OM in the News: Pratt & Whitney Grapples with its Supply Chain
Pratt & Whitney has bet billions on its commercial jet engine market, but first, it has to get parts delivered on time. The Wall Street Journal (June 8, 2016) reports that half of the company’s suppliers for its new “geared turbofan” engines aren’t delivering parts and materials at expected levels as seamlessly as the company expected. Some 44% of the company’s 1,600 suppliers weren’t meeting the company’s on-time delivery and quality control targets. “Forty-four percent is the challenge,” said the CEO.
It is the latest hiccup in P&W’s effort to ramp up production of the engine from 15 in 2015 to 200 units this year, and 1,200 a year by 2020. As P&W tries to coax its supply chain into shape, the company is requiring underperforming suppliers to provide buffers of extra parts as insurance against any interruption in production. The firm has more than 7,000 orders for the engine, and says that the new design will offer increased fuel efficiency and thrust while lowering engine noise—big enticements to airlines.
Unlike previous generations of engines, 80% of parts for the geared turbofan will be made by entities other than P&W itself, then shipped and assembled in the company’s engine manufacturing centers in Connecticut, Florida, Canada and Germany. As a defensive measure against production problems, the company says it has tried to double up its suppliers—signing up duplicate makers for many of the engine parts to avoid interruptions. “We have all the capacity we need—the challenge is to get all the parts in on time,” said P&W’s VP for operations. “It’s a dogfight every day.”
Classroom discussion questions:
- Discuss P&W’s approach to defend against production problems.
- Why is this supply chain problem arising?