Airbus and Boeing Manage Excessive Slack Time

Airbus and Boeing delivered a record breaking number of aircraft last year, citing improved supply chain management, according to the Wall Street Journal. Airbus managed to pump out 718 planes last year, a full 30 more aircraft than their previous record, which was in 2016. Despite this shift in pace, Airbus states that they were 200 aircraft short of their target for the year due to lingering engine supply issues. By year end, Airbus had accumulated nearly 30 aircraft waiting on engine delivery, taking up valuable space on the production floor.

Boeing cited similar issues, and it is clear that neither aircraft manufacturer can keep up with demand. The two firms had a total of 13,129 backlogged aircraft poised for production. At current rates, it would take 9 years of production to fulfill these orders. Last year, the companies acknowledged their inability to fulfill orders and promised to make adjustments, re-tooling factories and increasing oversight on suppliers. Since then, the suppliers have shown improvement as they have combined to add scale and gain the financial leverage to expand production capacity.

In terms of producing aircraft, operators have an immense task of managing the project. Each aircraft produced is a brand new project, built on a strict timeline. However, this timeline is heavily dependent on the suppliers, since nearly all of the interior parts, electronics, and engines are outsourced. Because of this outsourcing, crashing the project is a difficult and often unfeasible option. This significantly increases the importance of supply chain management in terms of matching the needs of the customers. In 2016, Airbus drew attention when it had 5 completely finished and painted aircraft lined up outside of their facility waiting for engines. This is an example of significant slack time, and customers noticed it. A few weeks later, Qatar Airlines cancelled an order with Airbus, after they failed they to deliver even a single plane despite the contract promising five by that time.

In the cases of these aircraft manufacturers, it is clear that their critical path lays by way of the suppliers. The manufacturers have already faced an abundance of indirect costs from cancelled orders and loss of stock value. If the suppliers can effectively improve their processes, it would greatly reduce the slack time that airline manufacturers face.

Original Article:

https://www.wsj.com/articles/airbus-delivers-record-718-aircraft-in-2017-beating-expectations-1516003411?mod=searchresults&page=2&pos=19

Supplementary Readings:

https://www.wsj.com/articles/where-are-the-toilets-order-glut-stretches-giant-jet-makers-to-limit-1487885428

https://www.wsj.com/articles/qatar-airways-walks-away-from-airbus-a320neo-deal-over-delays-1464954847

 

 

7 thoughts on “Airbus and Boeing Manage Excessive Slack Time

  • February 7, 2018 at 9:38 am
    Permalink

    I agree! It seems to me that Boeing and Airbus are implementing better supply management but there is still room for improvement with both companies. Airbus was able to increase their aircrafts produced by thirty more and was working towards reaching the project goals of their target number. But, this increase was still 200 aircrafts short of their goal. Boeing stated they have the same issues in keeping up with demand for aircrafts. In addition, the company had a great deal of backlog in the aircrafts they produced. This indicates to me that there are issues in the company’s planning part of the company’s project management. The company has been unable to effectively plan the project in order to estimate the correct start and finish times. This is seen as the company’s were unable to reach their target goals of producing a set number of aircrafts and with the great amount of backlog produced. In regards to the actual scheduling of the project during this planning phase, both company’s critical paths seem to be off to me in regards to the time allotted. When the critical path is not accurate, the entire project schedule is destined to be off as well, as the critical path guides the project timeline. This critical time has a great influence over determining the slack time for the entire project. If both the project length and critical path is off in time, the slack time will also be off. In my opinion, although both companies are dominant forces in producing airplanes, they both need to improve certain aspects of their project management. Do you think it is a good idea for companies to change their project goals of aircrafts produced to a more reasonable number? What do you think the best course of action is for the company to meet its target goals?

    • February 7, 2018 at 10:10 pm
      Permalink

      I completely agree with Lauren’s emphasis on accurate project timelines. I think that given the fact that these companies have had their recurring problems two years in a row shows this is a problematic trend. One thing not mentioned in this is the giant Oligopoly that occurs in the airline production market. Airbus and Boeing are the only two manufacturers around, which I think in this case is failing the consumer. I think that if there was more pressure from a possible large loss in business, the companies would be more sensitive to their production errors. This demonstrates a lack of penalty cost. Since both companies are having these problems, there is no penalty cost of not completing the order. This decreases the firms’ incentives to quickly and effectively solve these production problems.

