Best Practices -- Piloting Materials Management

Chicago-based Boeing Co. is off the ground with an improved maintenance materials management approach dubbed Integrated Materials Management (IMM) that it claims reduces operating costs for its commercial airline customers, gives Boeing better information about both one-use and repairable parts at their points of use, and improves the quality of information flowing to parts suppliers, which helps them reduce the costs of managing their supply chains. With this value-added and proven best practice -- it "conservatively" estimates IMM can save an airline 10% to 20% of its maintenance materials costs -- Boeing is adapting a supply-chain management approach from the automotive and electronics industries and introducing it to the aviation industry, where the supply chain historically has been fragmented. "We're trying to de-fragment that supply chain, aggregate it and integrate it to provide better information to both customers and suppliers, and, therefore, to improve performance for all of us," states Joe Brummitt, director of integrated materials management for Boeing Commercial Airplanes in Seattle. The program not so incidentally provides $50.5 billion Boeing with an additional revenue source, data on parts that can be fed back to design and customer service engineers, and, to the extent that it's not matched by such other commercial airplane makers as Airbus SA, a competitive advantage. How does IMM work? In May, Boeing disclosed that it would be managing much of the spare-parts supply chain for Japan Transocean Air. Boeing will be responsible for the purchasing, inventory management and logistics of such single-use parts as bushings, clamps, brackets, retainers, hoses, seals and couplings. Boeing and other suppliers will own the aircraft parts, which will be stored near the airline's operations until they are needed, and the airline will pay for parts as they are used. As of mid-June, four airlines -- Japan Transocean Air, Japan Airlines, KLM Royal Dutch Airlines and Airtran Airways -- were signed up for IMM or the Global Airline Inventory Network system, the 5-year-old legacy program on which IMM is based. In mid-June, Boeing and Texas-based Aviall Services Inc. said they had signed an agreement for Aviall to begin parts support for Japan Airlines on June 21 under IMM. Seventeen other supplier contracts were pending. Key to the success of IMM is getting better information from a part's point of use. "If we can get to that point, we can really improve dramatically the flow of information from where the part is being used -- rather than having to depend on the systems and practices of the airlines to place a purchase order with us as a suppler," says Boeing's Brummitt. "We can . . . transfer that information -- better information, more discrete information -- down the supply chain, and do it in a more rapid and efficient manner." Brummitt relates that some airlines have challenged Boeing, asking why it believes it can do a better job than some other companies and asking why they should trust Boeing. "What we bring to the table to them is really a hard financial analysis that says . . . that we can reduce your costs by X percent," insists Brummitt.