Are you adhering to supply chain management best practices? If so, you'll be, at the minimum, using automated data collection tools and following government and industry regulations. But typically the bare minimum isn't good enough.
Take for example Boeing, which faced major supply chain and supply chain management problems when it was building its to-be glamorous 787 aircraft. While the company eventually produced and shipped the airplane, it faced a gluttony of manufacturing and operating problems that delayed construction and delivery. The resulted in higher expenditures and bad press. These types of mistakes would put many companies well behind their competition.
The Story Behind Boeing 787
Several years ago, Boeing had big plans to change how the airline industry served customers by building a state-of-the art luxury airplane. According to Steve Denning, a Forbes contributor, Boeing also had lofty plans to cut the plane's manufacturing expenses by outsourcing to international and domestic suppliers. Theoretically, this would reduce manufacturing costs from $10 billion to $6 billion and decrease development time from six to four years. However, Boeing's outsourcing plan failed to come to full fruition because the project ran over budget and was constantly delayed.
Boeing had planned to deliver the 787 in 2008, but construction delays, mechanical issues and mounting production costs - partly due to supply chain and supply chain management problems - caused the project to fall years behind schedule. For example, Christopher Harress of IBT reported that workers in one Boeing plant were unhappy they were receiving defective, unfinished fuselages from employees in another Boeing facility.
The company's 787 eventually made its first commercial flight in 2011, but the plane continued to experience mechanical issues for years thereafter. In 2014, One Boeing engineer, according to The Seattle Times, blamed Boeing's supplier management program because it had a lack of engineering expertise.
"The supplier management organization (at Boeing) didn't have diddly-squat in terms of engineering capability when they sourced all that work," the engineer said.
As you can see, it's critical companies take seriously how their supply chains can affect their business goals. Failing to do so can damage bottom lines in the form of reduced processing efficiency, price and cost increases, and fees and fines if they fail to follow strict supply chain parameters. Further it can give these businesses less of a competitive advantage because faulty practices restrict profits and waste money.
Here are a few best practices all companies and their respective supply chain managers should consider if they want to stand toe-to-toe with competitors:
1. Define and Understand Worker Roles
One of Boeing's biggest problems, according to Harvard Business Review, was when it failed to properly set the correct goals and expectations for its suppliers. Instead of asking these third-party specialists to simply provide the parts based on the company's design strategy, the jetline manufacturer instead asked these subcontractors to play more of a role in product design. This caused confusion and stalled the airplane's assembly. The issue in this case wasn't necessarily third-party vendors - although they may have played a small role - it was actually Boeing for mismanaging their supply chain.
2. Integrate Data Collection Tools
If you're still manually collecting and tracking data, revisit this process and think of ways you can automate your supply chain management procedures. Effectively automating data entry can establish a foundation for better data quality and collaboration across the business. Companies today can't afford to waste time, enter or extract the wrong data or pass along inaccurate information to employees or suppliers.
Automated data collection tools accurately update inventory information in real time. In return, this can help employees:
- Better Manage Inventory: Products - such as food - are less likely to go bad because they're not sitting on the shelf for too long.
- Work More Efficiently: By understanding how products move in and out of their warehouse, managers can improve how items are shipped and received.
- Reduce Resource-intensive Inventory Counts: Employees who spend too much time manually managing data likely don't have enough time to spend on their core competencies, limiting the value they can offer their organizations.
3. Comply With Government Regulations
More than ever before, companies are having to search deep into their supply chains for any problems that might violate government or industry regulations. In 2012, President Barack Obama's Executive Order required federal contractors to take action if they found that human trafficking existed in their supply chain.
Since then, the U.S. has also made a number of moves to combat what equates to modern day slavery, such as the Trade Facilitation and Trade Enforcement Act and the Port State Measures Agreement. The former strengthens a previous 1930s law that barred a certain amount of imported goods produced by slave labor, according to OECD Insights. The latter banned all imported fish caught by forced labor in south-east Asia, reported The Guardian.
Failing to comply with government regulations can result in sanctions and fines. To operate within the rules, we suggest at least following the first two suggestions outlined in this article. Make sure you not only know who your suppliers are, but clearly define their responsibilities and outline to them industry best practices. Also, take advantage of advanced mobile data collection solutions, which can help you figure out pain points - such as poorly operating suppliers - so your managers can make adjustments on the fly.
As Boeing, and other companies in similar situations, have likely learned, creating a well-oiled supply chain and supply chain management strategy can help executives exceed budget and manufacturing goals.
Adhering to Industry Best Practices can Help You Keep a Competitive Edge
While Boeing remains an industry leader in its respective fields, it faces intense competition from a number of other companies including Airbus, Embraer and Bombardier and other international entrants. Its 787 disaster nearly a decade ago may be almost (or at least somewhat) of an after thought now, but it could have done serious, long-term damage - something many other companies couldn't handle.
The three tips we provided here will help your company stay competitive against looming threats, while helping you avoid mistakes that hampered Boeing's quest to make a world-class airplane.