GLOBAL STRATEGY 5
Supply chain management is a process that is essential to everycompany, and it involves the effective management or control ofmaterials, finances, and information from the suppliers to themanufacturers, and later to the wholesalers, retailers, andeventually to the consumers. This process becomes challenging for themultinational companies that have to coordinate the operations ofsuppliers, wholesalers, retailers, and clients from across the globe(Wisner, Tan, & Leong, 2012). Therefore, companies have resortedto adopting various strategies that are aimed at ensuring that theprocess is smooth. Essentially, supply chain management seeks toreduce production costs, and reduce the time of production. Boeing isone of the multinational companies that have adopted a differentsupply chain management. The company, which manufactures aircraft,has attempted to reduce the operation costs, and reduce theproduction time through its global supply chain management strategy.
In the 1980s, Boeing used to make almost all the parts of itsaircraft. Whereas this ensured quality of the different parts, it isessential to note that it increased the cost of productionsignificantly. Further, the time of production was extremely long,and the company could hardly meet the demand (Cizmeci, 2012).Competition from other aircraft making companies such as Airbusforced Boeing to adopt new strategies in order to remain competitivein the market. To assemble all the parts, their centers required ahuge number of employees leading to huge labor costs. Additionally,the manufacture of different parts needed various machines andskills, which were costly to the company.
In order to supply its aircraft across the world, Boeing sells theaircraft directly to clients or uses leasers. The process ofmanufacturing the aircraft is guided by the orders that are made bythe various clients from across the world. Notably, Boeing does notmanufacture aircraft without an order request from the differentclients. This has ensured that the company does not manufactureexcess aircraft. Further, the design and the materials that are usedare determined by the taste and preferences of the customers. This isdue to the fact that Boeing prides itself in delivering safety andcomfort to the clients. It is essential to note that Boeing usuallyarranges for financing for its customers by linking them to financialinstitutions that can offer loans (Cizmeci, 2012). The other approachthat the company uses to distribute its products is through leasers.These are organizations that are approved by Boeing to lease itsaircraft to clients. Some of these leasing companies such as GECASand CIT buy aircraft in large numbers from Boeing and eventuallylease them to clients. Boeing has also been financing some of theleasers since they buy many aircraft. It is important to note thatthe leasers can also offer to fund some of the small clients.
The company has also been selling its Integrated Defense Systems(IDS) to various governments. The U.S. government forms the largestmarket for IDSs. Boeing has divided this sector into AerospaceSupport, Missile Defense Systems, Air Force Systems Army Systems,
NASA Systems, Naval Systems, and Space & Intelligence Systems.Each of these products is sold through a different channel by thecompany. Tier I suppliers are essential in the supply chain of thecompany. There are approximately 30 Tier I suppliers across the worldwho manage the sale of the Boeing aircraft in every part of the world(Collins, 2012). The production of the above products requires theinput of numerous suppliers from across the world. Boeing hascontracted many suppliers who are tasked with the delivery of variousparts. Notably, Boeing still manufactures some of the over twomillion parts that make an aircraft. This makes sure that theproduction time is significantly reduced.
There is no doubt that dealing with such a huge number of suppliers,employees, leasers, and clients call for effective supply chainmanagement. There are many risks involved, and the company must besteadfast to meet the business demands. The company has embarked onquality inspection campaign throughout its operational processes. Thesuppliers are vetted and required to deliver the best quality ofmaterials (Collins, 2012). Quality assurance officers at Boeing aretasked with the responsibility of making sure that all the materialsdelivered to meet the company’s standards. Furthermore, the companyhas always relied on the tastes and preferences of clients. This hasmade sure that the products produced are within the customerrequirements. In order to effectively manage the risks, the companyholds the suppliers responsible for the materials they manufactureand deliver. The strategy that the firm has adopted to produceaircraft on order has made sure that the demand is effectively met.Furthermore, the company gives different clients different timelineswhen their products will be ready. This has ensured that all theclients are served in a timely manner.
While concluding, it is clear that supply chain management, inparticular on the international level plays a significant roletowards the reduction of production cost and time. Boeing has adopteda globe supply chain management strategy where it has outsourced mostof its manufacturing work to suppliers. The option to sell itsaircraft directly to the clients and the use of leasers has ensuredthat the company has full control of its supply chain. Demand for itsproducts has also been handled effectively since the company worksorders from clients.
Cizmeci, D. (2012). An Examination of Boeing`s Supply ChainManagement Practices within the Context of the Global AerospaceIndustry. Massachusetts Institute of Technology. Pdf.
Collins, M. (2012). The Boeing Supply Chain Model. Retrievedfrom: https://www.manufacturing.net/news/2010/07/boeing-supply-chain-model
Wisner, J.D., Tan, K.C., & Leong, G. (2012). Principles ofSupply Chain Management (3rd Ed.). Mason, OH: South-WesternCengage Learning.
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