More than 400 plants in the United States manufacture one or more of the 8,000 parts that go into the typical wind turbine, according to the American Wind Energy Association. Many more want to jump in to the supplier pool. U.S. manufacturing veteran David Buley says he has a "special part of my heart that is pro-U.S. content" when he is sourcing parts for the wind turbines that his employer, Northern Power Systems, produces.
But Buley is no pushover. As director, strategic sourcing, for the 34-year-old manufacturer of both community- and utility-scale wind turbines based in Barre, Vt., he demands that suppliers be globally competitive. In a session at the Great Lakes Wind Network conference held in Cleveland in July, Buley provided wind suppliers and potential suppliers with a tough-love view of what it takes to compete with the rest of the world and win his business.
Northern Power Systems follows a procurement model based around QDCCD -- quality, delivery, cost, cash flow and development. The elements are weighted according to the part involved, but Buley stressed that much of the time he is pursuing "aerospace-level quality at automotive prices." He noted that gas turbines are contributing to continuing downward pricing pressure on wind power suppliers. "For wind to win, the supply chain has to be cost-competitive," he stressed.
High quality is table stakes to gain Buley' s business. He pointed out that his company is selling a "20-year investment" to its customers. As a result, he wants suppliers to be able to provide parts that are perfect every time. "Show me that it is impossible to make a bad part," he says.
Buley says he wants his company' s suppliers to be profitable, but he also wants them to open their books to him and be as transparent as possible about what their costs are to produce parts. He cited a recent instance of working with a supplier to build a full-cost model of what a part cost. Working together, they were able to reduce the cost of the part by 40%. He contrasted that experience with a potential supplier who, when asked to show Buley his material costs, said "My material costs are none of your business." Buley indicated he was likely to stay just a "potential" supplier.
Buley also wants suppliers who are able to provide flexibility in lot sizes with little in the way of a cost penalty. He noted that lots can vary four to five times in size. "We need a supply base that has thought through how to do that cost-effectively," he told the GLWN audience.
Domestic Advantages
Domestic manufacturers have two major advantages, Buley noted: distance and language. Northern Power Systems wants parts that are perfect when they enter their plant. Distant suppliers make it harder to ensure that type of quality. They also increase lead times for delivery and boost transportation costs. And the longer the pipeline, he said, the more variability it introduces and the greater the need to "buffer that variability with inventory." The second factor, language, plays a role with overseas suppliers because it complicates communication and can hamper aspects of the supplier relationship from product development to delivery logistics.
U.S. manufacturers also have some barriers, said Buley, citing his 25 years of working with a wide variety of companies. One is the trap of being busy versus being productive. He finds too many companies with lots of activity but too little focus on getting material out the door.
He also contends that U.S. firms focus too much on labor costs and not labor content. He warns that while China' s labor costs are rising, they are investing in productivity enhancements and that their total labor content is actually trending down. That means U.S. suppliers need to continue to focus on driving productivity through lean Six Sigma, factory physics and other methodologies.
Northern Power Systems prides itself on offering a "disruptive" technology -- turbines that utilize a permanent magnet direct drive. He urged suppliers to take a similar stance to help their customers increase the value of their products. Otherwise, they may not be able to stand up to the competitive winds blowing from Europe and Asia.
Steve Minter
Editor-in-Chief
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