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

February 4, 2012

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?

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