Inventory management

The Boeing Company, headquartered in Chicago, Illinois, is one of the two major producers of aircraft in the global market. The other major producer is European Airbus. Boeing produces three models in Everett, Washington: 747s, 767s, and 777s. The planes are all produced in the same building. At any one time, there may be as many as six planes in various stages of production. Obviously, the building has to be fairly large to accommodate such a huge undertaking. In fact, the building is so large that it covers over 98 acres and it is four stories high, making it the largest building by volume in the world. It is so large that all of Disneyland would fit inside, and still leave about 15 acres for indoor parking! The windowless building has six huge doors along one side, each about 100 yards wide and 40 yards high (the size of a football field)—large enough to allow a completed airplane to pass through. Boeing sells airplanes to airlines and countries around the globe. There isn’t a set price for the planes; the actual price depends on what features the customer wants. Once the details have been settled and an order submitted, the customer requirements are sent to the design department. Design Designers formerly had to construct a mock-up to determine the exact dimensions of the plane and to identify any assembly problems that might occur. That required time, materials, labor, and space. Now they use coAAAAAAAA, avoiding the cost of the mockups and shortening the development time.
The Production Process Once designs have been completed and approved by the customer, production of the plane is scheduled, and parts and materials are ordered. Parts come to the plant by rail, airplane, and truck, and are delivered to the major assembly area of the plane they will be used for. The parts are scheduled so they arrive at the plant just prior to when they will be used in assembly, and immediately moved to storage areas close to where they will be used. Time-phasing shipments to arrive as parts are needed helps to keep inventory investment low and avoids having to devote space to store parts that won’t be used immediately. There is a tradeoff, though, because if any parts are missing or damaged and have to be reordered, that could cause production delays. When missing or defective parts are
discovered, they are assigned priorities according to how critical the part is in terms of disruption of the flow of work. The parts with the highest priorities are assigned to expediters who determine the best way to replace the part. The expediters keep track of the progress of the parts and deliver them to the appropriate location as soon as they arrive. In the meantime, a portion of the work remains unfinished, awaiting the replacement parts, and workers complete other portions of the assembly. If the supplier is unable to replace the part in a time frame that will not seriously delay assembly, as a last resort, Boeing has a machine shop that can make the necessary part. The partially assembled portions of the plane, and in later stages, the plane itself, move from station to station as the work progresses staying about five days at each station. Giant overhead cranes are used to move large sections from one station to the next, although once the wheel assemblies have been installed, the plane is towed to the remaining stations. Finished planes are painted in one of two separate buildings. Painting usually adds 400 to 600 pounds to the weight of a plane. The painting process involves giving the airplane a negative charge and the paint a positive charge so that the paint will be attracted to the airplane. Testing and Quality Control Boeing has extensive quality control measures in place throughout the entire design and production process. Not only are there quality inspectors, individual employees inspect their own work and the work previously done by others on the plane. Buyers’ inspectors also check on the quality of the work. There are 60 test pilots who fly the planes. Formerly planes were tested to evaluate their flight worthiness in a wind tunnel, which required expensive testing and added considerably to product development time. Now new designs are tested using a computerized wind tunnel before production even begins, greatly reducing both time and cost. And in case you’re wondering, the wings are fairly flexible; a typical wing can flap by as much as 22 feet before it will fracture. Re-engineering Boeing is re-engineering its business systems. A top priority is to upgrade its computer systems. This will provide better links to suppliers, provide more up-to-date information for materials management, and enable company representatives who are at customer sites to create customized aircraft design on their laptop computer. Another aspect of the re-engineering involves a shift to lean production. Key goals are to reduce production time and reduce inventory.
Boeing wants to reduce the time that a plane spends at each work station from 5 days to 3 days, a reduction of 40 percent. Not only will that mean that customers can get their planes much sooner, it will also reduce labor costs and inventory costs, and improve cash flow. One part of this will be accomplished by moving toward late-stage customization, or delayed differentiation. That would mean standardizing the assembly of planes as long as possible before adding custom features. This, and other time-saving steps, will speed up production considerably, giving it a major competitive advantage. It also wants to reduce the tremendous amount of inventory it carries (a 747 jumbo jet has about 6 million parts, including 3 million rivets). One part of the plan is to have suppliers do more pre-delivery work by assembling the parts into kits that are delivered directly to the staging area where they will be installed on the aircraft instead of delivering separate parts to inventory. That would cut down on inventory carrying costs and save time. Boeing is also hoping to reduce the number of suppliers it has, and to establish better links and cooperation from suppliers. Currently Boeing has about 3,500 suppliers. Compare that with GM’s roughly 2,500 suppliers, and you get an idea of
how large this number is.
Answer all the questions:
1- Analyze Boeing strategy in the location selection and layout of the venue where the airplanes are manufactured
2- What is the type of inventory management does Boeing embrace? How does Boeing manage its inventory? Why it is important to manage inventory?
3- Describe and critique the company’s strategy to overcome delays in manufacturing. 4- What other strategies Boeing is planning to implement to cut cycle times?

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