Airplane manufacturers are pushing for production increases, but their supply chains are not always meeting their marks. Last week, The Wall Street Journal published “Where Are the Toilets? Order Glut Stretches Giant Jet Makers to Limit.” According to the article, Airbus and Boeing are missing more than toilets; they need engines and seats, too, in order to deliver their completed planes to customers.
“After years of surging orders, including many from fast-growing Asian and Mideast airlines that sought fuel-efficient jets when oil prices were higher, the aviation industry is heaving under the strain,” Robert Wall and Doug Cameron write. In fact, Airbus and Boeing must make 30 percent more planes than they do now in order to fulfill existing orders, the writers note. “The scale of the ramp-up is putting companies to the test.”
Akbar Al Baker, CEO of Qatar Airways, is a frustrated customer, and he blames the manufacturers for being unprepared for the surge, which was generated by higher fuel prices and lower interest rates. “Both Airbus and Boeing, in order to mitigate their risk, will have to start investing in the industry in order to have a more diversified supply chain.”
Although the article focuses on toilets in its headline, the engine delays are creating the worst disruptions. Airbus uses engines made by Pratt & Whitney, a unit of United Technologies, and CFM International, a joint venture of General Electric and Safran, a French airline parts manufacturer. According to The Wall Street Journal, Pratt & Whitney promised 200 engines in 2016 but was able to deliver only 138. Likewise, CFM shipped only 77 of the 100 it planned.
Both engine companies are implementing changes to meet demand. United Technology’s CEO said Pratt & Whitney, under the guidance of a new president of commercial aircraft, is creating extra capacity and is on target to build 350–400 engines this year. CFM also has a new leader, who will oversee the joint venture. Plus, at least one of its plants is working to decrease its cycle time from 20 days to 10.
Supply chain and production improvements should help the companies deliver their final products. “Today, the yearslong order bonanza pressuring manufacturers shows signs of tailing off, but that doesn’t relieve the urgency to deliver ordered plans as quickly as possible,” Wall and Cameron write. According to the article, Airbus expects it will build more than 700 planes this year. Boeing anticipates it will deliver 760–765.
The basics reviewed
Unlike many other manufactured products, planes take a long time to build. Here, especially, is where the old adage “time is money” counts. First, take a look at the definition of cash conversion cycle from the APICS Dictionary, 15th edition: “In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.” Now consider the definition of cycle time: “In materials management, the length of time from when material enters a production facility until it exits.”
Although these factors are vitally important to business, Airbus and Boeing leaders need to examine more than just their cash conversion cycles and cycle times in order to meet demand and satisfy their customers. There’s expanding capacity; materials management; information visibility; good, old-fashioned risk management; and much, much more. No matter if you work for an airplane manufacturer, toy train maker, or anything in between, APICS offers best-in-class credentials that demonstrate to your organization that you understand these factors, have built skills to handle them, and can advance your firm’s performance. Find out which program is right for you by visiting www.apics.org/credentials-education/education-selector.
