Guy Norris/SEATTLE
Boeing has revealed radical plans to forge partnerships with its suppliers, as well as to eliminate others, as part of wide-ranging initiatives to improve overall profitability, reducing costs and cutting cycle times.
The revamp forms a vital element of Boeing's plans to boost its commercial aircraft operating margin to double the 4.5-5.5% level expected next year. Boeing Commercial Airplanes Group (BCAG) president Alan Mulally says: "We know we need to be well above 10% to fund new products and growth to maintain market leadership. The key will be to strengthen partnerships and working together skills." The prime focus of the initiatives includes redesigning aircraft and assembly processes to "take the variability out", have fewer parts and assemblies, involve suppliers in producing larger subassemblies before delivery to Boeing and spread the use of digital pre-assembly technology throughout the supplier network.
Speaking to an unprecedented gathering of suppliers linked worldwide by video, Mulally said: "With nearly 60-70% of our production supported by suppliers, it is critical we develop this plan together." Boeing deals with more than 30,000 suppliers in 46 US states and 37 countries and, last year, spent $37 billion with them. BCAG material division vice-president Russell Bunio said: "In 1999, this will be even higher. We take 100,000 part numbers every month to support our lines, and 50% of our production costs come from suppliers, so you are critical to our business."
New initiatives include the setting up of strategic relationships, the establishment of supplier management process councils in the USA, Europe and Asia, to oversee "best procurement practises across the company"; establishing a common certification programme for critical suppliers; and setting up a report system.
The Supplier Performance Measurement (SPM) report will rate suppliers on delivery, quality, affordability and customer satisfaction from next year. Suppliers will regularly be rated from gold to red, which means "unsatisfactory supplier performance, clearly failing to meet expectations".
The move indicates a tougher stance on poor performers. "We expect 100% quality, 100% on-time delivery and a focus on continuous improvement and reduced lead times. Anything less is not acceptable. Your future with Boeing will depend on your ability to meet this higher standard," says Bunio, who cautioned that 7% of suppliers involved in the continual cost improvement process (CCIP) are "in trouble". He declined to comment on reports of plans to cut the supplier list to 18,000. The CCIP is an initiative to cut costs and lower prices, using lean manufacturing techniques and other process improvements.
One "major supplier" expects to reduce prices by $63 million over the next nine years thanks to the CCIP, says Bunio.
Under the system, Boeing also gives suppliers a chance to come up with ideas for improvements that could be incorporated into another element of the plan called "Value Engineering", which is aimed at slashing $250 million from production costs through to 2004.
Source: Flight International
