The Customer Loyalty Solution : What Works (and What Doesnt) in Customer Loyalty Programs

Idle airplanes cost airlines thousands of dollars per hour. How many times have you sat in an airplane waiting for engineers to replace some malfunctioning part? Did you ever wonder where all the parts used at the hundreds of airfields that our planes fly out of in the United States come from? One missing $50 part can cost an airline thousands of dollars. But airlines cannot afford to keep every possible part at every possible airport from which their planes fly. The answer is to have quick access to spare parts from the manufacturer.

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For many years, Boeing had a customer service parts-ordering system with operators standing by 24 hours a day. Each operator had a computer terminal that helped him to locate the needed parts for his frantic customers. It was not easy. There are 2000 suppliers of parts for Boeing airplanes. There is competition. There are Asian suppliers who make replacements for most of the parts in Boeing planes. Spare parts for Boeing airplanes are a $7 billion per year business, and Boeing wants to get as much of that business as it can. So, several years ago, Boeing decided to let its customers come behind the counter. It gave its customers the same access to spare parts that its employees have. Boeing’s Airline Logistics Support organization is now an integral part of Boeing’s customer support operation.

Airline customers can log on to the Boeing customer support Web site with a PIN and have access to 400,000 parts in Boeing warehouses in Seattle, Atlanta, Los Angeles, Singapore, London, Dubai, and Amsterdam. The airline customer can find where her needed part is located, place her order without human intervention, and, if necessary, send a driver over to pick up the part.

The Boeing Spares organization was the first to offer spares ordering on the World Wide Web. Now more than 600 customers access the Boeing PART Page (see Figure 11-4). Boeing provides its customers with routine, next-day shipment of spares. The Spares organization also offers the Global Airline Inventory Network, an exclusive service in which Boeing manages an airline’s supply chain for expendable airframe spare parts. The network is designed to eliminate costly inventory inefficiencies.

Figure 11-4: The Boeing Global Airline Inventory Network

Industry studies indicate that for every $1 of spare parts inventory, airlines spend an additional 35 cents on inventory holding and materials management costs. Designed to attack these inefficiencies and costs, the new Boeing system provides both airlines and their suppliers with a more efficient supply chain.

Here’s how the Boeing system works:

• Boeing takes responsibility for purchasing, inventory management, and logistics for their airline customers’ expendable airframe parts.

• All airframe parts are forward-deployed by Boeing at or near the airline’s point of use. That means that the parts are stored either in a Boeing partner’s warehouse or actually at one of the airline customer’s parts departments.

• Boeing and other suppliers own these airframe parts until they are actually used. An airline pays for parts only as it uses them. This significantly reduces the airline’s inventory holding costs.

• A supply chain management system serves as the “command center” for the network, monitoring the parts use of customer airlines and allowing suppliers to better forecast demand and plan production accordingly.

• The existing Boeing spare parts distribution system, with seven regional distribution centers around the world, is the backbone of the network. In addition to Boeing’s proprietary parts, these distribution centers stock many of the other 2000 suppliers’ parts, creating a single parts-distribution channel.

This system helps airlines reduce costs and frees up significant amounts of capital that were formerly tied up in inventory. It enables suppliers to benefit from the efficiencies that come from better demand forecasting and using a single distribution channel.