Supplier Relationships

INTRODUCTION

The Procurement and Material Management organization has sole authority to make commitments for required materiel and services. This includes the sole authority for source selection and for entering into a contract with suppliers. Procurement may, as necessary, enlist the resources of other functions in order to arrive at a final selection of sources of supply. After award of an order, it is necessary to maintain a single voice with the supplier. For this reason all supplier contacts should be made by, through, or with the knowledge of the delegated Buyer or Subcontract Administrator (CP P102).

The Company and the Electronic Systems Sector have various initiatives in place that influence source selection decisions. While initiatives such as the establishment of an Approved Supplier List (ASL) are necessary in order to maintain ISO certification and prohibit the placement of purchase orders with unapproved firms, the Preferred Supplier and Corporate Procurement initiatives are in place for business reasons in order to achieve economies of scale, reduce processing time and to satisfy corporate level requirements. Northrop Grumman’s best interests are served only when the Company and the supplier derive equal benefit from the relationship. Non-Procurement personnel are not permitted to make agreements with suppliers that legally commit the company. 

Quality Evaluations

Approved Supplier List (ASL)

A per part number listing of sources who have undergone a quality survey, etc and are found to be qualified to produce the specific part number in question. ASL designation indicates that the Supplier’s quality system and manufacturing capability is acceptable and that business circumstances warrant the supplier’s use on new and ongoing programs. ASL status can be awarded on a by part number or by facility basis.

Q Info Records 

A record created in SAP that acknowledges quality consent for the supplier to provide a specific part number. It is important to note that a Q info record may have been created after quality review of an Unapproved Supplier Authorization form and the mere existence of a Q info record is not meant to infer that the supplier has been added to the ASL for that part number. In the SAP system transaction ZQ51 captures a listing of suppliers that have Q info records created by quality. The screen also reveals whether or not the supplier is on the ASL for that part number.

Applying for ASL Status 

Requests for ASL status should be submitted by any functional area representative to the Procurement Quality Administration department in the form of a written business case. Award of ASL status is contingent on the supplier evaluation and management approval. 

Preferred Supplier Program

This program was created to recognize the industry leaders in the Electronic Systems supplier base that are consistently cost-competitive, high-performing providers of deliverable production materials. These preferred suppliers deliver a broad range of products across many programs. Some requirements (for details, refer to command media procedure P342) for Preferred Supplier status include: maintaining proven quality systems and superior quality and delivery yield standards (95% and 90%, respectively); undergoing periodic audits of quality / business / management systems; and using NG ES logistics and performance status tools. Benefits of Preferred Supplier status include: early design collaboration with NG ES Engineering, source selection discriminators, technology- and business-forecast sharing, and supplier training on NG ES processes/tools.

Corporate Contracts

Annual agreements which establish negotiated rates with suppliers. Through utilization of these agreements buyers are able to expedite procurement packages thereby allowing for quick placement and order receipt. Through utilization of corporate contracts savings are achieved through reduced buyer intervention and by utilization of rates that were established with reference to corporate wide forecasted spending. 

Since corporate contracts are established on the basis of corporate wide forecasted spending it is necessary to place all procurements in these categories with the corporate sanctioned sources. Therefore, applicable procurements which are placed through alternate sources must contain a written statement of justification indicating why it was necessary to procure outside the realm of the corporate contract. 

Technical Recommended Source (P361-F01)

While a determination of best value involves a more intricate analysis than that of cost alone it is often necessary for procurement personnel to obtain source selection input from other departments, such as engineering. In such cases the input is recorded on Form P361-F01. 

American Express (AMEX) ES Purchasing Card (ESPC)

Procurement and Material Management may authorize issuance and use of the ESPC on an "as needed" basis. Rules governing use of the ESPC are very specific. For example, the ESPC shall not be used to purchase prohibited materials and service, including: direct charge material that is a deliverable contract item, material requiring quality-level approval/certification/inspection, items procured on a "time and material" contract, safety-related products, materials purchased outside the U.S. (due to export rules), capital equipment (i.e., items >$5,000), all computer hardware, computer software charged to a government contract, etc. (see ES P465 for a complete list of restrictions).

TEST YOURSELF

You are a member of Northrop Grumman’s Engineering community and you feel strongly that a specific source is the only source that is technically qualified to provide a certain material that is required for a current program.

  1. If the job is technically complex, may you mandate that procurement must use the specified source?
  2. In the situation described above, should you complete a P361-F01? 

    There is a corporate contract in place with a national supplier, but you prefer to use a local source because you need “hands on” involvement with the effort.
  3. Can you insist procurement use your preferred local source based on your requirements? 
  4. Should you present your rationale for procuring the material/service from an alternate source on a P361-F01? 

    You are not a member of the Procurement department but you know that an upcoming purchase order will be placed with a source you specified to the buyer.
  5. May you tell the supplier that the order is on the way? 
  6. After the contract is awarded, may you independently communicate changes or special needs to the supplier (e.g., design modifications and schedule changes)? 

    You are not a member of Procurement and Materiel Management, but you have identified a source that is capable of providing a specific product line.
  7. Should you identify this “find” to Procurement for review? 
  8. You are aware of a supplier on the Approved Supplier List (ASL) that has unique ability to provide a specific machined part number. Does their ASL status automatically qualify them to provide a newly specified part number?

    Your government customer just requested a change that requires a new part be incorporated into your contract deliverable product; the customer has agreed to pay for the part. To maintain delivery commitments, you must acquire the part immediately. A quick search on the Internet identifies a supplier who can ship the part overnight.
  9. May you order the new part using your American Express Purchasing Card?
  10. Does it make a difference if the customer/contract is commercial, rather than government?

Correct Answers

  1. No. You may recommend (not mandate) a source to procurement. 
  2. Yes. Use the P361-F01 form to recommend a technical source. 
  3. No. You should provide unique requirements to your procurement representative. 
  4. Yes. You should provide justification indicating why it was necessary to procure outside the realm of the corporate contract. 
  5. No. Procurement and Material Management has sole authority to make commitments for materials and services. 
  6. No. Any change or request that impacts our contract with a supplier must be made by, through, or with the knowledge of the designated Buyer or Subcontract Administrator -- this protects us, as well as, our suppliers. 
  7. Yes. Information that may enable us to improve quality/value is always welcome. 
  8. No. The ASL is based on quality acceptance for specific parts provided by specific suppliers (not suppliers generally). 
  9. No. Direct charge material that will be delivered or incorporated into a deliverable item under a contract must be obtained through Procurement.
  10. No. The restriction applies to commercial and government material that is direct charge, and will be delivered or incorporated into a deliverable item under a contract.