My recent diatribes on the aggressive supply management goals of General Motors and Ford Motor Company raised the attention of Industrial Maintenance and Plant Operation (IMPO) magazine. A reporter from the trade pub called me earlier this week for a column she was preparing on whether automotive manufacturers are “only hurting themselves by squeezing suppliers too hard.” And while in Detroit this would be a rhetorical question, I elected to take the call.

We’ll have to wait until the October issue to learn IMPO’s angle on the matter, but the line of questioning was troublesome, particularly the question as to whether Ford President and CEO Bill Ford should “step down before breaking contracts and low-balling price.” With lackluster sales, uninspiring vehicles, and overbearing labor unions, supply management tactics are the least of Mr. Ford’s problems. (Although I expect there will be a day soon when supply chain effectiveness is metric on the performance scorecard of C-level executives.)

The irony of the interview was that as we were speaking, Bill Ford was stepping aside as CEO and Alan Mulally, EVP of Boeing’s commerical aircraft division was ascending the post. Analysts and news media have been guarded about Mulally’s prospects for a turnaround, saying it needs to seen whether his experience and success at Boeing will translate to the automotive sector. Although, analysts do draw parellels between Boeing’s past struggles and those current suffered by Ford.

Under Mulally’s stewardship, Boeing transformed its commercial division from the outmoded player of aerospace industry to the renewed market champ. Much of Mulally’s success is tied to product and manufacturing innovation. He was the project lead for the Boeing-777, which launched in the 1980s to great success. Mulally is also credited with slashing the time it takes to build the company’s best-selling 737 in half by switching to the lean manufacturing techniques developed by Toyota. But Mulally’s opus may be the new Boeing-787 Dreamliner.

Enhanced styling and the use of new composite materials — particularly titanium — enables the new 250-passenger widebody to use 20% less fuel other aircraft  of similar size. Such efficiency has driven airlines, still smarting from skyrocketing fuel prices, to place orders for more than 420 Boeing 787s. There is speculation that Boeing could get another rush of orders for the 787 thanks to production and supply troubles rival Airbus’ A380 jumbo jetliner.

Some of Boeing 787’s success can be attributed to savvy supply management techniques, including early supplier invovlement in aircraft design, outsourcing of entire “systems” to suppliers, and advanced sourcing practices for raw materials, particularly titanium.

Early supplier invovement has been a forte of Boeing’s defense business, which has for years looked to suppliers to innovative new materials and sub-systems. With the 787, Boeing’s commerical division took supplier collaborative to a new height, outsourcing the development and manufacturer of nearly all the aircraft’s systems to suppliers. In addition, the 787 marks a milestone for global development and manufacturing. According to a recent Forbes article, “The wings will come from Japan; an Italian company is the key contractor on the fuselage; designers are working on the 787 in Moscow.” That leaves Boeing functioning as master orchestrator, coordinating these disparate and geographically dispersed paratners and managing final assembly and quality management. (Boeing is also responsible for the design and manufacture of the aircraft’s tail.)

In principle, these global design and manufacturing practices should transfer well to the automotive sector. However, the approach will likely need to be adjusted to meet the mass volumes and rapid leadtimes of automobile production.

Boeing’s other innovative supply management approach was to work collaboratively with suppliers to identify and secure new innovative composite materials that are stronger and lighter than conventional materials. To ensure supply availability of these materials, Boeing entered into a joint-venture with a Russian-based VSMPO, the world’s biggest titanium miner. As noted in previous posts, these moves have helped Boeing shore up more than one-third of all available titanium for each year the 787 is in production.

On the surface, such proactive supply risk management practices appear to be exactly the type of approach required for success in the automotive sector. In fact, Toyota and Honda have used similar supplier development tactics to command a lion’s share of available supply of engines for hybrid vehicles. (A practice which Ford execs have publicly cried fould about.)

However, when it comes to risk, too much of a good thing can be dangerous. Reports indicate that Boeing will get more than 40% of its titanium from the Russian JV. (Interestingly, rival Airbus gets nearly 60% of its titanium from VMSPO.) Such supply allocation may seem like no big deal in any other situation. But considering how Boeing has pinned its future on the 787, the approach may be cause for concern.

Of particular note is the growing instability of diplomatic relations between the U.S. and Russia over Iran’s nuclear program and intentions. The U.S. would like to impose sanctions against Iran but needs the support of both Russia and China to do so. Russia, which is building Iran’s first nuclear power plant, refuses to endorse such sanctions. The United States contends that Iran’s intention is to acquire nuclear weapons, and that Russia has been secretly providing a boost to Iran’s nuclear-arms program. Should diplomacy fail, a potential change in trade policies or tariffs could impact Boeing’s titanium supply either through higher prices or curtailed supply — or both.

The bottomline: There is no doubt that Ford and its supply management practices are in dire need of an overhaul. Years of damaged supply relationships won’t be repaired overnight. But the collaborative supply approaches endorsed by Boeing should transfer well to Ford’s supply chain — with a few tweaks for a multi-platform, mass production environment.

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