How They Did it: Supplier Relationship Management at Raytheon

This is an excerpt of the original article. It was written for the March-April 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

March-April 2015

Anyone who’s ever bought a house knows the realtor’s motto: Location, location,location. It’s the most important factor in determining the value of a property. Based on the press releases that come across my desk these days, supply chain’s motto is: Innovate,innovate, innovate. This issue includes approaches to inventory optimization, contract management with third party logistics providers and contract manufacturers, and the Goldilocks approach to supply management—an innovative concept aimed at keeping your procurement department from running too hot or too cold.

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In early May of 2014, senior executives from Raytheon’s Integrated Defense Systems (IDS) business met with senior executives from 13 key Raytheon suppliers at a hotel near Boston’s Logan Airport. The suppliers came from all over, including one who traveled from as far away as Norway, to launch Raytheon’s first Supplier Advisory Council, or SAC. The meeting was the first step toward a pilot program designed to be a key building block in Raytheon’s emerging Supplier Relationship Management (SRM) strategy. The ultimate goal, according to Michael Shaughnessy, vice president of Integrated Supply Chain for Raytheon Integrated Defense Systems, is to earn and provide preferential treatment as the Customer Of Choice—the customer who receives the best terms, manufacturing capacity as needed, and gets first dibs on innovations that can win in the marketplace. “In order to reach that level of earned preferential treatment, we have to build stronger bonds and greater trust into supplier relationships,” says Shaughnessy. Together, he adds, Raytheon and its suppliers can work collaboratively to develop winning technologies while taking costs out of the production and maintenance of products.

By all accounts, the first meeting started off slow. By the end of the day, however, there was a focus on next steps and a commitment to move forward. By the third meeting in September 2014, the suppliers were truly participatory. “We had momentum,” says Neil Perry, Raytheon Integrated Defense Systems’ director of supply chain operations.

The changes in Raytheon’s approach to supply management reflect the kinds of discussions that are going on at other industry leaders who are moving from transactional relationships based on cost and delivery times to more strategic relationships with their suppliers. This is the story of how Raytheon is implementing a Supplier Advisory Council in order to become the Customer Of Choice.

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