Epicor Case Study: Martin-Baker
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Company Name: Martin-Baker Locations: United Kingdom, France, Italy, United States Products: World leader in aircraft ejection-seat and escape-system technology Critical Needs: A more strategic approach to direct material procurement as a means of generating cost savings from its supplier community Benefits:
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In 1944, Martin-Baker began pioneering work in the field of aircrew ejection and now supplies ejection seats to approximately 70 percent of the world's air forces.
With manufacturing facilities in the United States, Great Britain, France, and Italy, Martin-Baker has a small but highly skilled workforce that produces ejection seats and other safety equipment for the aerospace industry. Each seat is manufactured on a made-to-order basis due to the differences in configuration depending on aircraft and the individual requirements of the purchasing air force or aircraft manufacturer.
In 2001, Martin-Baker decided to implement a new consolidated ERP solution to replace a number of older accounting and management systems. As a company that has always been innovative, it also decided to look at a new strategic sourcing solution to help manage and ultimately reduce the cost of its work materials.
"We wanted to test the water before jumping in feet first with a new electronic sourcing solution," explains Andy Patrick, purchasing manager for Martin-Baker. "We were beginning to explore the market for tier-1 ERP solutions and, although there were vague claims of the ability to manage reverse auctions, we wanted an application that we could deploy quickly and securely to explore the suppliers response to such a tool with minimum disruption to our business," he adds.
The number of reverse auctions Martin-Baker had envisaged was relatively small, but the value of each could range from £25,000 to £500,000, and the potential savings were great. Martin-Baker looked at the vendor community and, from a shortlist of three, decided that Epicor Sourcing would offer the fastest out-of-the-box implementation at a reasonable cost with the features that the company required.
Patrick says, "There were other SRM systems we considered, but they offered features we really didn't need and were more expensive. We planned to use the Epicor solution as almost a trial to see whether a reverse auction was feasible for us, and it was far quicker and less costly than trying to implement a similar solution integrated within any future ERP system." In fact, Martin-Baker participated in what became the very first JumpStart program. The Epicor Sourcing JumpStart program provides a 30-, 60-, and 90-day "try and buy" use of Epicor Sourcing. This service is hosted and maintained on the Epicor site, promising a production deployment within one to two weeks, and a package of implementation, consulting, training, and configuration services.
With the help of an implementation team from Epicor, the software was specified, installed, and configured over a two-week period in the summer of 2001. As a Web-based application, there were no legacy issues and required minimal infrastructure to deploy.
"We then ran a number of seminars for our suppliers and staff on our reasons for implementing the new system, how to use the interface, and the general procurement strategy," explains Patrick. We had expected a backlash, but this wasn't the case as only a relatively small part of our business would use the sourcing solution, and I think our suppliers understand that we all need to remain competitive to stay in business."
Due to the extremely high-quality standards required by Martin-Baker from its suppliers, each reverse auction has a limited number of invited participants. Each participant receives highly detailed proposals for the required parts for submanufacture, as well as details on quantity, delivery, and duration.
"We started it as a pilot, but the first auction was so successful that it effectively paid for the software and implementation cost due to the savings we made as our suppliers were able to reduce costs and lower margins to win the orders," says Patrick. Over a period of just three weeks, a Martin-Baker purchasing team supported by Epicor ran three successful sourcing events for selected component packages. These included highly complex engineered aluminum and steel components. The company received a 220 percent return on investment (ROI) during the first sourcing event alone. For the whole pilot program, the ROI was 400 percent. More significantly, each of the sourcing events lasted just one hour compared to the several weeks it would take to conduct events using more traditional processes.
Over the last 18 months, Martin-Baker has run eight reverse auctions using the Epicor Sourcing solution with a value of goods approximating to 15 percent of the annual direct material spend. Patrick estimates that the company has made a saving of 30 to 40 percent on the items purchased through the system.
Patrick believes that Martin-Baker has made a wise investment in Epicor Sourcing and is currently planning an RFP-type auction for its suppliers to design and manufacture functional items for Martin-Baker. "We have tested the waters and Sourcing works for us as a selectively deployed tool," Patrick says. "We will now look at how we can use the same tools for other parts of our business."
Martin-Baker is the world leader in aircraft ejection-seat and escape-system technology. They are the longest-established and most-experienced manufacturer of ejection seats and related equipment that safeguards an aviator throughout the escape, survival, and location and recovery phases. A world-class organization, Martin Baker has established a unique infrastructure to support its international business demands. Its headquarters are in the United Kingdom, with operating facilities in France, Italy, and the United States of America. These facilities offer a complete end-to-end service, from helping the customer establish operational safety and escape requirements, design, development, and qualification to ongoing support throughout the entire service life of the aircraft.
