be a lot less because each organization can reconcile their own objectives.
Martin:
For the purposes of our readers, what might be some activating or triggering words used by users that suggest they have challenges around component supplier management?
Dana:
Probably the most widely used word is “reuse”. A lot of companies have reuse goals. They want to be able to reuse a certain percentage of the components, say 20%, 30%. They will restrict the generation of new part numbers because they want people to reuse components. The problem is an engineer can’t use a part if they can’t find it. And finding components, not searching for components, but finding components is a huge challenge. So I would ask questions such as …
· “Do you have a reuse initiative?
· “Can you find the kind of components that you need for your design?”
· “Are you encouraged to reuse components?”
Those types of questions would lead to identification to the challenges.
Martin:
What applications, systems, platforms, whatever you want to call it, does CSM typically touch?
Dana:
Typically, on the procurement side, it’s usually an ERP system such as SAP. SAP is very prevalent in large industrial manufactures and large enterprises. But any kind of an ERP is typically the solution used by procurement. On the engineering side, it’s usually a product life cycle management system, PLM system, or some kind of a system that is keeping all of the bills of materials, drawings and CAD files in a central location.
Martin:
More specifically then, lets shift the attention to PLM. How does PLM contribute or assist in overcoming these challenges?
Dana:
PLM can contribute, but PLM must have good, detailed data. In many companies, PLM has the part numbers, bill of materials, drawings and specifications but it generally doesn’t have part cost or a set of robust component data about the components such as dimensional and performance characteristics. People need this data so they can find and use standard parts and components that meet their requirements and cost objectives.
So PLM contributes in some ways but in other ways there is a gap between what PLM can do today and what it should be doing. The gap is primarily in the data that is managed by the PLM. I probably should explain the word “data”. Many people use the word data to describe a document, like a drawing, or specification, or something along those lines. The way I am using the word data is to describe the more detailed, discrete and specific characteristics about a part, a dimension for example, a length, a width, a size, or performance characteristics.
Martin:
Like part attributes?
Dana:
Exactly, part attributes.
Martin:
I realize this touches a topic better suited for another conversation. But knowing a little bit about your background, it would seem to me that your expertise with classifications would play a significant role in the quality of the data?
Dana:
Yes, classification can be a huge benefit because it’s great methodology for assisting organizations in structuring data. Classification is a technique that our brains use to organize the world. Why not use classification to organize part data? Classification is a form of abstraction that is necessary for the way our brains work. It helps us group like parts together and capture detailed data about those parts. And of course, the better the data, the better users can make reuse decisions.