Tag: 737 Max

OM in the News: What are Boeing’s “Shadow Factories”?

Boeing is promising this year to get its jet production to precrisis levels and chip away at a growing backlog of orders. First, the manufacturer needs to clear out the dozens of planes in its shadow factories, reports The Wall Street Journal (Feb. 15-16, 2025). A shadow factory is what Boeing executives call a production line where engineers and mechanics work on fixing, maintaining or updating aircraft instead of building new ones. They exist for the company’s two-bestselling models, the 737 MAX and 787 Dreamliner.

As Boeing is struggling to hire and train enough machinists, the shadow factories can occupy some of the company’s most experienced workers. In some cases, Boeing spends more hours inspecting and reworking planes than it did to produce them in the first place. “It seems like 30% of everybody’s job is fixing something that’s bad quality or late product or something that shouldn’t have happened,” said the CEO.

It isn’t the first time Boeing has pledged to solve its shadow-factory problem. The company had initially vowed to be rid of it by the end of 2024, but clearing out the planes has proven vexing. The biggest chunk are MAXs parked at a facility in Moses Lake, Wash. They are mainly remnants of a global grounding of MAX jets following a pair of fatal crashes in 2018 and 2019. Boeing continued making the planes even though airlines weren’t taking them, and is still working to deliver them. Another couple of dozen are 787s sitting in Everett, Wash., awaiting checks to ensure parts of the planes are properly pieced together following quality questions raised years ago around the jet’s production process.

A year ago, Boeing estimated it had about 225 jets in the shadow factories.  Not only do the planes take up space and tie up billions in much-needed revenue, they require sophisticated care and reworking, which means some of the company’s most skilled machinists are charged with fixing defective jets.

Any time a model requires an update or repair—a common occurrence in machinery as complicated as a jetliner—crews must do the relevant work on every unfinished plane. In 2023, for instance, the company had to repair around 160 737s in the shadow factory after misdrilled holes were found in the fuselage of a completed jet.

Classroom discussion questions:

  1. Why is a shadow factory an unwise operations tool?
  2. What has happened at Boeing in recent years to cause such quality problems?

OM in the News: How Boeing’s Troubles are Affecting its Suppliers

Boeing’s troubles are bleeding out to its supply chain, where uncertainty over production rates has suppliers guessing at how many parts to make to avoid the cost of holding too much inventory, reports Financial Times (May 29, 2024) . It has slowed manufacturing of its workhorse jet, the 737 Max, as it tries to improve production quality following a recent door panel blowout on a flight. And it is facing an FAA deadline to deliver a plan that addresses a “flawed safety culture”.

 

The production slowdown is testing the resilience of a brittle aerospace supply chain that already has faced years of price cuts and choppy production thanks to Covid-19 and two fatal crashes that grounded the Max worldwide. Without a well-oiled supply chain, Boeing will struggle to deliver jets to airlines clamoring for them, and could destabilize labor in an industry that employs hundreds of thousands of workers.

The FAA has capped Boeing’s production of the Max at 38 per month. (The company is currently building even less). That affects the operations and finances for suppliers. The ones that do a lot of business with Boeing were “feeling the pain at the moment. Everybody was expecting a ramp-up in the production of the 737 and 787. They may have invested in people or capacity to meet that ramp- up, and when they get pushed back, it’s a problem,” said one industry consultant.

Spirit Aerospace, which produces the 737 fuselages, has had its own struggles with quality and has been the most high-profile casualty of the slowdown on the Max. Boeing stopped accepting those fuselages that do not meet specifications in an effort to reduce rework at its own Washington state factory, where rework performed increases the likelihood of manufacturing errors.

Spirit is far from alone. Howmet Aerospace, Triumph Group, Hexcel, Senior and ATI all have been affected by the slowdown on the 737. Triumph, for example, supplies $300,000 worth of equipment on each  737 Max and $1 million worth on each 787. It has slowed ordering materials from its own suppliers. Howmet is now assuming Boeing will produce 20 Maxes a month for the rest of the year, down from a previous assumption of 34. It is planning to deliver lower volumes “to prevent the case where we get caught with a lot of  inventory.”

Classroom discussion questions:

  1. What are Boeing’s OM options?
  2. What can its suppliers do?

OM in the News: Boeing 737 Max Production Freeze Risks ‘Supply Chain Fallout’

With 13,500 workers, Spirit is the largest employer in Kansas’ biggest city. It gets half of its revenue from making fuselages for the 737.

Boeing just announced it would suspend production of its 737 MAX jetliner. This is an escalation of the crisis facing the giant plane maker that will ripple through the global aerospace industry. Boeing plans to halt production in January at its Seattle plant. The MAX was grounded globally in March following two fatal crashes of the aircraft within five months. Boeing employs around 12,000 workers at that 737 assembly plant. But production of the 737 MAX also supports thousands of jobs across a network of over 600 suppliers and hundreds of other smaller firms in the global MAX supply chain, reports Supply Management (Dec. 17, 2019).

Boeing had 4,545 MAX orders in backlog as of November and had been building the aircraft at a rate of 42 a month since April (down from 52/month). Many suppliers had said they favored Boeing maintaining some production, citing the risk of losing workers in a tight labor market during a halt. They said furloughing staff and stopping machinery would be harder than lowering production, and that restarting assembly lines would be costly.

One industry expert stated:  “The decision to suspend production of the 737 Max is a largely unprecedented move and with the highest volume production of any large aircraft, the fallout across the global supply chain is going to be significant. The main problems for suppliers will be under-utilization of labor and machinery. Many suppliers have significant capital investment tied up in production capacity for the 737 Max program and they won’t be able to afford to keep this sitting idle for long.”

Classroom discussion questions:

  1. Do a SWOT analysis on this decision.
  2.  Identify the top 5 suppliers that will be impacted.

OM in the News: Capacity Planning and the 737 Max Grounding


Grounded Boeing 737 Max airplanes are stored in an area adjacent to Boeing Field in Seattle

The extended grounding of Boeing Co.’s 737 Max planes forced airlines across the globe to scale back growth plans for next summer, putting the airline industry on notice that the crisis is starting to affect longer-term plans. With a return date for the Max still uncertain after two fatal crashes, one  airline, the Irish carrier Ryanair, will receive barely half of the 58 planes it was expecting for the 2020 peak schedule. Ryanair estimates that the reduction will wipe 5 million passengers from its full-year tally.

Although U.S. operators of the Max haven’t yet talked about changing their growth plans beyond this year or readjusted deliveries, it will probably take 15 to 18 months for the carriers to catch up to their original schedules, writes The Los Angeles Times (July 16, 2019). (The timing depends on Boeing resuming its original delivery schedule, after slowing Max production rates to 42 from 57 aircraft a month). American Airlines and United Airlines just pulled the Max off their schedules through early November, in the latest sign the jet may not resume commercial service this year. Carriers will probably limit the expansion of the seat supply until late next year. Capacity growth will likely remain muted until the end of 2020 so that the first ‘normal’ year for capacity growth will be 2021.

Aviation regulators grounded the newest 737 after two crashes killed 346 people. In June, the FAA disclosed a separate software glitch it had found during simulator testing. That issue requires additional work by Boeing and is further delaying the Max’s return to service.

Classroom discussion questions:

  1. How can airlines forecast available capacity in a unique situation like this?
  2. What options do airlines have when planes are not delivered as planned or taken out of service?