Best Practices

Private sector firms have found that greater cooperation with suppliers has improved their ability to respond to changing business conditions. Such relationships have helped to cut costs, improve quality, and reduce product design and delivery times. The Defense Department (DOD), which wants to upgrade its weapon systems at a faster pace, needs to find ways to modernize its weaponry more economically. By incorporating best supplier practices into its process for weapon systems acquisitions, DOD may be able to respond more quickly to technological changes with shorter cycle times, reduced costs, and better weapon system quality. This report (1) identifies best commercial practices for establishing, managing, and sustaining excellent supplier relationships and (2) compares these practices with those of the military, prime contractors, and the supplier teams on two weapon system programs.

GAO noted that: (1) best commercial practices, when analyzed in the aggregate, can be seen as the four traits that operate in a system that is self-sustaining because it provides mutual benefits to both the firm responsible for the final product and its suppliers: (a) the leading commercial firms embrace effective supplier relationships as a core business strategy and build organizational structures with skilled people to carry out the strategy; (b) leading companies use a rigorous supplier selection process to create a strong supplier base that they could more effectively manage; (c) they establish effective communications and feedback systems with their suppliers to continually assess and improve both their own and supplier performance; and (d) the firms foster an environment in which suppliers realized that more significant contributions were matched with significant rewards; (2) DOD and prime contractors were aware of such benefits and were implementing some of these practices; (3) however, experience on the Brilliant Anti-Armor Submunition program showed that it could be difficult to translate the desire for better supplier relations into tangible differences in the actual relationships among suppliers, prime contractors, and DOD; (4) in the program, the four traits did not comprise as powerful a system as was formed by the best commercial practices; (5) consequently, their performance was strictly limited to compliance with contract requirements; (6) in the Joint Direct Attack Munitions (JDAM) program, a more rewarding environment was created for suppliers even though improved supplier relations was not an explicit program objective; (7) nonetheless, the action taken by DOD on the program bolstered the support for supplier relationships and encouraged the suppliers to play a greater role; (8) DOD shares responsibility with the prime contractors for shaping the suppliers' environment; (9) thus, the role it plays on individual programs has a direct bearing on the sophistication of supplier relationships and the success of best supplier practices; (10) the supplier relationships on the Brilliant Anti-Armor Submunition program reflect DOD's traditional role of distancing itself from suppliers; (11) on the JDAM program, DOD was much more proactive and involved with the suppliers; (12) its pilot program mandate supported the program office's involvement in seeing that best supplier practices were used; (13) the ultimate success of this approach in producing a weapon that will perform as required remains to be seen; and (14) suppliers praised the approach for the relationships it fostered.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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