Supply Chain Opportunities – Airbus’ New Approach AND Neiman Marcus vs. Target?

I found two great articles yesterday in the Wall Street Journal that caught my attention. One article focused on Airbus’ epiphany to redesign their manufacturing process in “Hit by Delays, Airbus Tries New Way of Building Planes.”  This is a must read as it is a classic lesson on how Supply Chain Management is critical to either the success or failure of a global manufacturer.  More later on the Airbus journey. . . .  The second article entitled Retail’s New Odd Couple was much more fun for me as it focused on a new Supply Chain partnership between two retail giants, Neiman Marcus and Target.  This is another must read for anyone that can’t even imagine putting those two companies in the same sentence.  Both articles helped to reaffirm in my mind that the discipline of Supply Chain Management is complex, fascinating, fun, and most importantly can be a competitive advantage for any company that does it well. Time will tell whether either of these new ventures will be successful . . .

Back to Airbus . . . .  The large aircraft manufacturers, both Airbus (a unit of European Aeronautic Defense and Space Co.) and Boeing Co. have been plagued in recent years by major delays and multibillion-dollar cost overruns.  Daniel Michaels writes, “Over the past six years, Airbus and U.S. rival Boeing Co. have lurched through a string of expensive and embarrassing crises while developing new airplanes. Their customers are furious about receiving planes years late, and investors are fuming that the projects have devoured cash rather than generating profits”.  As a result, both companies are rethinking the way they build jetliners.  The gist of the article outlines Airbus new strategy to go down a middle path which combines outsourcing with their already highly centralized production system.  What this requires is:

• Close, close collaboration with suppliers
• Teams which join Airbus engineers with experts from their suppliers
• Streamlined production processes
• More effective management of subcontractors to minimize risk
• Common standards and equipment
• An effective program manager to oversee all the moving parts (a true supply chain manager)
• Data sharing and visibility across the entire supply chain

Airbus as well as Boeing has some really bad press and past missteps to recover from.  I will be interested to see if these changes will turn out to be the wind beneath Airbus’ wings.   Interestingly enough, today Airbus announced a new $6.35 billion deal (see Boeing in focus as Airbus orders hit $16.9 billion) which was made just prior to Boeing’s announcement of a huge deal with United (see – Boeing wins $14.7 billion jet order from United).

Now on to the fun stuff – the partnership between Neiman Marcus and Target.  Two very different retailers with a very different customer base (or not?).  Neiman Marcus discovered that many of their high end clients were also shopping at Target (a fairly new phenomenon as a result of the recession) for basics.  In this new venture, Neiman Marcus will put together a limited collection from 24 American designers which will be cobranded and sold at both retailers.  What is the value proposition for both sides?  Neiman Marcus becomes more accessible to a broader range of customers, specifically those that are younger and less affluent.  In addition, Neiman’s needs to be able to tap into Target’s extensive Supply Chain (there it is again!) to produce the apparel in bulk.  This partnership allows them to attract customers that might be otherwise intimidated to enter their stores.  Brilliant!!!   For Target, they have the opportunity to work with numerous designers that would not have given them the time of day without Neiman’s clout.  Target has proved that they can sell designer wear which was proven last September when they carried a line by Missoni and sold out immediately.  This partnership gives them access to many more designers AND rubbing elbows with Neiman’s is a bonus.

The Neiman’s / Target example is a testament to how Supply Chain creativity can have a major impact on top line results not just bottom line cost savings. I will keep an eye on this one to see if it really is a success!  Nevertheless, we should add this to our many examples of how Supply Chain organizations can move beyond cost to create real value for their company.

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