Using SAP HANA & Predictive Analytics to Improve Lead-Time Forecasts

[Former Member]

As a manufacturer of satellites, missile defense systems and space flight launch vehicles, Lockheed Martin’s $8.1 billion Space Systems division relies heavily on suppliers and supply chain processes to execute orders on behalf of our many government and commercial customers.

As you might image, the building of space systems includes lots of parts – ranging from nuts and bolts to entire sub-systems.  We source thousands of parts from over 5,200 suppliers from 22 countries each year.  Over 70% of our cost structure in manufacturing space systems is procuring parts from across our supply chain.

So our ability to predict when orders will be delivered is essential to improving cost and efficiency across our business. For example, when parts are delivered later than expected, manufacturing slows down or stops completely.  When parts are delivered early, our warehouse and dock personnel costs increase.

But until now, our ability to predict how long it would take for our suppliers to fulfill orders was limited. Procurement typically had to make educated estimates on parts arrival based on prior experience with suppliers, which hampered efficiency.

So we built a new lead-time application powered by SAP HANA to help buyers better predict the lead-time between placing an order and receiving it. The application, built in collaboration with data scientists at SAP takes advantage of the SAP HANA predictive algorithm library and predictive analytics engine to run data models based on the R programming language. The predictive algorithms process large volumes of real-time transactions and historic procurement data to predict optimal lead times.

This new Web-based application automates many steps for our buyers. For example, it pre-populates the UI with a list of materials that have been ordered and shows planned delivery dates with 80% accuracy based on predictive algorithms run in SAP HANA.  The application also provides the buyer with average lead time, median lead time and mode lead time based on analysis of historic data.  With this application, the buyer can accept the pre-populated information, such as material parts and planned delivery times.  Or they can update just the planned delivery times based on previous experience with the supplier.  Once saved, the data is committed to the SAP ERP system, providing Lockheed Martin Space Systems with more complete and accurate procurement information.

We’ve been able to improve our lead-time accuracy by at least 25 percent, reduce lead-time overhead by 80 percent and, improve our process for handling the delivery of ordered parts.

The government and commercial entities we work with need to know that Lockheed Martin will get their assets into space on time, that the assets will stay operational and will perform as expected, and our new SAP HANA platform helps us continue to do that.