Boeing Production Rampup and Supplier Chain Role

An article in the Economist (Jan 28, 2012) describes Boeing’s efforts to speed up airplane production to respond to its eight year order backlog.  But worries about economic downturn have suppliers worried about order cancellations.  With the large fraction of outsourced manufacturing, production rampup requires supplier investments ahead of orders to keep the assembly plant supplied.  Boeing’s plan – use “examiners” – its own employees who visit suppliers to guarantee supply, a war room to monitor across suppliers, long term agreements for crucial components and insourcing some production.  Given all of these coordination issues and associated costs was the original fraction outsourced nonoptimal ? Given that individual airplanes are customized to airlines, and the risk of order cancellations, is the double booking of capacity claimed in the article an optimal solution to guarantee stable orders to suppliers ? How might a correlated demand shock,like oil price increases, impact the Boeing supply chain ?

About aviyer2010

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