Boeing: Learning From Past Mistakes

Loyal Spend Matters readers will note that I often hold Boeing's Spend Management practices in greater esteem than their competitor's across the pond. But Boeing's approaches to sourcing and supplier management have not always been cutting edge. In fact, less than a decade ago, Boeing suffered a huge loss, not because of a downturn in the economy, but because their supply chain broke down under the stress of increased demand.

According to an article that came out in the Wall Street Journal earlier this week, in 1997, "Boeing tried to ramp up production so quickly that suppliers were unable to make parts fast enough. Unfinished planes stacked up at its factories here, forcing managers to shut down production for a month to allow the strained supply chain to catch up. The colossal stumble led to a rare year-end loss and $2.6 billion in charges against earnings over two years."

This experience was more than a wake-up call for Boeing -- it was the first step in a major operations transformation for the A&D giant. And a large part of this came in the form of new supply management practices that would not only improve efficiency and effectiveness of the procurement function, but would also reduce overall company risk and exposure. In turn, this would enable Boeing to thrive on the demand creation side as well, by arming its sales executives with accurate information into production capacity and scheduling to improve their sales efforts.

For some, this is basic sales and operations (S&OP planning). But in such a complex, interlinked A&D supply chain, it can mean the difference between billions in profits or billions in losses. After all, just ask Airbus how a handful supplier and operational delays can sabotage an entire new product launch -- not to mention creating a whirlwind of negative PR that will hurt them for years to come.

Jason Busch

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