Supply Chain Management Case Study: How Boeing Transformed Aviation Industry

5374 Words 22 Pages
Register to read the introduction… In this vast changing of business or operation methods, a new order of relationships called supply chain management (figure 2) has emerged.

[pic] Figure 2. Supply Chain Management Diagram

“Supply chain management consists of firms collaborating to leverage strategic positioning and to improve operating efficiency” (Bowersox et al. 2007). Strategic sourcing is one of the components of supply chain management.

Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. Sourcing and strategic sourcing in buying goods and services in order to produce or manufacture at an optimum cost for maximum profit. In this stage (Figure 2), individual or groups analyze, access, and select vendors and their goods and services based on certain specifications and requirements. This relationship is typically documented in a contract with terms and conditions regarding products, services, prices, and service level (UPS Supply Chain Solutions).
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Dreamliner Project Aviation sector has long been known as a capital intensive industry. Heavy research and development is required for developing an aircraft. The actual development process and the manufacturing is complex as they carry the latest technology of civilization and involve thousands of people on every corner of the globe.

The Boeing Company is the world’s largest manufacturer of commercial airplanes and military aircraft. Boeing controls more than half of the global market for jet airliners and is the leading supplier of military jets and helicopters, missile systems, and aerospace technology. The company also is one of the leading exporters in the United States.

For decades, Boeing has outsourced a portion of the work on its planes, and its reliance on sub-contractors has risen with each succeeding generation of aircraft. But with the Dreamliner program, the aerospace giant has reached a point where its role has changed.
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Strategic Sourcing Team leaders meet regularly to discuss supplier/commodity issues and share success stories. Each SST uses a detailed system of metrics to track critical supplier information, including costs, on-time delivery, quality acceptance and more.

One result of such meticulous tracking has been the disengagement of weaker performing supplier that reduces the number of total suppliers to one-third – from nearly 30,000 in 1999 to 10,800 today.

Another significant program is known as Product Standards Cost Reduction Initiative. A cross-functional team of Boeing engineers and procurement agents focus on analysis of standard aerospace parts and material. They compares suppliers’ price of quotes and search for price anomalies among technically similar or identical parts. For instance, a part of Delta rocket program got a bid at $4.25 each, however a similar part cost a helicopter program 10 cents each.

Minor modification may add value a little, but not as high as the bid. By incorporating the technical data into the price analysis, the PSCRI are better equipped to negotiate a reasonable price with Boeing’s

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