How Boeing Manages Aluminum Suppliers In Its Supply Chain

| About: The Boeing (BA)

By Taras Berezowsky

The Boeing Company (NYSE:BA) knows a thing or two about managing supply chain risk. (After all, they had to manage the fallout of the 787 Dreamliner battery goof.) In all seriousness, however, as a friend once put it: "While far from perfect, I can't think of a company that has done a better job putting in place the systems and processes to monitor and managing each node in the supply chain. For example, Boeing buys mountains of titanium and aluminum to ensure that raw materials are never the reason a part is late. How many aircraft manufacturers can say the same?"

Jeff Carpenter, senior procurement manager, raw materials, of Boeing Commercial Airplanes Supplier Management, spoke to that sentiment in Part One of our Q&A with him, specifically on how Boeing goes about buying its aluminum.

In this second half of the Q&A, Carpenter gets into Boeing's supplier relationship management.

Metal Miner: How long can we expect the recent "vote of confidence" for aluminum from Boeing's CEO to last into the future (as far as sourcing and using that metal for fuselages in future models?)

Jeff Carpenter: In developing new airplanes, we work closely with our airline customers to determine their requirements related to passenger load, fuel consumption, maintenance and many other factors. Once we have defined the mission of the airplane we determine what materials best support that mission. All materials -- whether metal or plastic composite -- have to earn their way onto the airplane through superior value and performance.

MM: What do you look for in an aluminum supplier?

JC: We want to work with companies who understand the unique requirements of the aerospace industry. At the same time, there is a growing demand from our customers to deliver more for less. We need supplier partners who, through production efficiency, system design and ongoing innovation, provide superior value in terms of cost, quality, reliability and delivery. We want suppliers who are willing to work closely with us to continually improve the performance of our supply chain.

MM: How would you characterize your relationship with your suppliers?

JC: We generally have good, solid relationships with our suppliers. We are fortunate to have many long-standing suppliers who understand our business and what we need from them. Looking ahead, there is tremendous opportunity in the aerospace market. We project a need for 35,000 new commercial airplanes valued at $4.8 trillion over the next 20 years. Suppliers who work with us to create market-leading value through quality, cost and reliability will find their opportunities with Boeing increasing, while those who don't will see their opportunities diminish.