Ask any successful company about their vision or their purpose and you’re sure to get a multitude of responses, but at the end of the day it’s a pretty simple question, right? Why do we do what we do? At InterConnect Wiring, the answer is that “We do the most critical tasks for our customers better and faster than they once thought possible!.”
In order for any manufacturing organization to achieve this answer on a regular basis – and we do – just check out our On-Time Delivery rate. All departments must work together as a team. The Purchasing Department contributes significantly to the vision we have at InterConnect. No matter whether it is for the F-16, F-15, C-130, or B-1B, as a purchaser we have the same vantage point as our customers because we are used to being the customer. Therefore, we know what drives the decision making on selecting suppliers. We all want parts from qualified sources with the shortest lead times, and don’t forget the best price, too. So the one hundred thousand dollar question is, “How do we accomplish that?”
We accomplish this by forming successful business relationships with our respected suppliers. Through these relationships we establish different types of contract pricing agreements that allow us to mitigate the risk of shortages and in a sense, control the controllables. We’ve all seen it happen before. You place an order that has a six week lead time, and then six becomes eight, and eight becomes ten, and now you’re late to your customer. There has to be a better way to do business, and there is. At InterConnect, we form successful business relationships with our respected suppliers and, through these relationships, establish different types of contract pricing agreements allowing us to control the controllables and mitigate the risk of shortages. The contract pricing agreements we find most beneficial for both companies are JIT, VMI, and LTAs.
A Just-In-Time (JIT) contract is used when we don’t know the exact quantity of the part we need so we equip the supplier with a projected forecast and they will hold our inventory for the duration of the contract, allowing us to order as needed. At InterConnect Wiring we currently use an effective JIT agreement that allows us to support multiple customers on F-16 loose wire assemblies, F-2 wiring harnesses, and UH-60 harnesses. A Vendor Managed Inventory (VMI) requires the supplier to maintain stock at our facility for the duration of the contract, replenishing stock where needed and billing us for what we’ve used so far. We partnered with two key suppliers with this type of pricing agreement during our two most successful programs in company history; the F-15 aircraft complete rewire program and the H-92 helicopter wiring harness program. We have also utilized Long Term Agreements (LTAs) in situations that allow us to provide firm fixed pricing for our customers because of the partnerships formed with our key suppliers. We have been able to provide this benefit to aerospace giants like Lockheed Martin and Sikorsky Aircraft for F-16 cockpit panel, circuit breaker panels, and matrix assemblies as well as H-92 wiring harnesses, respectively.
These are all types of contract pricing agreements that we have used to achieve better pricing and lead times. There are many more types, but these are the ones that InterConnect has successfully utilized. What we have learned is that each pricing agreement has their own unique advantages, but at the end of the day they all serve the same purpose. By forecasting our material requirements over a longer period of time we see larger quantities that move into better price breaks. At the same time our suppliers agree to hold the inventory on their shelves for the duration of the agreement resulting in better price and lead times for us and secured business for our suppliers. Both companies win, along with our customer, who gets their product on-time, every time. To get to the next level you must look to your suppliers as more than just another place to get material, they must become trusted partners.