Managing Complexity in the Aerospace Supply Chain

Tags: Supply Chain Management, Logistics, Supply Chain

Aerospace is currently an industry at an inflection point, as it struggles to meet unprecedented challenges.

With the advent of new technologies like the Internet of Things and Blockchain, supply chains in virtually every industry are undergoing massive change. However, many companies still maintain legacy systems, processes, and supplier relationships that make it very challenging to take advantage of these new approaches to boost the efficiency of their supply chains.

Adopting new technologies and processes, and driving fundamental change to the way business has been conducted for many years, requires executives with the ability to see the true big picture and identify opportunities across complex global supply chains. Preparing the next generation of supply chain and logistics executives has been the objective of the Supply Chain Transportation and Logistics (SCTL) Master's program at the University of Washington since its inception. The interdisciplinary, engineering-based program is offered through the Department of Civil and Environmental Engineering; with a decidedly quantitative and holistic approach, the program helps its students to advance their careers by driving major changes in the way contemporary supply chains operate. To date the program has prepared hundreds of students to assume exactly such transformative roles at firms like Amazon, Tesla, and Boeing. Not surprisingly, as a firm with one of the world's most complex supply chains, professionals from across Boeing are well-represented in the program.

As one of the global centers of commercial aviation, Seattle is home to an intricate ecosystem of 1,700 suppliers that manufacture the inputs Boeing assembles into aircraft in its numerous facilities in the Puget Sound. Worldwide the company has nearly 6,500 suppliers in 100 countries1. While this number of suppliers obviously creates considerable complexity, the fact that for some components the supply chain is 10 levels deep only magnifies these challenges. A supplier in Japan who manufactures bearings might supply their product to their customer, who assembles it into another product and sells it to their upstream customer, who assembles that product into a sub-assembly that wends its way through several additional tiers of suppliers before finally being assembled into a jet engine that is in turn installed onto a finished Boeing aircraft.

Further adding to these significant supply chain challenges are the massive cost reductions big players like Boeing and Airbus are driving through their supply chains. (This is largely due to the decreasing prices discount carriers like RyanAir are willing to pay for their aircraft.) In some instances suppliers are being asked to decrease their prices by 20%, even though the average supplier margin in the industry is only 16%2. This new reality is likely to cause further supply chain disruptions, as some smaller vendors may go out of business or commit to contracts they ultimately can't fulfill. If the bearing supplier in Japan folds, especially without much warning, the impact all the way up the supply chain can be staggering. The 60+ Boeing students who have enrolled in the SCTL Master's program have learned how to identify major supply chain challenges, determine root causes, and design cross-functional solutions that span the entire supply chain to improve Boeing's efficiency and profitability.

Aerospace is currently an industry at an inflection point, as it struggles to meet unprecedented challenges. Meeting these challenges will require bold, out-of-the-box thinking—perhaps nothing short of reinventing the entire aerospace supply chain. SCTL students, instructed by a faculty of experienced practitioners from across many industries, have been successful in advancing their professional careers by developing end-to-end solutions to real supply chain and logistics problems, and helping their companies in a variety of industries compete in a rapidly-changing business environment.







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