Process for evaluating options for materials management outsourcing

Abstract

This thesis investigates the issues involved with the outsourcing of the materials management function within aerospace assembly, proposing a process for determining whether all or part of the responsibility should be given to suppliers. A flowchart tailored to the aerospace assembly process has been developed to address strategic as well as cost concerns. This flowchart looks not only at the outsourcing of the entire materials management function, but also at the possibility of outsourcing the management of individual carts of parts to suppliers. In this case, referred to as supplier kitting, existing suppliers package parts in a kit that stops short of a full outsourced assembly, but has many of the same attributes. At this point, a cost model is proposed for assessing the internal costs of receiving and packaging a single set of parts for use at the assembly line. The cost of receiving, storing, and building up a set of parts is difficult to estimate from the data used within internal accounting systems. The cost estimated by the model can be used as the basis of comparison for outside bids to package parts. In addition, the broader trend towards outsourcing in the industry is explored, along with the recent implementation of best practices in supply chain management that impact the requirements of the materials management function. Finally, the organizational barriers to making improvements in the organization's supply chain are explored, along with specific examples that are related to materials management.