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Focus: Sourcing/Procurement

Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

Jan. 4 , 2011

Supply Chain News: Still Stinging from 787 Supply Chain Disaster, Boeing Now Putting Suppliers to the Test


Daily Visits to Suppliers Now Not Uncommon; One Vendor Says Scrutiny Caused it to Replace its Scheduling Software


SDigest Editorial Staff 


Legendary aircraft maker Boeing found itself with a major supply chain snafu a few years ago when a dramatic change in sourcing strategy for its new 787 Dreamliner aircraft caused the plane to be more than three years late on delivery, and cost the company at minimum $2 billion to fix the problem, in addition to many billions of dollars more in delayed and lost revenue from the screw up.

SCDigest Says:


Now Boeing is using "a fundamentally different approach,' Wyse says,"by regularly verifying that suppliers have the right skills" and capacities.

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In a very condensed version, Boeing decided to outsource more complete sub-systems to its supply base, so that it would really just be an assembler of those systems in its production facilities, versus assembling most of the subsystems from components itself in the past.

The strategy sounded smart and was certainly in tune with how supply chain thinking had evolved at the time. The problem: Boeing suppliers turned out not to be ready for such a change in scope, and Boeing obviously wasn't ready to manage the change in its sourcing process.

With the first production 787 finally out the door in 2011, and a slew of orders for it and other aircraft, Boeing has apparently well-learned the lessons, and is now taking a much more aggressive stance on supplier and schedule management, using the kind of "stress test" techniques that gained common parlance during the financial crisis relative to federal government tests on banks and their ability to withstand economic downturn.

The new approach is critical - Boeing plans to boost output by about 60% in the next three years, meaning it will build nearly 300 more jets per year.

According to a recent article in the Wall Street Journal, the new stress tests look at exhaustive reviews of a supplier's production materials, schedules, finances and even the tools it uses.

"Boeing has bolstered its ranks of supplier examiners with about 200 engineers and other supply-chain specialists in the past 18 months. Its teams visit vendors more frequently and conduct evaluations that can take days to complete," the WSJ article says.

The CEO of one supplier, Vaupell Holdings, says "Boeing has become much more pro-active. They've got someone here almost every day."

All told, some 1000 suppliers are subject to this level of scrutiny.

Boeing has been conducting roughly four-hour-long monthly and quarterly assessments of Vaupell's ability to ramp up production, along with annual reviews that can take two to three days. It says Boeing's assessments led it to replace shop-floor scheduling software, as well as make other changes.

(Sourcing and Procurement Article Continues Below)



Of course, large jet aircraft are incredibly complex to produce, and are made of millions of parts. Problems far down in the supply chain, such as shortages of machines used to mold certain components, can cause delays that ripple across the industry. Boeing naturally wants to understand and react to such issues before rivals like Europe's Airbus can take action.

The WSJ quotes Beverly Wyse, vice president and general manager for the Boeing 737, as saying that In the past, "We had much more of an attitude [with suppliers] of: We'll set the requirements and you have to go do your job."

Now Boeing is using "a fundamentally different approach,' Wyse says,"by regularly verifying that suppliers have the right skills" and capacities.

With this new approach, Boeing is communicating more often with suppliers and sharing more information about its own forecasts and production plans, the article says.

Boeing says it also has increased its scrutiny of how its suppliers are evaluating their own vendors.

What do you think of Boeing's new approach to supplier management - about time? Is it always possible to get this deep into a supplier's operation - or does the unique characteristics of the aerospace industry make it easier there? Let us know your thoughts at the Feedback section below.

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