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Authors: Prakash Sathe
Published by: WDI Publishing, William Davidson Institute (EDI), University of Michigan
Originally published in: 2019
Version: 5 April 2019
Revision date: 05-Jul-2019

Abstract

This case details The Boeing Company's raw material supply chain risks and explores appropriate strategies to mitigate them. Aluminum and titanium accounted for about 75% of the weight of a typical large commercial aircraft, so Boeing and its suppliers bought hundreds of millions of pounds of these metals every year in order to manufacture structural parts. But Boeing's forecasting methodologies for aluminum and titanium consistently underestimated true demand, which cost the company significant time and money. The case describes an ineffective scrap recovery process which failed to recover millions of dollars of precious scrap material, as well as a disproportionately low allocation of risk mitigation resources to raw material mills. Students will analyze purchasing policies pertaining to supplier evaluation and develop new strategies to minimize raw material costs.

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Abstract

This case details The Boeing Company's raw material supply chain risks and explores appropriate strategies to mitigate them. Aluminum and titanium accounted for about 75% of the weight of a typical large commercial aircraft, so Boeing and its suppliers bought hundreds of millions of pounds of these metals every year in order to manufacture structural parts. But Boeing's forecasting methodologies for aluminum and titanium consistently underestimated true demand, which cost the company significant time and money. The case describes an ineffective scrap recovery process which failed to recover millions of dollars of precious scrap material, as well as a disproportionately low allocation of risk mitigation resources to raw material mills. Students will analyze purchasing policies pertaining to supplier evaluation and develop new strategies to minimize raw material costs.

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