APICS CEO Abe Eshkenazi CSCP, CPA, CAE -
July 13, 2012
It’s no secret that the aerospace industry has some of the most complex supply chains in the world. According to an article this week in the Wall Street Journal, Boeing’s commercial division uses more than 750 million parts provided by 1,200 suppliers operating in 5,400 factories around the world.
“That cast of thousands of suppliers is being stretched thinner and in more directions than ever, battered by increasingly scarce capital, man-made, and even natural disasters,” write Jon Ostrower and David Pearson.
By 2014, Boeing leaders plan to increase production by 40 percent, which works out to more than 750 deliveries a year. A Boeing spokesperson says the company is working with suppliers to examine their hiring plans, engineering capabilities, and equipment needs.
Likewise, according to Aviation Week, Airbus is expanding and leaning on its parts providers. A planned assembly line in Mobile, Alabama, puts the aircraft manufacturer closer to its growing number of US suppliers. Due to open in 2015, the $600 million factory is part of Airbus’s planned $12 billion in North American investments.
“Airbus’s move to expand its US supply base comes as the company’s current suppliers struggle to keep up with a ramp-up in A320 production rates,” Joseph C. Anselmo writes.
So, how can large, multinational corporations like Boeing and Airbus most effectively work with their suppliers, especially as suppliers’ challenges seem to swell? It’s an important task__one so important that the experts who developed the APICS Certified Supply Chain Professional (CSCP) courseware dedicate a significant amount of content to the subject.
The material emphasizes collaboration in supplier relationship management (SRM), including “the need to have two-way discussions with suppliers rather than just handing down specifications.”
CSCP also concentrates on supplier contracts, stating they should include at a minimum
- details on pricing
- delivery and order requirements
- transfer of ownership terms
- payment terms
- quality assurance.
It’s hard to tell from a review of the news articles if Boeing and Airbus are attempting genuine collaboration or if their spokespeople are merely stressing the idea in an attempt to garner positive press. Regardless of their motivations, the aircraft manufacturers are bound to face tribulations in any SRM pursuit. According to CSCP, SRM challenges include the complexities of globalization, as well as the difficulty of striking “a balance between the opposing forces of relentless cost reduction and better supplier relationships.”
One thing is abundantly clear: As companies’ ambitious plans increasingly rely on intricate supply chains, the professionals that ensure those supply chains are vital. Your role is more important than ever before.
Now, you can take the APICS Operations Management Now discussion to your social networks on LinkedIn, Facebook, Twitter, and the APICS Supply Chain Channel. Be sure to use the hashtag #OMNow and include @Tweet_APICS in any tweets to have your words featured on the APICS homepage.
In other news Related APICS education
- How do you view Boeing and Airbus’s relationships with suppliers? What are some steps these companies could take to improve collaboration?
- What are the responsibilities of both parties in a supplier relationship? What are the characteristics of a good supplier relationship?
- What are some examples of companies or industries with model supply chain relationships?
- A Shared Agenda
By Ron Crabtree, CIRM, CSCP, MLSSBB
July/August 2011, APICS magazine
- Sense and Respond
By John P. Collins, CFPIM, CSCP, and Eric P. Jack, PhD, CFPIM, CSCP
March/April 2011, APICS magazine