Own Organisation Monograph

DRS Rugged Systems (Europe) Limited is the main UK division of a growing international defence equipment supplier, DRS Technologies, Inc. The Corporation is a leading supplier of defence electronic systems, providing high-technology products and services to government and commercial markets worldwide.

The Company develops and manufactures a broad range of mission critical products, from rugged computers and peripherals to systems and components. The products are used in the areas of combat information, communications, data storage, digital imaging, electro-optics, flight safety and space. Defence electronics systems are sold to all branches of the U.S. military, government intelligence agencies, major aerospace and defence contractors, international military forces and a wide range of commercial customers. A full complement of technical support and advanced manufacturing services are also offered. Commercial and industrial products are used by the airline, banking, computer disk drive, security, transportation, retail sales and broadcast industries.

The published mission statement of the Corporation is as follows:

“It is the mission of DRS Technologies to be a leading, mid-tier defense technology company by earning the respect of our customers, suppliers, competitors and fellow employees through our commitment to the highest standards of ethics, quality and responsiveness. We also work to enhance stockholder value through our commitment to internal growth and to the acquisition of companies that complement our business, expand our market position or benefit from the transfer of our technologies.”

The Corporation also published a vision statement:

“It is the vision of DRS Technologies to be a leading, mid-tier defense technology company providing advanced products and services to both government and commercial markets worldwide.”

Corporate accounts

Condensed Consolidated Statements of Operations (Un-audited) DRS Technologies, Inc. and Subsidiaries:

All figures in $US	Three Months Ended December 31,		Nine Months Ended December 31,
	1998	1997	1998	1997
Revenues	76,991,000	49,915,000	169,105,000	127,650,000
Costs and expenses	72,985,000	46,200,000	161,284,000	117,751,000
Operating income	4,006,000	3,715,000	7,821,000	9,899,000
Interest and related expenses	(2,988,000)	(1,337,000)	(6,101,000)	(3,139,000)
Interest and other income, net	271,000	337,000	599,000	1,028,000
Minority interest	(235,000)	(239,000)	(660,000)	(851,000)
Earnings before income taxes and Extraordinary item	1,054,000	2,476,000	1,659,000	6,937,000
Income taxes	390,000	916,000	614,000	2,567,000
Net earnings before extraordinary item	664,000	1,560,000	1,045,000	4,370,000
Extraordinary item, net of tax	(2,306,000)	-	(2,306,000)	-
Net (loss) earnings	(1,642,000)	1,560,000	(1,261,000)	4,370,000
Basic net earnings (loss) per share of Common Stock:
Net earnings before extraordinary item	.10	.28	.17	.78
Extraordinary item, net of tax	(.36)	-	(.37)	-
Net (loss) earnings	.26)	.28	(.20)	.78
Diluted net earnings (loss) per share of Common Stock:
Net earnings before extraordinary item	.10	.22	.16	.64
Extraordinary item, net of tax	(.35)	-	(.35)	-
Net (loss) earnings	(.25)	.22	(.19)	.64
Weighted average number of shares of Common Stock outstanding:
Basic	6,350,000	5,614,000	6,266,000	5,598,000
Diluted	6,515,000	9,102,000	6,481,000	9,026,000

Condensed Consolidated Balance Sheets (Unaudited) DRS Technologies, Inc. and Subsidiaries:

	December 31,1998	March 31, 1998
Assets:
Cash and cash equivalents	21,510,000	9,673,000
Other current assets	119,439,000	87,759,000
Total current assets	140,949,000	97,432,000
Property, plant and equipment, net	35,236,000	22,972,000
Intangible and other assets	73,646,000	43,069,000
Total assets	249,831,000	163,473,000
Liabilities and stockholder's equity:
Short-term debt	8,170,000	5,100,000
Current installments of long-term debt	4,011,000	7,514,000
Accounts payable and other current liabilities	80,193,000	42,692,000
Total current liabilities	92,374,000	55,306,000
Long-term debt, excluding current installments	106,438,000	56,532,000
Deferred income taxes	2,825,000	3,897,000
Other liabilities	4,248,000	3,403,000
Net stock holders' equity	43,946,000	44,335,000
Total liabilities and stockholders' equity	249,831,000	163,473,000

Rugged Systems Europe position within DRS

DRS Rugged Systems (Europe) Limited (from here on referred to as DRS-RSE) was incorporated in the first quarter of 1999. This resulted from the acquisition by DRS Technologies inc, of NAI Technologies Inc. DRS-RSE existed previously under the name Lynwood Rugged Systems Limited, this company being the sole UK division of NAI Technologies inc. In its’ current form DRS-RSE is part of the Electronic Systems Group (ESG) within the overall DRS Corporation.

