What Are Boeing's Supply Chain Management (scm) Goals?

1. What are Boeing's supply chain management (SCM) goals?

According to Leenders, Fearon, Flynn and Johnson (2006:6), the supply chain management can be defined as a management process where the entire flow of information, materials and services are managed from raw material suppliers through factories and warehouses, to the delivery of the final product or service, to the end customer. Hutt and Speh (2010:331) explain SCM as a process, where all the activities which are involved in sourcing and obtaining, conversion as well the logistics management activities, are planned and managed.

Supply Chain Management (SCM) goals

According to Hutt and Speh (2010:335) a business undertake SCM so that four goals can be achieved, namely:

1. Waste reduction

2. Time Compression

3. Flexible Response

4. Unit cost reduction

The supply chain management goals for Boeing commercial aircraft is explored here in four main areas:

1. Waste reduction:

Waste reduction means trying to increase quality by minimizing operations and systems that is duplicated or similar. With this goal, people in charge of the supply chain can work together to ensure that policies and procedures are modified, as well as data-colletion practices which are responsible for producing waste (Hutt & Speh, 2010:335).

2. Time compression:

This goal focus on condensing the time that is takes for the order-to-delivery cycle (Hutt & Speh, 2010:335).

All the orders of Boeing are received from either leasing companies or airlines. The sale representatives of Boeing are always in contact with their existing and potential customers (Cizmeci, 2005:47). These orders form part of long-term supply agreements, which are closed with leasing businesses as well as large national and commercial airlines (Cizmeci, 2005:47).

Boeing manufactures their aircrafts only by order. The usual time it takes Boeing to deliver their aircrafts, are anywhere from 12 to 18 months, but it depends on their product. Boeing's new products will take longer to be delivered from the time that orders were placed because the set-up for the supply-chain of newly designed aircrafts take up alot of capacity (Cizmeci, 2005:47). The 787 series can be used as example Boeing approved it for sale to their customers on 16 December, 2003 (Anon., 2003a). All Nippon Airways were the first customer, on April 26, 2004, for the aircraft with 50 firm orders (Anon., 2004).

3. Flexible response:

According to Hutt and Speh (2010:336) the next goal of SCM is to make sure that a flexible response are developed through-out the supply chain. It refers to the response in order handling, the variety of products, configuration of orders, order size as well as other dimensions, so that customer's requirements are met reasonably.

4. Unit cost reduction:

The last goal of SCM, according to Hutt and Speh (2010:336), is to control logistics in such way that the cost per unit for the end customer, are reduced. Boeing must determine the performance level that their customers desires and then lessen the costs to provide that service level. Boeing's marketer must assess the balance between the cost level and the degree of service provided (Hutt & Speh, 2010:336).

Figure 1:

Source: The supply chain model (Anon., 2010a).

Boeing kept shipments of parts hanging, for the 787 Dreamlliner jet for almost five weeks, in April 2010. This happened when part shortages come to a standstill for plane mounting (Anon., 2010a). The 787 supply chain has been eyed by Boeings' investors because Boeing won't receive all of their payments on its "innovatory" aircraft until they deliver the final product (Anon., 2010a).

Two Dreamliners are produced by Boeing per month, but they plan increase production to 10 a month by 2013 (Anon., 2010a).

The second quarter earnings report of Boeing showed the strain of the supply chain. Boeing's deliveries decreased from 125 aircrafs to 114 in the same period last year. This was the result of a decrease of Boeing's net income from $998 million to $787 million (Anon., 2010a). Boeing suffered production interference when they had to let go of Japenese company Koito, which were one their seat suppliers, after inaccurate safety test results (Anon., 2010a).

One segment of Boeings intergrated program of aeropspace support, is the supply chain services. The Supply chain services' objectives are improving aircraft availability as well as reducing costs, according to customer-defined preferences (Anon., 2011).

2. How does Boeing reach its SCM goals?

Even though the supply chain services are designed for improving Boeing's aircraft availability and reducing their costs, these goals are obtained by (Anon., 2011).

Advantage Breakdown:

The supply chain services are developed and designed, so that aircrafts availability can be improved and reducing costs, but these goals are obtained by providing their customers with the following additional benefits (Anon, 2011):

* Order forecasting, the visibility of total assets, maintain information as well as field data.

* Up to date decision-making, so that the best relationship can be identified between affordability and aircraft readiness.

* The shipment of supplies must be accurate and on time.

Supply chain process:

Boeing make use of the following procedures, so that the supply chain services provide their customers with the maximuj benefits (Anon, 2011):

* The information that Boeing and their customers share, is accurate and on time, to assure that the highest levels of service effectiveness are attained.

* The information systems are interfaced with full databases and based on Web-architecture design. It refers to consistent demand forecasting, the visibility of total