Boeing’s Beer Game
Boeing is planning to shut down production of a cargo aircraft. It’s a slightly different lesson than the Ford posting, below. Here, the lead times on A&D items are so ridiculously long (34 months), that Boeing has to anticipate three years out what is needed from suppliers.
“The decision affects long lead-time items purchased from suppliers, many of which have to be ordered as long as 34 months in advance.”
So let’s say Boeing shuts off the spigot of parts from suppliers…. and then the government decides in a year that they want more planes. Where will the parts come from? If Boeing wants to be at all responsive to customer demand, they’ll have to spend a lot of money on inventory (“just in case”), a form of waste.
I hope that Boeing and other A&D OEM’s are working with suppliers to use lean to reduce lead times. The C-17 is a cargo plane, but I would supposed the same situation exists for fighter jets. How ironic that a company with products that can “turn on a dime” has a supply chain that’s as bulky and hard to turn as an aircraft carrier.
Production could be restarted if Congress approves funding, which could happen as early as next month. But restarting the supply chain would be costly and add millions of dollars to the cost of each plane â€” about $154 million each.
If you’re familiar with the “Beer Game” and the “Bullwhip Effect“, it seems like Boeing and its supply chain fits this dysfunctional mode. Long lead times lead to inventory and unresponsive supply chains. That’s why a core lean concept is the reduction of time — time from order to delivery, from order to cash, from supplier to factory, etc.