Supply Chain Management

1.Define the supply chain from raw material to final customer.
The 787 Dreamliner airplanes’ supply chain is the perfect example to define the supply chain from raw material to final customer. In the past, Boeing relied on many suppliers to provide Boeing with specific materials and parts in order to assemble the plane alone. However it took a long time therefore Boeing came up with a plane where the supplier will design certain and major sections of the plane, finish it at their location and ship these sections and parts to Boeing for final assembly and testing at the manufacturing plane.
As we know the most important part of the plane is the body which is made of the light-weight, carbon-fiber reinforced plastic supplied by Toray Industries in Japan. Toray Industries will supply these raw materials, the light-weight carbon-fiber reinforced plastic, to Boeing and its parts suppliers. Toray Industries supplies 34% of the world’s demand for the plastic and with other companies, supplies 70% of the world’s demand. The raw materials are distributed to its suppliers such as Alenia of Italy who makes mid fuselage section and horizontal stabilizer of wings; Spirit of Aerosystems of Wichity, Kansas who make nose section, engine pylons, and wings edges; another supplier who makes rear fuselage section is Vought of Charlestown & Dallas. Mitsubishi Heavy Industries makes wing, Kawasaki heavy Industries makes mid fuselage section as well, and Fuji Heavy Industries makes wing box. Every supplier will finished these sections at their locations and then will ship these parts to Everett, Washington (the manufacturing plant of Boeing) for assembly. After the plane is assembled and passed the testing then the plane is shipped to Boeing customers, such as British Airway, LAN of Chile, Quantas, or ANA of Japan.

2.Determine their performance in terms of deliver, quality, time and cost.
As we discussed in previous blog entries, Boeing uses project flow in terms of product flow. This means that Boeings products are very unique and take a long time to manufacture in the first place. Boeing delivery time for their newest commercial airplane, the Dreamliner is completely off schedule and years behind. As mentioned above, Boeing adapted a new supply chain strategy to reduce the delivery time, however the delivery of the entire order is not in time and the lead time is extremely long. The quality of Boeing airplanes is to the customer’s satisfaction. Boeing pays special attention to the perfect finish of their products. If Boeing makes one little mistakes, they will lose their reputation and their customers because there are life’s at stake if Boeing allows errors in their production. Furthermore, the time put in the airplanes is significant. The production takes a very long time, therefore, Boeing has to go a while without receiving cash, while spending money on inventory cost etc. The overall cost of an airplane is millions. However, since it is a unique product and quality has to be high, the high prices are justified and being paid by their customers. Also, the price rivalry between Boeing and their competitors is not very high.

3.What supply chain management do they currently have in place?
On September 9th, 2009 Boeing signed a Memorandum of Understanding (MOU) to develop logistic tools for improving global supply chain management. MOU will help to improve efficiency and effectiveness in Boeing’s multibillion-dollar supply chain optimization market. Boeing Company explores opportunities to use the developed Joint Logistics Command and Control Environment (JLC2E) modeling and simulation tool to expand into commercial markets. Boeing's state-of-the-art JLC2E tool allows defense customers to experiment and evaluate supply chain tactics, processes and technologies to support current and future complex defense missions.