DRS Technologies Inc. is a significant player in the international defence equipment market with a target turnover of $500M for fiscal year 1999-2000, and has a declared mission of becoming “the leading mid-tier defence contractor”. The ESG division, including DRS-RSE, are primarily concerned with design, development, manufacturing and supporting rugged computer equipment and peripherals for defence organisations around the world.

The Electronic Systems Group designs, manufactures and integrates complex systems using advanced commercial technology to meet the performance and environmental requirements of military customers. Current products include tactical display and processing systems for military ships and aircraft, radar and acoustic sensor systems, and low-cost emulators of legacy military systems for test and training support. The Electronic Systems Group also provides high-quality manufacturing services and technical support services for both DRS products and those of other customers.

Within the United Kingdom The Electronic Systems has two sites; these being the former Lynwood site at Farnham, Surrey, and the former European Data Systems Ltd site at Chippenham in Wiltshire. Following the acquisition of NAI, and hence Lynwood, in early 1999, a successful bid was made by the new DRS-RSE operating unit to acquire European Data Systems Ltd (EDSL), a company operating in the same market place as Lynwood but with other significant attributes that made the combination of Lynwood and EDSL a greater force in the market than either of the two working alone.

As well as the changes in ownership and organisation described above, DRS-RSE has also seen changes in the local (UK) management team with the voluntary departure of the former Managing Director, Paul Rossiter, shortly after completion of the acquisition by DRS. Paul signified his desire to move on prior to the acquisition, and as a result stepped down as MD and resumed his earlier position as Financial Director. Peter Hurst, who had been Sales Director, took the position of Managing Director for DRS-RSE, and was the prime mover in the acquisition of EDSL. The role of Financial Director for DRS-RSE has been filled by the appointment of Les Wallis, who takes responsibility in this role for both UK sites.

Following the acquisition of EDSL, the UK site at Farnham has been named “DRS-RSE Systems division” and the Chippenham site “DRS-RSE Products division”. The names chosen highlight the different focus of Marketing and Engineering that exists. This point is a key factor in the synergy perceived to exist between the two operations.

Rugged Systems Europe

The map below shows the locations of DRS Technologies, inc. sites worldwide.

DRS Site addresses (Electronic Systems Group only)
DRS Advanced Programs, Inc. 7125 Riverwood Drive Columbia, MD 21046	DRS Rugged Systems, Inc. 2405 Trade Centre Avenue Longmont, CO 80503
DRS Electronic Systems, Inc. 200 Professional Drive Gaithersburg, MD 20879	DRS Rugged Systems (Europe) Ltd. Lynwood House, The Trading Estate Farnham, Surrey England GU9 9NN
DRS Electronic Systems, Inc. 1215 S. Jefferson Davis Highway Suite 1004 Arlington, VA 22202	DRS Rugged Systems (Australia) Pty. Ltd. 13-15 Townsville Street, Unit 4 Fyshwick, ACT Australia 2609
DRS Laurel Technologies (a Partnership) 423 Walters Avenue Johnstown, PA 15904	DRS Technical Services 737 Volvo Parkway Suite 150 Chesapeake, VA 23320
DRS Technical Services, Inc. 2535 Camino Del Rio South Suite 300 San Diego, CA 92108	DRS Rugged Systems (Europe) Ltd. Chippenham, England

The structure of DRS-RSE (organisation chart)

This sheet shows the organisation chart for DRS-RSE Systems Division

Farnham Site:

Identification of my roles in the organization and the nature and significance of my work

Associates roles

My position within DRS-RSE comes under the title “General Manager Programmes and Systems”. The title is somewhat contrived, having been designed to reflect the combination of responsibilities that I have taken on over the time that I have worked here.

The primary focus of my job is on the Projects that we run in response to contracts that are won. Almost all contracts accepted by DRS-RSE result from bids made against “invitations to tender”, sent out by defence organisations and larger defence contractors. The type of business on offer in these invitations typically involves design, development, manufacture, and support of computer hardware, together with a significant element of project management.

The full set of roles that I cover is as follows:

Programme Management

Through a Programmes Manager I have responsibility for the Management of Projects run from the Farnham Site. As noted above this is the most this is the most important part of the job. This is because all revenue generating work done by DRS-RSE is concerned with meeting the requirements of contracts won and booked, and these contracts are almost always run as Projects. It follows that all the other roles are performed in support of the project work, and hence my contribution in the other roles is as a people manager and in some cases as the local “expert”.

