In class we’ve discussed how supply chain design can make or break the efficiency and profit of an organization or company. Simpler doesn’t always mean better or faster, but Boeing has chosen to cut various management layers in attempt to better its supply chain design. The article that first announced these cuts was published by The Seattle Times in November 2017. The cuts were made in the hope that “any non-management employment cuts can be achieved through attrition or reducing contract labor, not layoffs.” Boeing planned to use attrition and reduction of contract workers to reduce managers and overlap within its supply chain layers. The charge was primarily lead by Chief Executive Kevin McAllister and Jenette Ramos, the senior vice president of supply chain and operations. Boeing spokesperson Jessica Kowal explained the decision by saying, “It’s figuring out how do we operate more efficiently and improve performance and affordability in Boeing’s supply chain.”
From the donut activity in class, we have all experienced first-hand how a company’s relationship with its supplier or suppliers is of the utmost importance. It was reported in October of 2017 that a supplier of Boeing, Spirit AeroSystems, Inc., “had fallen behind on deliveries of the 737 fuselages it builds locally.” The company struggled with the increased production demands, which challenged its own labor base and supply chain. Spirit has worked on all Boeing commercial programs and builds about 70 percent of every 737 aircraft delivered.
Boeing received roughly 1 billion parts each year, which presents a large problem when attempting to synchronize its own supply chain. Only then will it be able to address issues with the supply chains of its partners. Boeing also recently set up an in-house supplier (Boeing Avionics) to increase profit margins.
Today, Wichita business journal followed up on Boeing’s decision to streamline production in November. The article reports that, “Despite recent difficulties in the supply chain of its workhorse 737 narrow-body, the Boeing Co. on Tuesday reported an overall increase year over year for commercial deliveries in the first quarter.” Boeing’s monthly production rate is currently 47 with a forecasted 52 products per month, resulting in an average monthly delivery of 44. Therefore, Boeing came in just under production rate.
What were the specific supply chain difficulties? Are they only from the suppliers, such as Spirit AeroSystem, or form Boeing’s internal supply chain? Was the decision to streamline its supply chain result in more harm than success, despite the slight increase in commercial deliveries? What does the rest of the first quarter report look like? Do you agree with Boeing’s decision to streamline its supply chain?