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OM in the News: Jet Makers’ Supply Chains Under Strain

July 19, 2018

A plane engine made by CFM remains behind schedule, forcing Airbus to postpone aircraft deliveries

Boeing and Airbus, swamped with orders for new jets, are struggling to deliver them all on time—in some cases angering customers and delaying payments, reports The Wall Street Journal (July 16, 2018). Airbus has missed a number of delivery deadlines, forcing airline customers to find alternatives, change routes or cancel flights. It has delivered fewer planes than it did by this time last year, despite promising 80 more this year. The missed deliveries mean delayed payments because most cash changes hands only upon delivery.

Boeing is straining with the same supplier shortfalls as Airbus. The company has made investments to help manage its suppliers, including in technology to help monitor their performance. Those efforts are crucial, with Boeing poised to deliver more than 800 planes for the first time this year and more than 900 annually by 2020.

For years, booming demand for new aircraft has made it more challenging for jet makers to deliver planes on time to airline customers. A supply-line crunch for items including engines and wing components is now magnifying the strain. The result: Some airlines have been left waiting for months for new planes, angering executives.

Suppliers to Boeing and Airbus have struggled to keep up with the surging demand. Engine-production delays have been among the most painful. At one point this year, Airbus had more than 100 nearly finished planes waiting on the tarmac for their engines. In the first 6 months, the company delivered 303 jets against a full-year target of 800 deliveries, mostly because of late engines. Airbus considered slowing production of planes while the engine makers recovered, but it feared that could disrupt other parts makers, causing further delays.

“The job today is not just about running a factory but running the entire supply chain,” said the head of a major supplier to both manufacturers.

Classroom discussion questions:

  1. What is causing the strain on both firms’ supply chains?
  2. What can the manufacturers do to alleviate supply chain issues such as these? What parts will always be an issue?
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