19 October 2006

Strategic supplier partnerships may form the backbone of Boeing's success over the next five years, according to the aerospace giant.

Norma Clayton, vice-president of global sourcing effectiveness, said collaboration with suppliers could be "the single biggest differentiator in competitive advantage", as it seeks to extend its lead over crisis-hit European rival Airbus and other big players.

Boeing's strategy of focusing on design and systems integration means 60 per cent of the value contained in its commercial and military aircraft, satellites and missile systems now comes from external suppliers.

Clayton said partnering marked a major shift for the firm, which will spend $36 billion (£19.4 billion) with 15,000 suppliers this year.

Speaking at the ProcureCon event last week, she admitted: "Boeing at times can be very arrogant and difficult to do business with, because of our size and leverage.

"We took a hard look in the mirror. That's tough because you're bound to see something you don't like."

With growing complexity and a need for flexibility, traditional supply chains and supplier relationships "are no longer going to work", she said.

Successful collaboration required common goals and objectives; aligned strategies; excellent communications; and high levels of trust.

Meanwhile, Airbus revealed this month that it is undergoing a cost reduction and efficiency programme to counter its financial problems.

Staff cuts and increased outsourcing are among measures being taken to ease the company's financial crisis caused largely by delays delivering the A380 aircraft.

The plan, dubbed "Power8", aims to tackle three problems: a lack of cash; the low dollar; and how it can catch up with Boeing. It said it has also felt the impact of "difficult pricing".

Airbus hopes it will generate "sustainable annual cost savings of at least ?2 billion (£1.35 billion) from 2010 onwards".

SMoct2006