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Table of Contents:

see also:  supply chain management,    logistics ,    transportation industry

Example:  Blue Jeans supply chain:

Aligning the interests of all parties

Question "How to you make sure the interests of all suppliers are aligned with your own?"  The key here is to devise an incentive system where the supplier and the buyer have incentives to improve the overall cost effectiveness, responsiveness, and agility of the ENTIRE supply chain, and not just their own little portion.  Aligning the interests of all parties will ensure that there is not excessive inventory built up in certain locations, or that pressures for JIT deliveries dont pressure suppliers to stock up on safety stocks.  Focus on incentives to make sure the right signals are being sent to suppliers, and that they are improving the entire system when they are acting in their own best interests. 

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High Oil Prices are leading to inflation by increasing shipping costs

Supply Chains for competitiveness

The ability of developing countries to connect firms, suppliers and consumers to global supply chains efficiently is essential to their competitiveness, says the World Bank in a new study on trade logistics. The study ranks countries on an index which combines seven measures of logistics performance, including the efficiency of customs procedures, costs, and the quality of infrastructure. Developed countries all score highly; Singapore comes top. Those developing countries where trade is central to economic performance, such as China and Chile, tend to be ranked higher than others with similar incomes. Some higher-income countries, such as the oil producers, tend to perform below their peers.

Trade logistics

Nov 15th 2007

Why both Boeing and Airbus are grumbling about their supply chains

DESPITE bulging order books, the mood at Airbus and Boeing is far from celebratory. Both aviation giants are moaning loudly that their production systems and supply chains are flawed, albeit for ostensibly different reasons. This week Louis Gallois, the boss of EADS, the Franco-German aerospace consortium that owns Airbus, added substance to warnings a week earlier by the planemaker's chief executive, Tom Enders, that the dollar's decline was “life-threatening” for the firm. Mr Gallois said it was no longer just a possibility that Airbus would have to move a large part of its production to “the dollar zone” or low-cost countries, but a certainty.

Airbus is already in the middle of Power8, a big restructuring plan that involves the loss of 10,000 jobs and the sale of several plants, which is meant to offset the losses caused by the delays in delivering the A380 superjumbo. But Power8 assumed that a euro was worth $1.35, not today's $1.47. Mr Gallois estimates that each 10-cent rise in the euro costs Airbus €1 billion. At present, Airbus makes 76% of its purchases within Europe, but generates over 60% of its sales elsewhere. It must now shift some production abroad—known in French as délocalisation.

Until now, Airbus has mainly used délocalisation as a means of drumming up orders or investment. Next year it will open an assembly line for the single-aisle A320 in China, which will be followed by a second site for making composite components. The conversion of A320 passenger aircraft into a cargo variant will take place in Russia, which will also get 5% of the work on the new A350. And on November 30th Airbus, which has yet to penetrate the Japanese market, revealed that it was in talks with Japanese companies to take on more than 5% of the A350 programme.

Airbus is now likely to forge ahead much further. Mr Gallois suggests that when the A350 enters service in 2013, 70% of it will have been “purchased” in dollars, against 50% for the A380 and an average 24% of Airbus production today. Because Airbus insists that some of its European suppliers price in dollars that means about 50% of the A350's production will be outsourced. New aircraft, such as the A320's successor, may be made almost entirely outside the euro-zone.

Airbus maintains that exchange rates are not the only reason for outsourcing: it is keen to tap into composite-manufacturing expertise wherever it exists. It also insists that it will not repeat the mistakes Boeing has made with its new 787 Dreamliner, about 80% of which has been outsourced. A few weeks ago Mike Bair, the executive responsible for the 787 programme, who was recently moved sideways after mounting production delays, launched a withering attack on some of the companies recruited to build the plane. He said that in future Boeing would not entrust design work to partners who “proved incapable of doing it”, and would make suppliers build factories close to Boeing's main assembly operation, rather than flying semi-finished sections of the aircraft round the world on huge Dreamlifter transporters.

It is too early to conclude that the two rivals are heading in opposite directions—Boeing renouncing the global supply chain just as Airbus adopts it. Each company has its own axe to grind. Airbus needs greater flexibility, and the weak dollar provides helpful cover as it takes on its grumbling unions. Boeing, for its part, wants to shift the blame for delays to the 787 on to its partners. The logic of global outsourcing in the aerospace industry remains powerful. Whatever they may be saying now, Airbus and Boeing are more likely to converge than to diverge.

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