PART of a new plan

TacAir team now gets components 'just in time'

BY KATHLEEN COOK

Keeping too many supplies on hand is an expense any business would like to avoid. Boeing Integrated Defense Systems in St. Louis is doing something to minimize it.

Using consumption-based ordering, the Tactical Aircraft team is working to have the right number of parts and supplies on hand when needed-and not a day before.

Consumption-based ordering uses the advantages of just-in-time ordering and the value of close partnerships with suppliers. The result is a more efficient system with benefits for Boeing and its suppliers.

CBO offers suppliers visibility into the Boeing inventory system. The suppliers can see readily when parts or products need to be shipped, without specific notifications from Boeing to begin the process.

"There are 40,000 procured parts active in our system for St. Louis at any one time," said Ken Caen, Boeing IDS supplier program manager for TacAir and a focal for the CBO system. "Using CBO reduces transaction time for both Boeing and suppliers."

The CBO system establishes a minimum and maximum number of items that each supplier needs to maintain in the Boeing inventory. Suppliers check the inventory and ship items in time to maintain that range.

To do this, suppliers check the Boeing inventory to verify the number and status of their supplied parts. To protect both Boeing and its hundreds of suppliers, the CBO system gives access only to the portion of the inventory with that supplier's parts, Caen said.

The suppliers determine how often they want to check the inventory and decide when to ship items, based on the information they receive from the CBO system. The benefit to the suppliers, Caen said, is that they can control when and how many items they should produce and ship.

CBO grew out of suggestions from several suppliers who said Boeing was utilizing multiple systems to accomplish the same task. It became the Boeing standard for Tailored Material Management Systems and is used in St. Louis, Seattle, Philadelphia, Portland, Ore., Long Beach, Calif., and Mesa, Ariz. Not all parts are in CBO, and the process might not be the optimal solution in certain situations, such as for test equipment and other nonproduction items. However, Boeing representatives and suppliers agree the process has value because it reduces transactions and saves money.

Under the traditional system, Boeing purchasing agents prepared and sent purchase contracts, which included information on how many items to ship and dates those items were due. With CBO, suppliers may ship according to their schedules, as long as they stay within their range of items in the Boeing system.

That range is determined by the dollar value and the build rate, said Kent Weber, a TacAir supply chain manager.

The TacAir team has classified its parts into three categories. The parts that have the highest dollar value and use, such as a generator, windscreen or a landing gear, are A's. The C's are the many items, such as fasteners and clips, that comprise few of the dollars. The B's are those that fall in between, Weber said.

As to build rate, "you may need a little more cushion on an F-15 part than an F/A-18 part," Weber said, because the build rate for the F/A-18 is higher. That means more parts are coming in regularly and more frequently, which enables Boeing to allow the inventory to get a little lower.

The initial range for a particular part is not set in stone. The reasons for changing can vary from a Boeing request due to changes in production, to a supplier request based on shipping changes. As an example, a supplier whose range is between three and 21 parts may ask to change the range limits to multiples of four, to accommodate new shipping containers that hold four of an item.

The computer screen that suppliers access provides all the information they need to know for when to ship items. The system shows the minimum and maximum range, the number on hand, the next projected "pull" date and any items that have discrepancies.

It also enables the suppliers to view the Boeing production forecast for up to 36 months, which allows more flexibility in planning production and shipping.

"Before, we told [suppliers], 'these are the dates we want you to deliver the parts.' If some dates changed, we had to flow that through as a [purchase-contract] change order, which had some cost associated with it," said Boeing IDS Purchasing Agent Steve Jones. With CBO, Jones said, "They can see what we're building and they can plan their work accordingly. It gives them more flexibility and saves them money, which in turn saves Boeing money."

Consumption-based ordering is a significant saver, Caen explained, because it allows Boeing to keep the right amount of supplies and parts on hand without maintaining costly, excess inventories. Because the system has maximum numbers, arrived at with guidance from production control, the Boeing shop knows there is enough space for items, and everything can be delivered to the proper "point-of-use" station. Indeed, Caen said suppliers are subject to the same performance-rating penalty for being over the maximum as they would for being under the minimum.

By giving suppliers access to the Boeing system, procurement agents can "spend a lot less time on tasks like little change orders here and there, and more time on the important things that a supplier needs," Jones said. "It makes me more available to the supplier."

Suppliers agree. Tom Kirk, president of Oppenheimer Precision Products and a Boeing supplier, called the CBO system a win-win for Boeing and suppliers. "Once the contract is set, we have no administration; we ship to the CBO. There are direct savings in overhead, and that's kind of hard to beat," he said.

Jackie Entzel of Killdeer Mountain Manufacturing, one of the many small-business suppliers to Boeing, echoed those sentiments. "We don't have to go through a purchase order change for every little change in schedule," he said. "Doing business this way saves a lot of paper."

THE RIGHT PLACE AT THE RIGHT TIME A look at procurement on the F/A-18 line before and after consumption-based ordering (CBO) began.
Before CBO		After CBO
Boeing purchasing agents prepared and sent purchase contracts. These agreements stated how many items to ship and dates those items were due.		CBO system establishes a minimum and maximum number of items each supplier needs to maintain in the Boeing inventory.
Changes to the purchase order required follow-up paperwork, which increases costs.		Suppliers use the computerized network to check the inventory of their parts and ship items in time to maintain that range. Suppliers do not get specific notifications from Boeing to begin the process.
Suppliers had little insight to Boeing's future needs, which hampered their planning ability.		Suppliers can view the Boeing production forecast for up to 36 months, giving them more flexibility in planning production and shipping.
System did not fully accommodate minimum and maximum number of items needed.		Suppliers now control when and how many items they should produce and ship, as long as they stay in the minimum-to-maximum range.
Boeing shop floor had to contend with excess parts inventories, which led to shop-floor clutter and the cost of maintaining the parts.		With a maximum part count, Boeing keeps the right amount of supplies and parts on hand without maintaining costly, excess inventories.
Other CBO benefits Gives suppliers flexibility and saves them money, which lowers Boeing procurement costs Lets Boeing procurement agents spend less time on small tasks and more time with suppliers

kathleen.m.cook@boeing.com