Boeing’s Production Slowed by Supplier

The Boeing Company is currently attempting to ramp up production of their 737 aircraft from 47 to 52 jets per month. Demand is so great that they have aspirations to increase this goal in the near future. However on the way to this goal they are experiencing significant issues in sourcing input materials. The article below describes the current issues that are being experienced by Boeing and their fuselage manufacturer Spirit. Spirit Aerosystems is located in Wichita, Kansas where they manufacture the fuselages for Boeing’s 737 aircraft. The fuselages are then shipped by rail daily to Boeing’s factory where the wings are attached and the interior of the airplane cabins are assembled. Currently Spirit is struggling a great deal with the increased production that Boeing has planned. A Spirit executive cited shortages in parts, skilled mechanics, and quality control issues as the main causes of the slowdown. In attempts to address these issues Spirit is sending teams to their suppliers to ensure that the proper parts are being sent, they have hired 900 new mechanics and while these new hires are being trained they are having their current employees work overtime and hiring contractors as temporary labor, they have also asked that their production staff to identify issues earlier as they are currently not catching mistakes until the products are about to ship.

These issues highlight the difficulties associated with planning production. Historically Spirit had been very effective in providing components in a timely manner that never delayed production. The costs associated with these delays are also affecting both companies. Due to the increased costs of overtime, temporary labor, and defective materials, Spirit’s pre-tax income was reduced by $21.7 million last quarter. Boeing’s holding costs have also increased as one employee described that they have the parts for ten airplanes just waiting for the fuselages from Spirit.

I felt this story captured some of the unforeseen aspects when a company attempts to plan its level of production. To me this stresses the importance of working with one’s suppliers to ensure a smooth operation. The story also made me think about what would be the best way to accomplish this goal. For me the clearest lesson to learn from this was that when planning a production schedule a company needs to really do its due diligence to be sure that their suppliers can keep up. I am curious to hear from the rest of you about how you think a company can best plan production accounting for suppliers.