Flying high on supplier influencing capabilities

If you were to ask your average procurement professional to name a company that should be held up in lights in terms of supply-chain excellence, few would likely mention Boeing. After all, the failings of it’s Dreamliner 787 project is now a chapter in every business book - a case study about the inherent risks of supply chain, inventory management and product assembly.

I won’t go into the story as it’s well reported both by ourselves (here and here, among others) and the mainstream media but if there’s one thing that cockups of that type of magnitude provide, it’s lessons. And they are well worth looking into.

As a result of the supply chain problems it experienced, Boeing introduced a series of measures to make sure they wouldn’t happen again. One such measure was to stress test suppliers, something which is becoming more and more important the more successful the Dreamliner becomes.

Today, Boeing is sitting on an order book valued at more than $270bn (a backlog of 3,500 commercial jets) meaning that the stress tests are absolutely critical to its success or, rather, avoiding failure. After all, a single failure in its supply chain will have significant ripple effects on customers and suppliers, and could impact share-price performance - potentially irreversibly.

No wonder, then, that Boeing is taking it so seriously. This Wall Street Journal article explains how Boeing now employs 200 full-time examiners to visit suppliers, perform on-site evaluations lasting days and recommend actions. "They’ve got someone here almost every day," said the CEO of one who took the decision to make significant changes to working practices in order to reduce risk and improve working practice.

It’s an excellent example of how competitive advantage is increasingly being found in the supply chain. True, Boeing has trusted far more assembly to its suppliers than ever before to help speed total assembly and cut down inventory, meaning close scrutiny and stewardship is a necessity, but this doesn’t take away from the fact that it is influencing supplier strategies and working practices more than ever before.

In this, there is nothing new. There are many examples of organisations bringing suppliers together to work on projects jointly (sometimes when those suppliers are the fiercest of rivals), staff are often seconded to supplier facilities too. But these are often done in isolation, to help improve the performance of a specific project or respond to a specific set of circumstances. Rarely is the supply chain viewed as a whole - as a constantly changing, but nonetheless constant, ingredient.

Companies truly at the pinnacle of supply chain and procurement excellence must be on top of this. They must influence the recruitment procedures of their suppliers, influence their working practices, their cultures.

We operate in the era of brand-based companies, where product marketing, design and sales are often separated completely from manufacturing and assembly. The only way to sustain success in such a world is to treat the supply chain as a single entity and influence everything from people to process and technology.

Boeing seems to be on the right flight path.

David Rae is editor of Procurement Leaders. To subscribe to the magazine, click here.