  • February 7, 2018 at 5:52 pm
    Permalink

    In order to improve their ability to meet demand is it possible that the companies would consider constructing the engines in-house. This would significantly cut down the wait time involved in production. This would require significant changes to the organizational structure and large influxes in capital that may make the addition of this capability impossible. Another potential area to explore would be acquiring their current supplier and operating them as a subsidiary. This would allow the company to have far more control of the production timeline while also not taking on the burden of learning all new processes. In order to justify these actions, it may be interesting to calculate the total income that is lost from the supply disruptions and compare that to the costs of producing one’s own engines or acquiring an already established manufacturer.

  • February 8, 2018 at 12:25 am
    Permalink

    It is really fascinating to see how important supply chain operations are in the real world, and to see what we learn in class occur outside the classroom and beyond. Sam, you definitely highlight the influence supply chain operations have in project management in your piece. If a company cannot operate properly, the introduction of new projects will ultimately fail. Airbus needed to re-evaluate their business strategy, improve their supplier and customer relationships for quicker turnover and regain the trust of distressed customers. Airbus clearly needed to focus more on its competitive priority of time strategy to make sure they are completing their deliveries within the time span that was set. I decided to do additional research on Airbus and the delivery of their past products. As this article states, the introduction of the company’s most popular aircraft, the A380, was nearly two years behind struggle. This was in April of 2008, and nearly ten years later, Airbus is still facing delivery time issues. However, as Samuel has pointed out Airbus made the necessary improvements. Airbus has made strides, but still continue to work on their time strategy to efficiently produce its products in a timely manner.

    Read Article Here: (www.uk.reuters.com/article/idlNIndia-52679420101104).

  • February 8, 2018 at 12:27 am
    Permalink

    Sam clearly outlines the exaggerated production time involved in making an aircraft. Each aircraft project is essentially a job tasked to the entire production facility in order to fulfill just one order. This places extra emphasis on slack time because excessive slack can halt productivity for a whole unit of the production team while it waits for one process to finish before they commence another process assigned to them. This can lead to penalty costs which will not help the Boeing’s profit. A perfect example is laid out in the article with the Airbus case. They were waiting on suppliers for an engine part before they could finish a process in the project plan. Qatar Airlines cancelled the order and they lost a significant sale. There are significant risks in businesses with low sales volume and inventory turnover. The entire revenue during a given period can be from the sale of a single aircraft. This is why it makes sense for Boeing and its competitors to implement methods to crash a project devoting additional resources with extra costs if that is what it takes to fulfill an order.

  • February 8, 2018 at 1:13 am
    Permalink

    Thomas makes a fascinating point about the possibility of making the engines that are needed for the plans to become profitable, in house. Although he is right that it would cut down the wait time, the initial investment and research would be extremely costly. They would also create the risk of faulty engines, that would cripple this plan and make the entire project a sunk cost. He then brings up the point of acquiring the engine making company and running it as a subsidiary. The companies that make these engines include names like Rolls-Royce, Pratt & Whitney, and General Eclectic, which would all be extremely costly to acquire. There would also be the issue of getting an acquisition like this passed through the government, that might not allow this to happen to avoid a future monopoly. It is extremely fascinating however to read that Airbus and Boeing manufactured a record number of aircrafts, while coming up short on the year. I wonder if these companies are spending too much capital, and not investing enough and research. The demand for comfortable and efficient flying has never been greater, and the sky is literally the limit for companies like these to go. With a business that has so many barriers to entry, Airbus or Boeing should be investing in research for the best new plane, or way of travel.

  • February 8, 2018 at 7:59 am
    Permalink

    It is an interesting trade-off within the supply chain to see where certain processes have an impact on managing projects and crashing costs. This article mentions outsourcing, a large factor within the supply chain, being one of the elements that is preventing Airbus and Boeing from creating more aircrafts. This has led to over 13,000 backlogged aircrafts poised for production, amounting to a total of 9 years (!) of production.

    Managers must be able to understand the critical path in order to manage their resources and create efficiency through each process or operation. For this example, perhaps Airbus and Boeing should redefine each task and decide which ones take up the most time, and which ones have slack time. Perhaps they should consider, instead of outsourcing their engines and other materials to suppliers, making the product themselves. The concern is, really, will this create more costs for them if they made it in their production units? Will they be able to increase speed if this decision was made? As I mentioned before, there are trade-offs in the supply chain processes that make these questions truly difficult to answer.

    Another alternative to crashing their production timeline could be to create better relationships with the supplier, and be willing to demand higher production rates. While more engines and intermediate goods could be made, efficiency could be lost if they decided to do this. Airbus and Boeing managers are in a difficult spot to try to manage all these projects, given the scale of the items that they are building.

Comments are closed.

css.php