Just In Time -- If Supply Chain Management is the Answer, What's the Question?

May 2008 was supposed to be the month when aerospace giant Boeing Co. debuted its "game-changing" 787 Dreamliner, the month when supply chain management as we know it would take that next evolutionary step forward and prove that an extended enterprise -- in Boeing's case, outsourcing the entire production of its new aircraft to suppliers, with Boeing itself finishing the plane at the final assembly stage -- was an idea whose time had finally come. But a funny thing happened on the way to Boeing's coronation as a game-changer: The roll-out of the first Dreamliner got postponed, not once, not twice, but three times, with the program now delayed a good 15 months.

In a sense, Boeing has succeeded in changing the way we think about supply chain management, but unfortunately, not in a good way -- the Dreamliner nightmare is threatening to set back the cause of supply chain management by several years at least. I'm not referring to the production problems, parts shortages or even technological snafus that have derailed the project. What troubles me the most is how quick Boeing has been to blame its suppliers for every missed deadline, insisting that the suppliers weren't up to the task of delivering components and finished sections on time (or ever), leaving unanswered the question, "So who exactly is managing Boeing's extended supply chain, then?"

Emblematic of Boeing's patchwork approach to the Dreamliner project was its recent decision to acquire Vought Aircraft Industries' interest in Global Aeronautica, a move that signaled that Boeing's goal of jobbing out key assembly tasks to suppliers wasn't working, so they might as well just go back and do it themselves. Not exactly a ringing endorsement of supply chain management, is it?

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And then we have the U.S. automotive industry, which keeps shooting itself in the foot every time it seems like maybe, just maybe, they've finally figured out what they've been doing wrong. In Detroit, the idea of collaboration between the OEMs and suppliers usually boils down to: "If you'll keep your prices as low as we want, then we'll continue to buy from you." Certainly, that's not the way it always works, but for the most part, the idea of working closely with suppliers seems to be completely foreign to their standard operating procedures. "Foreign" is the operative word in that sentence, since some Japanese automakers have done quite well with that type of win-win relationship, often symbolized by the idea of the keiretsu, or joint partnership. The Detroit Three automakers, on the other hand, apparently see greater promise in pursuing lose-lose relationships.

Just to cite one recent example, look at the relationship (if you want to call it that) between Chrysler and one of its Tier One suppliers, Plastech, who had fallen on hard times. Rather than offering assistance to a key supplier, Chrysler canceled its contract with Plastech, which not only led Chrysler to temporarily shut down production at four assembly plants, but also caused Plastech to file for bankruptcy protection.

Or take the story of Excello, a supplier to Ford, Honda and Toyota that used to be based here in my neck of the woods in northeast Ohio. I say "used to be" because Excello recently closed up shop for good, causing nearly 130 workers to lose their jobs. As reported by the hometown Cleveland Plain Dealer, Honda and Toyota stepped forward and agreed they would contribute to a fund for the displaced workers; Ford, on the other hand, declined to contribute. I'm reminded of one of the key principles cited in Jeffrey Liker's book, The Toyota Way: "Respect your extended network of partners and suppliers by challenging them and helping them improve." Based on Ford's relationship with Excello, the Ford Way apparently is: "Sorry, can't help you."

Look, I've been writing about supply chain management for a long time -- I even wrote a book about it -- so I know there are no easy, paint-by-numbers solutions to coordinating global supply networks. What troubles me, though, is that the key word in supply chain management is management, and when relationships aren't managed properly (or at all), then there really isn't much of a supply chain. What you've got instead is a mad free-for-all, and ultimately, a lot of unhappy customers.

David Blanchard is IW's editor-in-chief. He is based in Cleveland. Also see Chain Reactions: David Blanchard's blog about supply chain management.