Trends-February 2009

Boeing is making supply chain management a critical pivot as it tries to steer its way out of an economic vortex. As demand for new aircraft ebbs, and a machinist’s strike and failed component installation hamper the launch of the 787 Dreamliner program, the company is reconsidering its global supplier network.

The Chicago-headquartered aircraft manufacturer recently launched a new supply chain management and operations organization that will address commercial aircraft supplier management, fabrication, propulsion, manufacturing, and quality control.

As announced last year, Boeing expects to start making deliveries of the 787 in the first quarter of 2010—after two years of delays. The latest hiccup in the Dreamliner saga has forced the company to overhaul its supply chain oversight, pulling back the strings of what has been largely a global effort.

The company’s network of suppliers spans countries such as Japan, Britain, France, Germany, South Korea, and Italy. Boeing aims to bring more engineering and manufacturing closer to home as it moves forward with the 787 series.

While many businesses continue to explore economies in offshore markets, Boeing has learned firsthand the difficulty of managing operations among a scattered network of suppliers. But what has triggered fallout over missed deadlines and customer deliveries—controlling the supply chain—may yet help the aircraft company emerge from its current jet lag.

Retailers Turn to Inventory Management

Retailers currently face a predicament as consumers continue to hunker down. One way they can combat this macroeconomic environment is by paying attention to merchandising and inventory management, according to a study by Karabus Management, a Toronto-based retail consultant.

The study examines how retailers are allocating capital and impacting earnings through cost-cutting initiatives and improving inventory control.

“The macroeconomic environment demands CFOs examine and adjust their financial and operational plans quickly in order to counteract the dramatic decrease in consumer spending,” says Antony Karabus, CEO of Karabus Management. “Ninety-five percent of retailers surveyed are cutting capital expenditure budgets for 2009 by at least 10 to 25 percent, expecting the challenging environment to continue in the year ahead.”

Retailers are sharpening their focus on inventory management in three ways, according to the Karabus study:

• Canceling select orders. Twenty-five percent of CFOs surveyed are canceling select orders where possible, especially when suppliers are late.
• Deferring receipts on replenishment items. Seventy-five percent of retailers surveyed are flowing receipts on basic/replenishment items much closer to the expected need date, and are working with suppliers to renegotiate receipt dates.
• Reducing inventories. Ninety percent of CFOs surveyed say they reduced inventory between five to 15 percent on a comparable square footage basis during this past holiday season and for spring 2009 introductions. Most plan to reduce inventory receipts for fall 2009 by up to 25 percent.