Former Boeing VP John Byrne on How the OEM Optimized its Direct Materials Supply Chain Visibility

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If you’re a direct materials procurement professional, what would force you to change the way you do business?

For John Byrne, former vice president of aircraft materials/structures at Boeing, it was nothing short of a supply chain emergency.

“The situation we faced at Boeing was initially borne out of a situation driven by a crisis,” Byrne said in the recent webinar “Supercharge Your Approach: Managing Direct Materials Across Global Supply Chains,” hosted by our sister site, MetalMiner.

Back in the late 1990s, the aerospace industry was still highly cyclical, according to Byrne, which ended up hitting the raw materials suppliers pretty heavily. OEMs would ultimately see a lot of variability in lead times and pricing. 

“The most difficult place to find yourself as an OEM is when you’re actually competing with key parts of your supply chain for precious capacity — and we didn’t want to do that,” Byrne said. “So began a journey of aggregation and consolidating our metallic purchases. First and foremost was to bring order to that part of our business.”

Of course, this is an issue still faced by many procurement organizations: gaining optimal n-tier supply chain visibility. This became especially difficult a few decades ago when rather than producing all or even most of parts in-house, OEMs began outsourcing their parts and materials needs to vast amounts of suppliers from all over the world.

Here’s the history of the issue in a nutshell:

Courtesy of Supply Dynamics

Boeing, surely in the upper echelon of global OEMs when it comes to total number of parts, processes and suppliers used for its products, is an ideal test case.

How to Deal With “Unstructured Data”?

It’s not just Boeing and the aerospace industry that deal with supply chain visibility management issues. The automotive, appliance and power generation industries also have the need to keep tabs on thousands of parts from hundreds of suppliers — while manufacturing their products on time.

“It’s only been in the last 10 years or so that technology has evolved to the point of enabling companies like Boeing to systematically collaborate and orchestrate the purchase of common materials across that extended enterprise,” said Trevor Stansbury, CEO of Supply Dynamics, another guest speaker on the webinar.

A crucial component of working toward the concept of “material demand aggregation,” a term at the core of Supply Dynamics’ technology solution offering, is getting a handle on the reams of unstructured data that are flying across the supply chain.

To put it simply, “unstructured data” is another way of saying that OEMs and different suppliers all have different naming conventions for their parts and materials. According to Stansbury, the biggest challenge for OEMs to progress beyond simply reactive behavior to true collaboration and orchestration is solving the data fragmentation across the enterprise.

Even if the external supplier were willing to provide information or report what their bill of material or bill of resource is, no one subscribes to the same nomenclature.

“Somebody calls a material ‘titanium six four,’ and others put a dash between the ‘6’ and the ‘4,’” said Stansbury. “I would suggest that one of the biggest challenges is getting information about material to conform to a common taxonomy.”

Byrne agrees — without it, it’s hard for the OEM to move forward strategically.

“In the absence of good structured data, the opportunities that are presented in an aggregation strategy do get somewhat limited,” Byrne said. “We knew what our production rates were two years in advance, and our BOM should be fairly stable, so that should [have been] able to drive some good activity through the entire system — and that just [hadn’t] been the case.”

“You can find that you sub-optimized your supply chain at the wrong place,” he added, “in that you took out cost, but added more complexity to the entire system.”

More on How to Manage Your Extended Direct Materials Supply Chain

Byrne and Stansbury discussed more issues facing direct materials procurement management, including:

  • Right to buy versus directed buy programs
  • Sharing savings with suppliers
  • Dealing with internal and external stakeholder buy-in
  • Technology adoption successes/failures and strategies
  • Hindsight being 20/20 — “What would have John Byrne done differently at Boeing?”

Listen to the full webinar here.

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