Early supplier integration in the US defense industry

Garrett Lane Cohee,Rob Handfield,Jeff Barrows

doi:10.1108/jdal-03-2018-0007

Abstract

Purpose Each year, the US defense industry outsources nearly $400 bn of domestic goods and services through competitive bids. These procurement activities are quite often complex and specialized in nature because of a highly regulated federal acquisition contracting environment. Ongoing calls to improve supplier management and drive innovation in the defense industry offers an opportunity to adopt Early Supplier Integration (ESI) initiatives that have proven successful in the private sector. This paper identifies critical ESI activities and acquisition practices that the defense industry should adopt to ensure enhanced effectiveness in new product development. Design/methodology/approach Leveraging a conceptual ESI model derived from the research, an in-depth case study of 12 product development projects from a major defense contractor was performed. In the context of project performance, critical ESI activities and moderating effects were assessed. Findings Three key ESI activities have the greatest impact on aggregate project performance: system design involvement, design adjustment opportunities and design for manufacturability/assembly/testability involvement. Use of formal supplier agreements also significantly impacts project performance during the development phase. In addition, project complexity and product team maturity were identified as environment moderators; higher complexity projects tended to negatively moderate the impact of ESI upon performance, and higher team maturity levels tended to positively moderate the impact of ESI upon performance. Originality/value The results provide a sound framework for empirical validation through future quantitative studies and defense industry analyses. In addition, insights and recommendations for interpretation and adaptation of federal acquisition regulations to allow increased utilization of ESI within the defense industry are substantiated.

Highlights

Returning to our objective, we sought insights into how Early Supplier Integration (ESI) could be used in the defense industry, where federal acquisition requirements may impede the effectiveness of prime contractors and suppliers; thereby negatively impacting project performance
We developed a case study research design of 12 different projects to identify the most important ESI elements from the research literature, and sought to explore the application of ESI practices within the unique US defense acquisition environment
We identified that many of the ESI approaches used in private industry exist in the context of product development sourcing within the defense industry, despite the perceived existence of limitations that exist within the highly regulated federal acquisition environment

Summary

Introduction

This study focuses on procurement activities between prime contractors and suppliers within their supply chain Each year, this US defense industrial base competitively procures over $400 bn of domestically contracted goods and services (Gansler and Lucyshyn, 2013). No less than eight major acquisition reform initiatives have been undertaken since the 1980s, with the most recent directed by the Obama Administration in 2009 (Gansler and Lucyshyn, 2013) While these initiatives have focused broadly on contracting activities, defense industry procurement practices represent a specific recurring opportunity for cost improvements and performance benefits [Government Accountability Office (GAO), 2006, Forum]

Methods

Results

Conclusion