L16 Boeing Fasteners 052015

8/19/2019 L16 Boeing Fasteners 052015

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BOEING: THE FIGHT FOR FASTENERS

Boeing - The Fight for Fasteners©Anupindi 1

© Prof. Ravi Anupindi, Univ. of Michigan – used by Prof. Hausman with permission

Anupindi

5/15


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BOEING ORDERS AND DELIVERIES (1995-2007)



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7X7 TO 787



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787 SUPPLY CHAIN



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FASTENER T YPES


Hi-Locks Pins

Nuts Collars

Washers

Rivets

Spacers


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DIRECT VS. INDIRECT CONSUMPTION OF FASTENERS BY PROGRAM



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DISCRETE FASTENER T YPES BY VOLUME


5,608

4,322

1,227

961

388

206 145 101 62 53 49 43193 102 34

-

1,000

2,000

3,000

4,000

5,000

6,000

Average Quantity Per Airplane (n = 150)Source: Boeing Forecasting Model


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FASTENER INDUSTRY

SUPPLY CHAIN


Raw MaterialSuppliers

• Qualifiedsuppliers

Fastener

OEMs

Distributors

Brokeragehouse

Partner C

Partner D

Partner B

Tier 2/3supplier

BCA

BCA andPartner A

provide the only

consumptionbased signal tosuppliers

Distributorsspeculating

Tier 1

partners

Bar and coilorders by

material type

and diameterwith >1 year

lead times

Brokerage housesmay be double-ordering through

different channels

Partner A

outsourcedfastener

procurementand stocking

consideringgoing

throughdistributors

for all

Consumption demand signal

IDS

Aggregated demand signal

Sales offastenersbetween

BCA andpartners

BCA: Boeing

Commercial

Aircraft


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BOEING’S TIER-1 PARTNER ORDERING

METHODOLOGIES FOR FASTENERS


Current Ordering Methodology

Partner A • Min/Max and AMU* data to signal demand to

manufacturers

– Different Min/Max systems at different sites

• One site may order from manufacturers while others

utilize distributors

Partner B • Outsources fastener procurement and ordering to

third party distributors

Partner C • Order through brokerage houses for logistics and

currency exchange risk

•

Purchase at market rates with 1-2 large orders a yearPartner D • Uses distributors and manufacturers

• Places quarterly aggregated orders

*Average Monthly Usage


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DISCUSSION

What were the causes of the fastener crisis in

Boeing? Why was the problem ignored for solong?



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ACTIVE LEARNING I: KEY ELEMENTS OF THE NEW

FASTENER PROCUREMENT MODEL (FPM)?



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FLOWS


TIER-1

PARTNERS

FASTENER

SUPPLIERS

BOEING

ENTITY


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FLOWS


TIER-1

PARTNERS

FASTENER

SUPPLIERS

BOEING

ENTITY1. PartnerMin/Max

Signals


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FLOWS


TIER-1

PARTNERS

FASTENER

SUPPLIERS

BOEING


Signals

2. Aggregated

Min/Max

Signal


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FLOWS


TIER-1

PARTNERS

FASTENER

SUPPLIERS

BOEING


Signals

2. Aggregated

Min/Max

Signal

5. DROP SHIP

(High Volume)

3. DIRECT SHIP

(High Volume)

4a. DIRECT

SHIP

(Low Volume)

4b. ISSUE /

SHIP

(Low Volume)


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EVALUATION OF FPM BY BOEING:

Pro Con



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EVALUATION OF FPM BY TIER-1 PARTNERS:


Pro Con


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EVALUATION OF FPM BY FASTENER

MANUFACTURERS:


Pro Con


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EVALUATION OF FPM BY OTHER

STAKEHOLDERS:


Pro Con


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IMPLEMENTING FPM

What problems were encountered in rolling out

the FPM? Could they have been avoided?



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ACTIVE LEARNING II: LESSONS FROM THE

TMX PROGRAM (APPENDIX 6)?



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SHARING THE GAINS?



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BOEING’S PROPOSAL – A COMMON PRACTICE?

Reaching further back in the supply chain to

secure supply.



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ACTIVE LEARNING III: PAYMENT

TERMS (NOT IN CASE)

T-1 suppliers won’t be paid for developmentcosts until Boeing delivers its first 787 to a

customer

Intention: provide incentive to collaborate andcoordinate all development efforts

… Your analysis?



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SUMMARY

Observe Supply Chain risk, even on low-spend

items

Understand and critique the design and

implementation of a new procurement model

Different ways an OEM and its partners cansource components

Boeing The Fight for Fasteners©Anupindi 25

Documents

L16 Boeing Fasteners 052015