Skip to 0 minutes and 8 secondsWell, yeah. The phrase is, again, fairly loosely used. I mean, you'll find a truck driving down the motorway with your supply chain partner. Well, yeah. They are a partner in the supply chain, obviously. But no. Supply chain management, to me, is really what it says. It's about how do you manage, particularly, the relationships with upstream suppliers? In the past, there was typically an arm's length relationship, often. We didn't want to bring him too closely into our business. But now, particularly as a result of outsourcing, things we used to do in-house are now done by others, we've come to recognise we've got to work in a different way. So to me, supply chain management is about managing those relationships, upstream, downstream.
Skip to 0 minutes and 57 secondsAnd try and work as if it were a single business, even though it's many businesses. Well, because Boeing monitors the supply chain through a very close relationship with all of our suppliers, from the great big tier ones right down to below that, to smaller companies we're working with, as I say, we've got thousands of companies across the world that we work with. In this country alone, in the UK, we have over 250. And we have a very close partnership from the design stage.
Skip to 1 minute and 25 secondsWe have an architecture for our supply, looking 10 years ahead right down through the sort of middle period where we're working with them on contracts, through almost a daily monitoring to make sure that they're delivering on time. And I'll tell you why that's important. Because the aerospace industry is booming and we have order books going out five years and we're making planes at a fantastically high rate and we're ramping that rate up, so we're making two and a half airplanes a day, now, and that's increasing. And every piece in that airplane has to arrive on time, to be high quality and to be reliable. So safety and quality are absolutely the top of the agenda for Boeing.
Skip to 2 minutes and 9 secondsBut because 65% of our aircraft is our suppliers, they too have to have reliability, safety and quality right up the top of the agenda. So we work with them to ensure that our very high standards are met by them. And if they don't, we change suppliers. So we use... competition is very important inside our supply chain. Incumbency is no answer, the fact that they're there now doesn't mean they're necessarily there tomorrow. Well, we have a vision to make the best aircraft in the world. We've done that for a hundred years and we're carrying on doing that the next hundred years. So quality of product is part of the drive.
Skip to 2 minutes and 45 secondsBut increasingly, because of the competition across the world and because the customers are demanding more for less - you want to pay the same and get a better aircraft that flies cheaper and further - all of that requires us, with our suppliers, to modernise the way they make things, to think about engineering innovation. So we're constantly, with the suppliers, innovating in the pieces they make, how they're integrated, what we actually use in airplanes. So the more for less, cost reduction and better production is the main driver for what we're doing. So now let's look at what is sort of the supply chain management. So the supply chain management really is we have all of these assets in the whole network.
Skip to 3 minutes and 33 secondsSo how do we maximise the value from this? That is basically what supply chain management is all about. And for me, it's to primarily drive four Cs. It's to drive customer experience, it's to drive cost, to drive compliance and finally to drive the carbon footprint down. So it's kind of all about driving four Cs so that we maximise the value for the shareholders and maximise the value for our customers. So that is really what supply chain management is to us.
Perspective of supply chain management
The video identifies commonality in themes, but lack of consensual definition with respect to the term supply chain management.
Professor Martin Christopher, Emeritus Professor of Marketing and Logistics, Cranfield University stresses the importance of relationships to enable companies to work as a single business, when in reality there are many. Sir Michael Arthur, Chairman Boeing UK, discusses the different phases of product development through which Boeing works with its supply chain to not only build 2.5 aircraft / day now, but also to design the aircraft of the future. Vikram Singha, Supply Chain and Product Innovation Cloud Applications Leader, Oracle UK Applications, talks about the need to harness assets to deliver value in terms of the 4 C’s: Customer Experience, Cost, Compliance and Carbon Footprint.
The Council for Supply Chain Management Professionals (CSCMP) is based in Illinois, USA. It was originally founded as the National Council of Physical Distribution Management (NCPDM) in 1963. The NCPDM was formed by a visionary group of educators, consultants, and managers who envisioned the integration of transportation, warehousing, and inventory as the future of the discipline. In 1985, NCPDM’s name was changed to the Council of Logistics Management (CLM) to reflect the evolution of physical distribution into logistics management. Twenty years later, in 2005, the organization was renamed the Council of Supply Chain Management Professionals (CSCMP). This change acknowledged the evolving needs of the council’s members, whose responsibilities had expanded within their companies and the profession to encompass not only logistics, but also procurement, manufacturing operations, and sales and marketing functions. CSCMP currently serves over 8,500 members representing industry, government, and academia from 67 countries.
The evolution to form the CSCMP led to the organisation defining supply chain management in 2005 in a way that I find very useful:
“Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies”
Given the heritage of the organisation it is not surprising that there is a slight logistics bias to the definition, though it is holistic in its nature. It also highlights the primary purpose of supply chain management as to balance demand and supply both within and across companies. This is absolutely fundamental. Whilst we can think it is great to grab a bargain after Easter if the supermarket shelves are awash with unsold Easter eggs, this is not good for the supermarket or potentially the manufacturer depending on the contractual arrangement. In an ideal world the last Easter egg would be sold on the Saturday before Easter at full price just as the store closes. Demand and supply perfectly matched. In our increasingly complex world where demand is uncertain in terms of when we will buy, where we will buy, and what we will buy it becomes a real challenge to manage the supply chain to meet that demand.
Too much supply is inefficient as it means at best discounting products and a loss of revenue, in the worst case it can lead to waste. Not enough supply and consumers become disillusioned and may switch to another product. Despite its limited recognition, supply chain management is at the heart of commercial success or failure.
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