March 1, 2008

Supply chain woes ground Boeing's Dreamliner

Boeing was counting on its suppliers to preassemble portions of the Dreamliner and ship those sections to Seattle for final assembly.

By DC Velocity Staff

Boeing's new 787 Dreamliner won't be flying the friendly skies until early next year, months later than originally expected. The Seattle-based manufacturer had promised the highly anticipated aircraft to customers by this May but has now postponed the first deliveries until January 2009.

Supply chain issues appear to be partly to blame for the delay; Boeing's announcement cited a shortage of fasteners as a contributing factor. Such problems are common in the aerospace and defense sector, which relies on extremely complex supply chains. Boeing, for example, is counting on its suppliers to preassemble portions of the Dreamliner and ship those sections to Seattle for final assembly. That plan, a first for Boeing, was designed to speed up production but now appears to be backfiring as suppliers run into difficulties fulfilling those requirements.

Boeing's problems and similar travails experienced by its major rival, Airbus, highlight the need for aerospace and defense companies to address their supply chain deficiencies. In fact, the risk of failure for those companies is "real and significant" if they don't implement changes now to improve their supply chains, according to analysts at Deloitte Consulting LLP's Aerospace and Defense (A&D) industry group. That group published a brief on the supply chain challenges facing the aerospace and defense sector in January.

"Over the past year the A&D industry has suffered numerous service issues, many as a direct result of inefficient supply chains," said John Coykendall, a principal at Deloitte Consulting, in a statement. "These difficulties have resulted in enormous cost overruns, delayed new product rollouts, and missed delivery dates, and have forced companies to make serious adjustments in production, which, in turn, has affected their entire supplier network."

Coykendall noted that product delays and related problems many times are the result of supply chain breakdowns. Even when companies attempt to improve supply chain performance, actions taken to solve one challenge can create disruption elsewhere.

As the Deloitte analysts see it, some of the problems may stem from a failure to take an integrated view of the supply chain. "Supply chains have traditionally been depicted as linear streams, and this narrow view can lead to missed opportunities for improved integration of supply chain capabilities," said Jim Schwendinger, Deloitte's vice chairman of global aerospace and defense, in a statement.

Flight path to improvement
In their brief, the consultants also suggested several techniques for boosting the aerospace and defense sector's supply chain performance—techniques that could be readily adopted by other industries as well. Most important is aligning supply chain and business strategies. In addition, knowing when and where to integrate supply chain networks, and aligning and integrating supply chain planning are both critically important. Companies need tight coordination and integration of demand plans, inventory plans, and production schedules.

Deloitte analysts also recommended that companies strategically manage their supply network and align the supply chain organization to facilitate better decisionmaking. Businesses must manage multiple linkages and dependencies within the network to gain flexibility and competitive advantage. With visibility shifting away from original equipment manufacturers (OEMs) to tier-one suppliers, supply chain managers must increase their focus on tier-two and tier-three players, they said.

Achieving future supply chain success, the Deloitte executives said, will likely involve changes across entire enterprises. "The risks are imminent," said Schwendinger. "Costs and inventories are growing, service levels are lagging, and products are not making it to customers on time or on budget. Significantly optimizing your supply chain for high-speed performance is an effective way to deliver what customers and the market expect."

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