Tag: 787

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: 787 Dreamliners Facing More Rolls-Royce Engine Flaws

Rolls Royce engine of a Boeing 787 Dreamliner

Faulty Rolls-Royce engine blades are deteriorating faster than expected, prompting additional groundings of Boeing Co.’s 787 jetliners for early repairs, reports Businessweek (Sept. 27, 2018). The discovery affects about 120 Trent 1000 turbines,  8% of the global fleet, and has frustrated efforts to reduce the number of idled planes after a series of engine issues.

Rolls-Royce uncovered the part’s shorter life-span in December, when Air New Zealand Dreamliners suffered in-flight turbine damage on successive days. The flaws add to Rolls-Royce’s struggle with design faults to the engines, which have already prompted the company to record $1.5 billion in charges. The engine maker also faces a blow to its image because the faults involve the high-profile 787, Boeing’s most advanced model, leaving airlines rushing to find replacement aircraft for long-haul routes. Air New Zealand said it will cost the airline $26 million this year. With as many as five of its 13 Dreamliners grounded at any given time, the carrier has had to lease three aircraft to make up for the shortage.

The intermediate pressure turbine blades — which had already been flagged for replacement — aren’t lasting long enough to meet the previously set maintenance schedule. Engine makers like Rolls-Royce typically foot the bill — including for the leasing of replacement aircraft — when design or production issues delay deliveries or force airlines to idle jets that are already in service. The U.K. manufacturer has gone on a fence-mending campaign as customers for the engine — including British Airways, Virgin Atlantic, and Norwegian Air — have been forced to hire jets this summer as turbines go in for repairs.

Classroom discussion questions:

  1. Why are flights being grounded?
  2. What is the cost to Boeing? To customers? To Rolls-Royce?

OM in the News: Dreamliner Woes Test Boeing’s Corporate Ties in Japan

japan and boeingIn the Global Company Profile that opens Chapter 2, we note the important and growing role Japan suppliers have played in Boeing’s 787. But the well-discussed woes of the Dreamliner (see The Wall Street Journal, Jan.29, 2013) are beginning to strain one of the aviation world’s coziest relationships: that between Boeing and its customers in Japan. All Nippon Airways, the first and largest operator of Boeing’s new 787, cancelled 459 flights through Jan. 31 after battery fires on two Dreamliners prompted regulators to ground the planes over two weeks ago. Rival Japan Airlines, which flies 7 Dreamliners and suffered a fire, has also been hit by the plane’s stoppage. “As an airline person, it’s exasperating to think that we’ve got 17 cutting-edge planes sitting here that can’t fly,” says ANA’s VP.

It’s not just the airlines that are affected. More than a third of each 787 is built by Japanese manufacturers before being sent to the U.S. for assembly. Roughly 43% of Japanese aerospace employment is linked to Boeing projects. In other markets, the Dreamliner’s delays and problems might prompt customer defections. But Japanese companies do so much business with Boeing that their fortunes are closely linked.

ANA and Japan Airlines flaunt their allegiance to Boeing. ANA, deeply involved in the design of the jet, boasts that its “passion persuaded Boeing” to use a durable Japan-made paint on the 787 and that the Dreamliner’s composition is “Japan 35%; Boeing 35%; Others 30%.” When the Dreamliner faced big delays between 2007 and 2010, Japanese aviation exports plummeted 25%.

The ties go back to U.S. support for Japanese reconstruction after World War II. In the 1970s and 1980s, Japanese airlines became big buyers of U.S. planes, partly to help offset a huge trade imbalance. “Ever since the war, Japan’s aviation industry has been basically America,” says one trade official.

Discussion questions:

1. Why did Boeing outsource such a large percent of its jets to Japanese suppliers?

2. Why have JAL and ANA remained loyal customers?

OM in the News: Innovation is a Messy Business

Grounded Japanese 787s
Grounded Japanese 787s

In Chapter 5, Design of Goods and Services, we talk about how new products are the heart of a great company. 3M, for example, introduces a new product every day! But The Wall Street Journal (Jan. 24, 2013) headline warns: Innovation is a Messy Business. Writes the Journal, “Aviation innovation is especially risky because the stakes are so high. A crashed laptop might lose data, but a crashed plane kills people.” Unlike 3M products, entirely new jetliners get developed only about once a decade, costing billions of dollars.

