The grounding of Boeing’s 737 MAX is pushing some aerospace supply chains into a slow descent. Some suppliers are reconsidering decisions to keep making parts for the plane at full steam, The Wall Street Journal (June 14, 2019) writes, as inventories swell and a timeline for recertifying the plane remains hazy.
The new look at production highlights the tough economics of shifting gears in big supply chains for high-cost manufacturing operations. The grounding of the 737 MAX is stretching into its fourth month. Suppliers have largely kept pumping out parts, betting the grounding would be relatively short-lived. Some even saw it as a chance to catch their breath after years of blistering deadlines. Stopping and restarting production can be more costly and disruptive than keeping assembly lines humming, even at the expense of building inventories, but the calculation is changing as Boeing’s jet remains in limbo.
German seat maker Recaro initially kept production lines going full throttle but now is dialing back as fewer seats are needed in the short term. CFM International, which makes the MAX’s engines, has so far kept producing at its pre-grounding target rate, but is considering slowing that down. CFM also wants to make sure the company can quickly provide technical support to airlines once the MAX is cleared to fly again. Around 500 MAX planes have been idled. Their engines will need some maintenance from CFM before airlines can use them again.
Spirit AeroSystems, which makes the 737 fuselage, is still building 52 of them a month– matching Boeing’s pre-grounding output for the plane. Boeing has since throttled back to 42 planes a month. Boeing pays for the parts on delivery, but Spirit is keeping them at storage sites. The large fuselages are lined up outside the company’s Kansas facility. It is storing wing flaps and pylons, used to mount engines, indoors.
Classroom discussion questions:
- What are the OM issues involved in this production slowdown?
- What is the role of the engine manufacturer in the MAX shutdown and startup?