Boeing Supply Chain Management: Strategy and Best Practices

Introduction to Supply Chain Management

Supply chain management has become a concept without which companies could not face today's increasingly complicated business environment, especially given competition from firms that can operate at lower costs and thereby increase their profit margins through cost-based competitive advantages.

In order to achieve lower costs, better distribution processes, and shorter delivery times, companies have adopted supply chain management. It can be defined as "the practice of coordinating the flow of goods, services, information and finances as they move from raw materials to parts supplier to manufacturer to wholesaler to retailer to consumer"[1] and, as a process, includes "order generation, order taking, information feedback and the efficient and timely delivery of goods and services"[2].

Boeing's Supplier Partnerships and Collaboration

Boeing is an excellent example in this regard. Operating in an industry as complex as aeronautics, facing tough competition from European firms such as Airbus, Boeing must ensure a high-quality supply chain management process.

Perhaps the most important aspect of Boeing's supply chain policies is its collaboration with carefully selected partner companies chosen to fit Boeing's exact requirements. The partners Boeing selects share a series of distinct characteristics, most notably "online visibility and leading-edge application of technology"[3].

There are several relevant examples of Boeing's supply chain strategies, with inter-enterprise links ranging from partnerships to market alliances. Perhaps the best example is Boeing's relationship with GKN Aerospace North America. That company was established in 2001, when Boeing decided to concentrate on assembly and sold its fabrication division to GKN[4].

From that point forward, GKN worked to achieve — "down to the hour and minute" — the needs and wants of its largest customer[5]. This meant that a fully functional coordination system needed to be put in place to best align GKN's production with Boeing's consumption. The technological solution was genuinely impressive: a system that monitors "key indicators in Boeing's production systems via a Web-based portal and reports back to GKN's ERP system"[6]. As a result, the coordination process is directly linked to any increase or decrease in Boeing's production cycle.

The significance of this example is illustrated by Boeing's own personnel. According to Cassandra Erdeac, general procurement supplier manager for Boeing Integrated Defense Systems, "the better GKN does business, the cheaper we can get our product from them. Through the supply chain, everybody is linked"[7].

Real-Time Information Systems in Boeing's Supply Chain

Boeing thus chose to decentralize part of its production and incorporate it into its supply chain. Through this arrangement, Boeing achieved real-time coordination with its supplier by maintaining excellent communication in which the supplier knew precisely when parts would be needed and in what quantities.

Real-time data exchange appears to be the key factor in Boeing's supply chain management process. It is identified as such in a presentation of Boeing's aerospace division[8] and can readily be extrapolated to every other industry in which Boeing operates.

Boeing's supply chain management is built upon "online, real-time, integrated information systems"[9]. These are not one-way systems — as in the GKN example — connecting Boeing solely to its suppliers. They also extend outward to meet customers' precise needs with respect to delivery times, quantities, and specifications.