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9 June 2012 | Kamalpreet Badasha
Lockheed Martin has signed a deal to cut the number of suppliers of electronic components it deals with from 240 to one.
The one-year agreement with Arrow Electronics covers the procurement of more than 22,000 components used in the manufacture of missiles, satellites, radar systems and tactical fighter aircraft. Arrow will provide around a third of the total number of components Lockheed uses in these items.
Lockheed Martin plans to use similar strategic agreements for the procurement of other materials to save money on operations. The intention of the strategy is to reduce lead times and standardise part selection, in addition to cost savings.
Lockheed Martin said using one supplier will reduce administration and allow money to be saved through economies of scale. The agreement will allow lower unit prices for the majority of components and greater flexibility on minimum order quantities benefitting inventory and cash management.
“We are adapting our supply chain strategy to further improve programme execution, drive affordability and assure quality performance,” said Dan Pleshko, vice president, global supply chain operations for Lockheed Martin.
To mitigate the risk of using a single contractor, Arrow was awarded the contract following a due-diligence test checking the financial health of bidders. Lockheed said it is “comfortable with the one-year term of the agreement” of Arrow Electronics which is publicly traded.