Boeing Turns Up Heat On Suppliers

Paris Air Show » 2013
June 17, 2013, 12:40 AM

Recent remarks by Boeing CEO Jim McNerney about creating a so-called no-fly list of suppliers who fail to meet certain standards for quality, speed of delivery and cost has turned a spotlight on the company’s four supply chain management heads, all tasked with implementing the boss’s decree within their respective areas of responsibility and keeping vigil for “divide and conquer” tactics sometimes employed by program partners. For example, Boeing Commercial Airplanes supplier management vice president and general manager Kent Fisher works closely with his counterpart at Boeing Defense, Space & Security, Jack House, to ensure that those suppliers who, in Fisher’s words, do inappropriate things with one part of the business can’t find their way onto programs in another part.

“Jim [McNerney] has put a fair amount of effort into making sure that the four supplier management leaders, myself included, are working together more and more and leveraging one Boeing,” said Fisher. “The main way that we do that is through ensuring that we have once common strategy for each of the suppliers that we share, and ensuring that we’re not working at cross-purposes with any specific supplier.

“We are aligned in that when [House] asks me not to do business with a particular supplier for either performance or commercial issues, I’ll honor that, and he’s done the same for me.”

While Boeing would rather not have to deal with the disruption associated with replacing suppliers, it’s so-called “cost-down” initiatives has led to more aggressive use of competition between suppliers than it has in the past, said Fisher. As a result, the company has sought more bids and introduced more new suppliers in its proposal process of late. “I’m pushing my team to be more open-minded,” he stressed. “I think to some extent we have an incumbency mentality and we’re definitely challenging that.”

Meanwhile, as Boeing continues to increase production rates across its product line, “rate readiness” has become an ever more vital part of its supplier evaluations, not only among its 1,500 primes but many more sub-tier suppliers, from whom much of the 787’s delays stemmed.

“Early on in the 787 program we were not very attentive to what was going on among the sub-tiers, whether it was fasteners or raw materials or even electrical standards,” said Fisher. “And we got into a situation where if we hadn’t taken action it would have caused significant problems. While we might not have a direct relationship, we’re doing a better job of understanding what the impact would be on those sub-tier components.”

Although Boeing still outsources some 60 percent of the value of its airplanes to external suppliers, its experience with the 787 has also increased its bias toward supplying itself internally, most notably in engineering.

A decision on whether or not to build a part in-house boil down not only to cost, quality and efficiency, but competitive sensitivity, explained Fisher. For example, if Boeing developed a unique composite fabrication technology, it would likely keep the work within its own fabrication division–at least for a few years–to preserve its competitive advantage. Second, said Fisher, Boeing assesses which suppliers it can trust more than others and chooses those it deems least likely to leak proprietary information for use in a competing product. Another consideration might involve whether or not a particular supplier can give Boeing a market access advantage.

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