The Project Management group at DRS-RSE has grown from myself in 1993, when I had direct responsibility for managing a Software development for the Metropolitan Police, to a group of three Project Managers, Four Project Engineers, and a Programmes section Manager today. At the time of writing there were twenty-four active projects under the groups management.

Purchasing

I was asked to take (and accepted) responsibility for the Purchasing department in November 1998. The department had previously reported to the Managing Director, and the change coincided with the change of Managing Director from Paul Rossiter to Peter Hurst. Purchasing are responsible for buying all parts requirements generated by the MRPII system, as well as miscellaneous items on IPR’s (internal purchase requisitions). The group also plays a part in supplier selection and management. At present I am working with the groups’ Lead Buyer to develop Policies for purchasing in order to improve both quality and timeliness of parts bought in. The aim is to determine the most effective ways of operating our own manufacturing section, and then working with suppliers to ensure that they are able to meet our requirements. This will demand that we review the existing supplier base and set performance targets for them. In some cases there is likely to be a need to add new suppliers and possibly drop some that are not able to meet the standards required. An important consideration in making changes in this area is that we need to ensure we have a healthy balance of suppliers available without putting too many eggs in one basket. This is a risk with suppliers that make parts specifically for us to our own designs, and at present is a particular risk with metal work. We have a situation where eighty percent of our metal work orders by value are placed with one supplier, and this is believed to represent more than seventy percent of that suppliers business. This causes delivery problems now because the supplier is known not to meet required and promised delivery dates due to workload. We are also at risk of this supplier failing financially. Conversely we cannot simply place these orders with other suppliers because the volume involved would leave them with the same problem, and at the same time removing business from the exiting supplier would put them more at risk of failure. The solution would appear to be that we plan to move work over a period so that the exiting large supplier has the time to obtain business from elsewhere, and other supplier have tine to invest and grow to meet our needs. We will aim to have three suppliers with approximately one-third each of our work, and will select and maintain those suppliers based on their performance and ability to meet our defined requirements for delivery and quality. We will also devise methods of ensuring that pricing is competitive.

Software

I first joined DRS-RSE in 1990, when it was known as Lynwood Scientific Developments Limited. I joined the company as Unix Development Manager, and was responsible for Software development on the Lynwood Workstation. As a result of this I am used as a Software Consultant when the need arises. The history of roles I have had also leads on to the IT role that I have in taking responsibility for in-house computer systems.

IT

The IT department at DRS-RSE consists of one full time contractor with the job title IT administrator, plus myself. My role is one of setting policies, strategies, and priorities combined with providing backup support to the administrator. The IT administrator looks after the day to day running of two network servers, the network infrastructure, and around eighty desktop computers.

Services provided include file storage, printing, Internet access to the WWW, Internal and Internet email, file backup, maintenance of the MRPII system and databases, installation and configuration of software for users’ desktop machines, and general support to other staff.

Quality

At the beginning of 1994 DRS-RSE, then known as Lynwood, was in the middle of a strategic change of direction. The change was from a medium volume commercial computer terminal manufacturer to a small volume military rugged computer system developer and manufacturer. The changeover period saw the staff numbers drop from over two hundred to under eighty, and part of this drop was accounted for by the removal of the entire quality department. However after a period of time it became apparent that to win the type of contracts that we were now aiming for we needed to be ISO9001 accredited, and this entailed having both a Quality System and A Quality Manager. I was asked to take on the task of being Quality Manager and obtaining ISO9001 accreditation for the organisation. By using nominated Quality Assurance Representatives from each major department, and training them in Internal Auditing and in the newly developed Quality System, we were able to achieve accreditation to ISO9001 for “Design Development, Manufacture and Support of computer systems and associated peripherals” in November 1994.

Since that time developments in the system, and targeting of real problems have required changes in the system, and today the QA department has become more conventional, in that we have appointed staff to specific role within the group. The QA department as of October 1999 consists of a Quality Engineer, responsible for Quality Inspections of all product prior to shipment, and operation of the customer side of the FRACAS system, a Goods in inspector responsible for all metalwork parts made to DRS-RSE drawings and designs, a Quality Auditor and Vendor QA person responsible for internal and Supplier audits as well as dealing with supplier returns, myself as Quality Manager, and am in-process inspector responsible for the quality of manufacturing processes.

This sheet shows the organisation of the Programmes group of DRS-RSE Systems Division at the UK Farnham site.

