(By Balaseshan) Lockheed Martin Corp. (NYSE:LMT), a global security and aerospace company, said it has reached a new strategic supply chain enterprise agreement with the distributor of electronic components Arrow Electronics Inc. (NYSE:ARW).
Lockheed Martin signed a new strategic enterprise agreement covering procurement of more than 22,000 electronic components used in advanced technology systems such as missiles, satellites, radar systems, tactical fighter aircraft and unmanned surveillance systems.
The agreement includes a one-year term with an additional one-year option. This marks the first of multiple strategic agreements between Lockheed Martin and key suppliers intended to generate material cost savings and operational efficiencies for its programs and customers.
Lockheed Martin said it is adapting its supply chain strategy to further improve program execution, drive affordability and assure quality performance. Arrow was selected in a competitive process, and Lockheed Martin would use a similar approach to form strategic agreements for other categories of direct and indirect material.
The new agreement allows Lockheed Martin to improve product delivery performance, standardize parts selection and increase internal efficiency and productivity.
Lockheed Martin will realize cost reductions based on historical pricing for most electronic components covered under the agreement. Additionally, more than one-third of the components will be delivered to Lockheed Martin with substantial lead time reductions.
It represents Lockheed Martin's largest agreement with any single supplier for these commodities, and concentrates procurement of parts covered under the agreement with a leading national franchised distributor, down from 240 suppliers in 2011.
LMT is trading up 1.00% at $83.20 on Thursday, while ARW trades up 0.26% at $34.09.