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Supply Chain Management – ES4C9

Negotiation in the Aviation & Defence SectorBAE Systems, PLC.

James Fairbairn18/11/2013

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Introduction• FTSE 100 Company

• Sale (2012) ~ £16.6 bn• Gross profit (2012) ~ £1.37 bn• 84,000 Employees worldwide• Stock/Current WIP value ~ £665 m• ~25,000 Suppliers worldwide

Revenue by Business area (2013)

Electronic SystemsCyber & IntelligencePlatforms & Services (US)Platforms & Services (UK)Platforms & Services (International)HQ

• FAME, 2013. Company report: BAE Systems PLC (UK) Limited [online]. Brussels: Bureau van Dijk [viewed 11 November 2013]. • Investis.com, 2013. BAE Systems, 2013 Half year results [online].

http://bae-systems-investor-relations-v2.production.investis.com/ Accessed 11 November 2013

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Negotiation – Current state

Challenges faced

• Contract winning• Expertise & technology acquisition• Specification adherence• Process improvement in existing relationships• Reliance on Government Contracts

Impact

• Reputation• Profitability• Future contracts• Financial performance linked to political climate

• Yousigma.com, 2013. BAE Systems PLC (SWOT Analysis) [online]. http://yousigma.com/comparativeanalysis/baesystemsplc.html Accessed 11 November 2013

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Negotiation Style

• Dr Dawei Lu, MSc Supply Chain Management module

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Negotiation on two fronts

• Contract negotiation• Utilising teams of in-house & external experts with both

technical and in-field experience to define key points• Analysing and proposing alterations to specifications• Ensuring contracts provide value for both parties• Secure Intellectual Property Rights

• Supplier negotiation• Establishing trust

• Ensuring capability & capacity within schedule• Satisfying security requirements

• Agree on roadmap to integration into chain & pull systems• Utilise expertise in other business areas – further integration• All-or-nothing scenarios can still elicit extreme responses

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Conclusions

• Quality as the primary driver restricts negotiation styles

• High value to supplying BAE Systems for suppliers

• Industry demands infer a high cost of failure• Trust is a prerequisite to business

• Building long term relationships is key to improvement across multiple product lines

Company negotiators hold most of the cards when dealing with suppliers, but a fully collaborative approach must be taken to secure quality, integrate companies into the pull-system and reduce waste throughout the entire chain

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Thank you for listening