Performance Partnering on the Astute Submarine Programme
Tue 28th Apr 2015
Introduction
The research underpinning this impact case was a £147,000 UK Government (Department for Trade and Industry) funded project entitled ‘Competitive Success through Supply Chain Performance Improvement’. Dr Joe Sanderson was the principal investigator. The research involved four main collaborating companies in UK naval shipbuilding: BAE Systems (Marine), VT Shipbuilding, Truflo Marine and Fleet Support. Each of the companies identified a particular supply chain for analysis. The key insight of this research is that the scope for a buyer to engage a supplier in a collaborative effort to improve its performance is a function of the supplier’s willingness/ incentive to undertake the necessary performance improvement actions. This was an important issue for BAE Systems because it was under pressure from its customer, the Ministry of Defence (MoD), to keep costs on the Astute submarine programme under control while ensuring that quality and innovation were not compromised. BAE Systems had not historically engaged in collaborative supply chain management initiatives, but saw this research as an opportunity to explore the potential of such supplier collaboration as a way of delivering what the MoD wanted.
The research investigated how the power structures underpinning particular buyer-supplier relationships affected the supplier’s willingness to collaborate, and the effects of any such collaboration on the performance of the supplier. The evidence suggested that effective collaboration, leading to performance improvement, was most likely in circumstances either of buyer dominance or buyer-supplier interdependence.
In the former circumstance the buying organisation was able to insist on supplier involvement in a collaborative initiative. In the latter, collaborative efforts made sense given the heavy dependence on each party on the other and the lack, therefore, of competitive market pressure to drive performance improvement. The evidence also suggested that effective collaboration was much less likely in circumstances either of supplier dominance or buyer supplier independence. In the former situation the supplier was able to dictate the terms of its relationship with the buyer, while in the latter it did not make commercial sense for either party to forgo the freedom to switch by incurring the significant sunk costs associated with collaboration
Benefits and impacts
Instrumental impact
The impact was achieved through the collaborative relationship developed with the companies during the research. The findings of the research were initially disseminated into the collaborating companies and user community through a series of four workshops led by Dr Sanderson. The findings and underpinning analysis were also written up and disseminated to the collaborating companies. The industry trade body, the Shipbuilding and Ship-Repair Association, also ensured wider dissemination of the findings through its publications and website.
Subsequently, Dr Sanderson was invited to visit BAE Systems to assist members of their procurement and supply management function in understanding how the methodologies used in the DTI-funded research could be adopted more widely to model and evaluate performance improvement opportunities in other supply chains. He was also asked to give advice on how best to handle vulnerable sources of supply involved in providing critical components to the Astute submarine programme. Through the research findings and these subsequent interactions, those responsible for procurement and supply management on the Astute programme recognised that their short-term, boat-by-boat, approach to awarding contracts was making BAE Systems an unattractive, and therefore commercially weaker, customer in the eyes of many of its suppliers. Consequently, the scope to achieve cost control, enhanced quality and technical improvement was being limited and supplier performance was suffering.
Impact is most clearly demonstrated by the radical change to the management of key suppliers on the Astute programme through the introduction of longer-term (multi-boat) contracts called Performance Partnering Arrangements (PPA). Rather than being awarded a contract for one single boat, suppliers receive a commitment for the duration of the class of boat. In return they are expected to achieve a series of challenging quality, cost reduction and technical innovation targets. There are various publicly available accounts of the use of PPA by BAE Systems on the Astute and other submarine programmes, for example with Thales UK (March 2009), AMETEK SCP (March 2009), Babcock (March 2012) and Northrop Grumman (July 2012).
References:
Sanderson, J. (2009), ‘Buyer-supplier partnering in UK defence procurement: Looking beyond the policy rhetoric’, Public Administration: An International Quarterly, Vol. 87, No. 2, pp. 327-350, DOI 10.1111/j1467- 9299.2008.01734
