Farnborough Air Show

Boeing Commercial Looks To Ease Sole-Supplier Threats

 - July 11, 2012, 1:00 AM

Boeing’s well-documented development struggles with the new 787 Dreamliner raised questions over the wisdom of its plan to reduce the number of its suppliers and to place more responsibility with them for design and management of their own supply chains. However, at the time, the industry’s supplier base had become “thicker,” meaning it had added more layers, resulting in more specialization and incentive for OEMs such as Boeing to lean more heavily on their Tier 1 and Tier 2 suppliers to conduct their own supply management functions.

But now, Boeing has established a goal of spreading risk within its supply chain by actively seeking more than one source for given components across its commercial airplane line, raising new questions about whether it has reconsidered the philosophy it adopted more than a decade ago.

“Where we see a commercial threat associated with sole-source suppliers, we are looking hard at what we should do to address that,” said BCA vice president and general manager for supplier management Kent Fisher. “There’s a spectrum of places where I feel like, commercially, I’m being taken advantage of from a sole-source perspective.”

Qualifying Suppliers

Fisher wouldn’t identify any of the companies in question, but he stressed that several opportunities exist to use two sources, ranging from Tier 1 down to Tier 4 suppliers, for both new and existing programs. “We have to qualify suppliers at the lower levels to let our Tier 1s and [Tier] 2s use them, and we’ll look at qualifying additional suppliers for certain things,” said Fisher. However, that does not necessarily reflect a retreat from Boeing’s move to minimize its supplier base and place more supply-chain management responsibility on its Tier 1 and Tier 2 partners, he insisted.

“The dual sourcing is about business continuity and getting better commercial terms where we can,” said Fisher. “There are certainly suppliers that have taken advantage of a unique position in the supply chain and used it, I think, to earn unreasonable profits.”

Meanwhile, Boeing’s production rate increases across its product line has driven what Fisher characterized as the company’s most proactive effort ever toward managing the supply base. So-called production readiness assessments have always included general appraisals of suppliers’ management of their own supply chains, engineering and manufacturing capability and quality assurance. Last year, however, Boeing augmented those activities with a process of reviewing more than 1,000 suppliers’ specific plans for achieving the rate increases.

“So we would go and ask each one of them, ‘Are you purchasing more equipment? Are you hiring more staff? Are you sending work out of your facility to other suppliers?’” said Fisher. “We reviewed those plans in some detail with them and then worked on a collaborative basis if we saw any issues.”

Monitoring Mode

Since collecting and evaluating those plans, Boeing has now moved into what Fisher called a monitoring mode, which, he said, has progressed “relatively well.”

“As we’ve moved through the rate breaks over the past year or so, the performance of the supply chain has been very strong,” he added. “We’ve seen record low supplier cost shortages on our programs…We have a long way to go, however, and I don’t want to declare success until we get through all of the rate increases.”

Boeing then sends experts in various fields to individual suppliers to address whatever production difficulties it might encounter. Most often, he added, success will depend the cooperation showed by the supplier. “And we are not shy about implementing that if we see a need,” said Fisher.

Of course, schedule changes initiated by Boeing itself could stress suppliers as well, Fisher acknowledged, and he named several accommodations the OEM has made. In some cases, the sides have arrived at a compromise shipping schedule, allowing, for example, suppliers to ship earlier than Boeing’s strict schedule might require to allow their production systems to flow more smoothly.

In fact, Boeing has learned from the way some of its Tier 1 suppliers manage their own supply chains and incorporated some of those methods itself. Of course, others have proved rather poor at supplier management, said Fisher.

“We really try to be collaborative,” he stressed. “I don’t know if every supplier would describe it that way, but we try to come in and understand the total circumstances of that supplier and find a solution that keeps these factories moving.”

One Tier 1 partner deserves particular praise for its responsiveness under particularly trying circumstances, said Fisher. Wichita-based Spirit Aerosystems, supplier of most of the Boeing 737 fuselage along with major parts for virtually the entire line of Boeing commercial airplanes, never missed a delivery despite serious tornado damage in April that closed its operation for more than a week.

“We are aware that there are many facilities, not just in Wichita, that are difficult to replace,” said Fisher. “So if something happens we will have to overcome interruptions in supply and I think that the way that we’ve approached that is by dedicating our resources and counting on the kind of performance that we saw out of the Spirit team.”