Programmes Group:

Nature and processes of DRS-RSE

As a manufacturing company DRS-RSE naturally enough have a factory section that makes the equipment and products. With almost one hundred percent of the product being designed and developed for specific needs of military customers it is essential that we also have many other capabilities and processes.

The chart at appendix A shows a graphical representation of all the main processes in the chain from finding a prospect to delivering a developed product and providing after sales support.

Each circle in the chart represent a discrete process in the chain, and currently all the processes shown are carried out at the Farnham site. It is not essential to the operation of the organisation all existing processes to be performed in-house, and there is regular review of what we do and what is sub-contracted or bought out. In much the same way that our customers use us to provide a hardware solution for a larger requirement they have contracted to fulfil we in turn use subcontractors to perform design and manufacture of elements of the total package of work that we take on. The level to which we do this is driven by existing capabilities (resource levels plus equipment) combined with the workload that we have in the various sections at any time.

Ways in which we gather data and information for use in decision making

In discussing the subject of this section with other managers within DRS, it would at first appear that all decisions are made based purely on the experience of the manager in question. When prompted however various other sources emerged. Firstly financial information provided by our own accounts department, and then knowledge gained from trade journals and magazines were reported as the most common sources. The information in question is that used to support decisions on internal management and resource planning. The primary source of information used in marketing is word of mouth from customers and the availability of data on competitive products on the Internet.

Availability and accessibility to Associates of local library services.

There is little in the way of local library services in the area available. This is due partly to location, but more importantly opening hours. However this is not perceived as a problem because the availability of the Internet as a resource both for research, and also for direct ordering of any necessary books allows access to almost unlimited information.

Issues perceived as most likely to influence the future managerial success of myself and DRS-RSE

This section, although last in the OOM, is actually the most significant in terms of the further work to be done for the MBA upgrade, as it is an analysis of the issues that need to be dealt with at DRS-RSE and therefore offers up the issues that may form the basis for the action learning projects to be carried out for the course.

A number of issues are apparent currently, some of which need urgent attention and some of which warrant deeper research and planning. These less urgent, but possibly more important for the medium to long term, issues are considered to be candidates for the MBA project.

At present the major issues facing the management team at DRS-RSE are:

· Meeting revenue and earnings targets and maintaining growth

The primary concern for Management at all times is ensuring that the business is run in a manner that will achieve the agreed Annual Operating Plan which includes Bookings, Revenue, and Earnings. All other objectives are in support of this.

· Ensuring bids are won at a profitable rate

An issue at the present time is how to ensure that the bookings made are from bids that are both competitive in price, delivery timescales, and value to give the best chance of winning the business, whilst at the same time having a high confidence level in the costing and estimating processes to be sure that the business won is and remains profitable throughout the project execution.

· Improving supply chain management for delivery, cost and quality

One of my direct responsibilities is the purchasing department. In this I have a key role in developing the staff and processes to improve the efficiency and performance of the group. A particular issue in this area is that of project purchasing. At present all ordering is done based on the MRP derived requirements of the computer system. This is problematic both because the MRP planning and suggested ordering depends on each and every part record containing accurate information for lead times and build times, and because there is no distinction between projects when orders are raised. The need here is to develop methods of generating purchase orders against specific customer order items, and then collecting cost data from the same orders to enable financial management of projects against budgets.

· Improving efficiency of Programmes department

As with the purchasing department, the Programmes group one of my line management responsibilities. Within this group I have a team of “seasoned professionals” and little effort is required in operational terms. The group do however suffer from a lack of consistency of performance across projects. The strategic issue here is to explore ways of improving cost performance by bringing out the best practice in all areas and develop methods of making this the standard for all project managers. A caveat worth mentioning here is that not all contracts require the same level of “product” and it is important to recognise the valid differences between methods where this is the reason.

· Integration of Chippenham (EDS acquisition) as DRS Products division

The remaining major issue faced by the Management of DRS-RSE is that of gaining the best return from the acquisition of the Chippenham site and all the associated assets. The term integration here is intended to imply that the functions carried out at Chippenham will be reviewed and the benefits of retaining them as separate Geographic entities considered against the cost and returns. As a result the long-term nature of the operation at the site will be determined and plans made to meet any changes deemed necessary. There is a possibility in this that the site will not be part of the long-term plans of the organisation, and this raises questions about the staffing of the site. The sites are split by about one hundred miles geographically and there are differences in life style between the regions involved. These would be expected to have an effect on the people involved should any question of relocation arise.