Strengthening the chain

Imagine a half-dozen companies: all leaders in their respective industries, all with 50+ year histories, headquartered in different countries, with different business traditions, systems and languages, different legal and industrial regulations, and all with their own distinct networks of suppliers, technologies, materials and other resources.

Now imagine all of that coming together. As GE’s Oil & Gas business grows, strengthening our service areas and regional capabilities, we continually assess every aspect of our internal workings – adopting best practices and designing better ones wherever possible – in an ongoing effort to increase efficiency and improve our ability to meet each customer’s unique needs.

The latest step on this journey will perhaps be our most significant of the century from an operating standpoint. We are in the process of uniting all distinct manufacturing, sourcing and procurement functions for all our product and application areas into a single new Global Supply Chain that will also include the integration of many key vendor activities worldwide. It will result in faster product delivery, more comprehensive knowledge transfer internally and with clients, higher-performing technologies and higher-quality solutions in every regard. Today, we have integrated the manufacturing operations of more than 25 legacy organizations into a unified Global Supply Chain for sourcing and manufacturing.

Making every link Lean

We have had tremendous success using Lean projects to increase quality and speed across the entire organization. In 2008, the Global Supply Chain initiative will involve additional training of more than 200 people in Lean Six Sigma and Supplier Quality Audits. We are adding 40 Product and Supplier Quality Engineers, and 15 Advanced Manufacturing Engineers focused on the incorporation and development of new technologies. Fifteen Lean Leaders will be added, along with focused teams of production, sourcing and quality leaders. And we’ve consolidated 61 regional teams down to a single Global Team with four main hubs.

Site management

Comprehensive bar coding is one of the main logistics actions driving the improved accuracy of material tracking and subsequent productivity increases. Last year we implemented bar coding by all suppliers for single buy items. All suppliers have been trained for the common bar code format and the system has already significantly improved our receiving accuracy and reduced cycle time. The solution will be in place for complex assembly buy items by Q3 of 2008 and all our suppliers will be on board. This new system will effectively manage inventory, manufacturing and installation planning at every step from supplier to plant to customer – at any point in time and at any site around the world.

Packing

We have introduced a new packing typology – Active Preservation – to provide enhanced mechanical protection from expected external and internal stresses and impacts, enable adequate chemical-physical protection for the unique material types, and reduce the instance of non-conformities at site. After benchmarking with key customers, suppliers and other GE businesses, our Logistics Team tested a wide range of products, obtained EHS and Engineering approval and gradually developed them in the new Box & Packing Standard. The products form a molecular layer on metal surfaces, preventing corrosion and creating a protective environment in the enclosed volumes. Active Preservation offers a higher standard of protection than that provided by oils, films and barrier bags used in the past, doubling the duration of external preservation and it is easily manageable at the customer site.

Transportation

Oracle Transportation Management (OTM) is an end-to-end system specifically designed for GE’s Oil & Gas business to cover everything from initial transport request, to shipment consolidation, execution, receiving and invoice settlement. All stages of the supply chain are digitized on a common platform for simple tracking and coordination. OTM went live in January 2008, fully integrated on ERP to ensure Track & Trace visibility and End-to-End Process Linearity – giving us significantly greater control and shorter lead times.

A new standard of supply

We have raised the performance standard – and we are improving everything within our reach to meet it. Scheduling will be consolidated between our own factories and those of our suppliers to ensure all materials and components are delivered in sequence, based on customer requirements. We have introduced common manufacturing and supplier first-piece qualification, audit and surveillance requirements. Supplier quality issues will be resolved and prevented by a collective Manufacturing and Technical Resources team. The system will draw on increased supplier feedback for better quality, logistics and delivery. A common tracking rigor will increase production coordination and delivery timing of both purchased and manufactured parts, and the same ISO standards will be applied to all components. A joint team of Quality Engineers and Advanced Manufacturing Engineers working for the Global Supply Chain will facilitate greater transfer of manufacturing technologies to our suppliers, to ensure that every link in the chain is as strong as possible.

Results

Learning and leveraging best practices from GE and supplier manufacturing facilities around the world has already resulted in impressive improvements. In drilling riser production, for instance, by the first half of 2008 we’ll have seven new manufacturing processes, a simpler supplier transition process using one move instead of a dozen, and a 50% overall cycle-time reduction at our Houston facilities. On the rotating equipment side of the business, on-time delivery of turbine-compressor packages has been improved dramatically by 22%

The process is well underway, but it is far from complete. Indeed, it is a continual process in which success merely opens the door to new possibilities for improvement. As we continue to integrate Global Supply Chain operations across the Oil & Gas business, our customers can expect to benefit not only from reduced delivery times and improved quality and consistency, but also from the simplification of maintenance and service activities that result from common part and component designs across a wider range of equipment. And finally, by bringing all our manufacturing capabilities together into a unified and standardized structure, we can ensure greater localized capabilities for all our customers around the world.