An analysis of long-term agreements with suppliers in Lockheed Martin's commercial satellite systems division

Lockheed Martin designs and builds commercial satellites to customers' specifications. The customers, such as telecommunications companies and weather forecasters, are very price sensitive and, usually, award contracts to the lowest priced bids. Lockheed manufactures satellites using a combination of in-house manufacturing, purchasing, and subcontracting (for subcontract parts). The subcontract parts constitute a majority of a satellite's costs. Lockheed uses contracts and other supply management techniques to stay competitive and to keep satellite, specifically subcontract part, costs under control. Some of the subcontract part contracts are managed under subcontract agreements called long-term agreements (LTA). A small supplier pool, long turnover (for bringing these suppliers onboard), regulatory requirements, and capital-intensive nature of the industry are important considerations in evaluating these LTAs. The LTAs embody the risks inherent in project supply chains, specifically, price, currency, and supply risks. In such events, LTAs can become a liability and can lead to monetary losses or discord with suppliers. This thesis provides an overview of the satellite supply chain, analyzes supplier relations to better understand the business dynamics, and analyzes LTAs to better control the satellite input costs. Key words: commercial satellite, contractor, long-term agreement, subcontract, Lockheed, subcontractor, LTA, satellite supply chain, contracts.

Department dc:contributor.department

Massachusetts Institute of Technology. Engineering Systems Division.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2009

Author dc:creator

• Singh, Hem

Advisor dc:contributor.advisor

• Edgar Blanco.

• Engineering Systems Division.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/53053

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/53053