Boeing

9/17/2015 Summary

Dana Hullinger - Boeing

Last Thursday, We had Mr. Hullinger came to our campus give us a presentation regard to the supply chain strategy and risk. In his presentation, he covered multiple topics on supply chain risk management. There are two topics he covered that I found are pretty interesting to me and I’d like to review them.

First, risk associated with globalized supply chain. As we know, sourcing from developing countries can significantly reduce the cost (includes labor, land, and materials) and increase potential profit because of the different currency powers and customer purchase powers among countries. But on the other hand, the distance also create more risk, for example: there are more uncertainty while the lead time tend to be very long, and while the lead time is long, the related cost associated with excess inventory (bullwhip effect) in warehouses will also increase; also, defects shipments is another possible risk. Take my previous employer as an example, most of their suppliers are in China and they are targeting to U.S. customers. The lead time for most of our ocean shipments from China is about six weeks. Because the lead time is long, we need to keep a lot of safety stock on our warehouses; also, if there are some defect parts, it’s very costly for us to return the parts and most of the time we just ask for refunds and cancel the partial quantity from customer order. It’s like a tradeoff between risks and more profit. So we need to be very careful when thinking about out-sourcing and picking suppliers from other countries.