Boeing is re-writing the rule book on contractor-supplier relationships and, in doing so, is threatening to start a tidal wave of far-reaching changes that could affect the aerospace industry at large. The US manufacturer dropped the rock into the supplier pool late last month when it announced radical revisions in its dealings with more than 30,000 suppliers.
From next year, suppliers will have to be more accountable, flexible and responsive. If not, many of them may not be working for Boeing for much longer. Boeing has long-term plans to chop the number of suppliers by as much as 40%, and has devised a report card system that will help weed out the poor performers. Boeing is anxious to "work together" with suppliers, and wants them to form closer partnerships on subsystems to reduce costs on all fronts.
Boeing calls it a "win-win" situation, but only for those that make the grade. "We want 100% quality, and 100% on-time delivery. Anything less is not acceptable," says Boeing. Despite the "working together" rhetoric, the suppliers are under no illusions. They are being told to shape up, or ship out.
Boeing's massive supplier base, for the moment at least, represents a good proportion of the world's active aerospace industry. With suppliers in 46 US states and 37 countries, whatever comes out of the initiative is likely to have an impact on the industry as a whole.
A spate of second and third level mergers and acquisitions is one possible result. Some may be attracted into each others arms by "working together". Others, suddenly unable to share in Boeing's massive annual spending on outside goods and services ($37 billion last year), will be forced into life-saving partnerships.
Like earlier waves of change that swept through the business, this is likely to result in pain and gain. New feedback mechanisms in the system mean good ideas from suppliers will be used - to mutual benefit. Boeing's "leaner" know-how will be fed into suppliers, again for mutual advantage. Conforming to Boeing's new supplier paradigm will be tough, but failing to do so will be disastrous.
Source: Flight International