Nine years ago, Boeing  decided to take the biggest leap in airliner technology in a generation and develop the 787 Dreamliner. Boeing promised it would burn less fuel while flying farther and offering more passenger comfort than existing models. The 787 also showed Boeing’s “commitment to innovation.” Airlines, eager to save money and woo fliers, ordered a record numbers of Dreamliners.

We in academia have made “innovation” a buzzword for competing in the global economy. Boeing’s experience offers a reminder that innovation—for all its value—doesn’t come as easily as a catchphrase. It can get messy. Boeing, an icon of  ingenuity, has reshaped travel over the past half-century with bold technological leaps such as the 747 jumbo jet. But the 747 first nearly bankrupted the company due to technical problems. Boeing’s backers say the Dreamliner will prove just as revolutionary.

The 787’s problems again show the traumas that innovation can bring. Boeing said the plane would leapfrog advanced technologies at Airbus. It would rely more on electricity to run its systems than existing planes, which used hydraulic and pneumatic power. To convince wary airline executives that carbon-fiber body material was strong, Boeing sales teams carried samples and hammers, letting airline executives whack the composite with all their might. Airlines signed on, knowing the risk.

Discussion questions:

1. What are the main operations problems facing the 787?

2. Why did Boeing risk introducing such a radically different plane?

OM in the News: Boeing Wants Production Faster, Faster, Faster

There are not many businesses in which the next 6 years’ worth of customers form an orderly queue, put down fat deposits, and make futher installments as they wait for delivery. But Boeing, reports The Economist (Jan.28,2012), has such a backlog (and 2011 profits of $4 billion). The key to continued success, though, is ramping up production to meet the soaring demand–an operations issue if there ever was one.

At its Renton factory (near Seattle), 737s are being churned out at a record rate of 35/month after a recent speeding up of the 2 assembly lines. The plan is to increase to 42/month by 2014, squeezing a 3rd line into the giant hangar. Likewise, at Boeing’s nearby Everett  factory and at a 2nd plant in South Carolina, plans are to turn out 10 giant 787 Dreamliners/month by the end of 2013.

These assembly plants are the final stage in a long and hugely complex global supply chain that we describe in the Global Company Profile in Chapter 2. Boeing has about 1,200 tier one suppliers, providing parts coming in from 5,400 factories in 40 countries. These in turn are fed by thousnads more tier 2 suppliers, which themselves receive parts from countless others.

Boeing is the first to admit that it outsourced too much work on the 787, leading to 2 years of delays and 40 unfinished jets parked on runways in several states awaiting final parts. Some work has been brought back in-house, and a “war room” has been set up to constantly monitor the world’s supply of parts and raw materials. Boeing just signed a long term contract with the Russians to ensure a steady stream of titanium. It has also hired 100’s of “examiners” to visit suppliers to check that they are building production to meet Boeing’s rush to expansion.

Discussion questions:

1. Why is Boeing working more closely with suppliers now?

2.What is the danger in ramping up production dramatically?

Teaching Tip: Product Development Needs Revolution As Well As Evolution

Which is better?  To create dramatic new products that wow the market–or to incrementally improve an existing product that performs well. Boeing, of course,  has done both. It took its 737 and has gradually upgraded it dozens of times over the past 3 decades, making it the best selling plane of all times. But the firm also decided to bet the farm on its all new 787, the 1st large jet to have a structure made of high-tech lightweight composites. The headline in Tribune newspapers around the country yesterday pretty much sums up how that company’s operations managers feel these days: “Dreamliner Still in a Tailspin: Delay Plagued 787 a Huge Headache for Boeing and Suppliers”. Now 3 years late, about 100 orders have been cancelled by frustrated customers, and Boeing has spent close to $10 billion in cost overruns and penalties.

So when you teach this topic in Ch.5, I have two examples to share, both from recent TED talks. These short lectures, often by famous  people, present some pretty amazing ideas. Let me start with the evolutionary example . My friend Allen Kupetz just gave a TED talk on how the pencil has changed over the past 445 years.  He makes a good case for why small, incremental changes in product design are as important as revolutionary new products. (Allen traces from the start of the pencil in 1565, to the change to 6-sided in 1839, to the addition of an eraser in 1858, and so on). Try to show the last 5 minutes to your class.

How about revolutionary change? Perhaps the most inspiring talk you will ever hear is from Frank Reynolds, paralyzed with a permanent spinal cord injury while in grad school at St. Josephs U. Frank layed in bed for 5 years and taught himself everything he could about medicine. In the end, this amazing man has developed a cure for such injuries and has started a firm called InVivo Technologies. I was so impressed that I invested in his company!  This video is worth your time.