Aerospace Supply Chain Dynamics

Managing specific metallic alloy in a cyclical market is a challenge for aerospace industry. When demand for new aeroplanes fluctuates, glut and shortages of raw materials may occur. Suppliers think of exit from the industry. Boeing has faced raw material shortages which resulted in expediting costs to increase and in worst cases shutdown. This problem has been studied and CPFR is being used. It should generate planned demand for components and raw materials throughout supply chain. It should help mills producing raw materials plan their capacity and dampen oscillations throughout S.C.

Introduction
Study involves metallic alloy which constitutes 40% of world demand. Figures 18.1 and 18.2 show the demand for aeroplane, price and alloy price & production. Fluctuation in demand for alloy causes fluctuation in production capacity. Companies are forced to adjust to Fluctuation. Boeing had to stop production for 20 days as cos could not supply components. Prices increased, LT also increased by factor of 8. Study indicated that oscillations were caused by delays in the system. Delay include order processing, delivery, production, capacity adjustment. Reduce delays but use of IT.

Figure 18.1 : The cyclical nature of the commercial airplane market, from all airplane manufacturers, causes fluctuation in the demand, production and price of aerospace metal. Source: Roskill Information Services (1998)

Figure 18.2 : The increase in demand for raw material, hence shipment, creates a dramatic increase in lead-time (baseline 1993).

Boeing Commercial Aeroplanes Supply Chain

Figure 18.3 supply chain Most suppliers follow made to order policy in the chain which causes aeroplane deliveries to lag. The industry is capital intensive. Limited safety stocks are held by suppliers. Mills fluctuate from under capacity to overcapacity. Various options were explored for modeling the S.C. The figure 18.4 shows the propagation of demand for components that begins with the delivery schedule. There is no sharing of information between entities.

Simplified Supply Chain Networks for Boeing Commercial Airplanes

PM Final Assembly CM

RM SPW
SPW FST

Fastener Suppliers

CB

SAM

FST SAB

A/C Model

MILL

Subassembly Suppliers FST

CB

RM PM
Processing House

PM

SAB CB PM CM

Machine Shops

Figure 18.4 : The lag that occurs from raw material production to airplane delivery is due to the production and delivery delay within the supply chain network in which most of the entities adopt the make-to-order policy.

Figure 18.10 : Simulated result of lead-time for various entities within the supply chain. The simulation is for the case in which the process house and mill wait to adjust production capacity.

 Manufacturing dynamics for process hours and machine shops are shown in figure. Carrying inventory is costly for mills and hence they produce rods, bars & billets. Orders are batched to minimize set up cost. Dynamic modeling; system dynamics that operates in a jobshop environment is used.

The dynamics in a cell for a manufacturing facility that operates in a jobshop environment
Cell

Beginning Inventory

Process

Beginning Inventory

Forging

Machining

Assembly

Billet Conversion

Hammer

Closed Die Forging

Interaction among the entities in the current environment. Only demand from the immediate downstream entity is passed along.
Mill Forging House Machine Shop Issue PO To Mill Issue PO To Mill Issue PO To Mill Forge Parts Machine Parts An Assembly House
Issue PO Forging House

Final Assembly

Buyer Issue external PO

Determine Source Type

Delivery Schedule

Issue PO M/c. Shop

Issue internal PO

Release Delivery Schedule

assemble

Efforts to Dampen Oscillations

Bullwhip phenomena is observed. When suppliers adopt make to stock policy to meet customer demand. Bullwhip effect can be reduced if collaboration is done in SC. Strategic partnership like relationship.

Model
Demand Fulfillment Backlog Cancellation b tj u tj u j Release to Production rjt p tj Completion Rate Filling From Stock C
t j

Filling from Stock f i1 s tj e tj Shipment of Demand less Oscillation

Demand

ju j Parts On hand Receiving q tj Ordering from suppliers wtj Parts on Order v tj tj Canceling order Parts Consumption

Mathematical expression

t +1 j

= b +c f u e
t j t j t j t j

t j

t +1 j

= p +u u u
t j t j t j

t T j j

x tj+1 = x tj + e tj .rjt f jt y tj+1 = y tj j .u tj + v tj w

t +1 j

= w +q v
t j t j t j

t j

u t T j rjt +1 = t u j u t T j f jt = 0 u t T j rjt +1 = t u j

MTO MTS

MTO MTS MTO MTS

Each mode in the supply chain performs demand fulfillment & parts replenishment funcitons. MTO, MTS production policies can use this

Model Consists
Final assembly facilities that produce unique aroplane models; these facilities also produce subassemblies and components. Subassembly manufacturers from whom the equipment manufacturer purchases the buy subassemblies. Component manufacturers from whom the subassembly and the original equipment manufacturers purchase the buy component for subassemblies. Process houses that manufacturer processed raw materials for making components. Fastener manufacturers that produce fasteners for assembly. Speciality wires for fasteners. Mills that provide ingots and billets.

Planning for purchase and Manufacturer of parts in an MTO environment

Demand Management Customer Order (2) Development of Final assembly Schedule (FAS) Material Requirement Planning (MRP) (4) Master Production Schedule (MPS)

Order promising And configuration (1) Forecast

Forecast

MRP

MRP Component Purchase Component manufacturing POU Raw Material Sub-Assembly Purchase Sub-Assembly manufacturing POU Raw Components

MPS

Raw Material Purchase

Final Assembly

Point of Use (POU) Subassemblies

PM

Processed material Speciality wire Fastener Components for Boeing Component manufacturer Subassemblies produced for Boeing Major subassemblies

SPW FST CB

CM SAB SAM

800% increase in lead time from the mill caused by approximate 100% increase in OEM production. Simulations carried out & observed behaviour is shown in figure 18.10 Figure 18.11 gives simulated response of lead time dynamics when mills and process houses are 80%. responsive
600% 500

Simulated % change in Mill Lead Time

Slow Capacity Adjustment

400 300 200 100

Flexible Capacity Adjustment

10 20 30 40 50 60 When the mill adjusts its production capacity as a response to a doubling in demand, the mill 100 70 80 90 Time Unit experiences a low percentage increase in its lead time.

Discrete Event Modelling

It is used to study the effect of complexity & variation within the system It requires significant amount of data Software used was supply Chain Guru from crystallize inc. as the modeling tool. The data required are : Products (mill products, processed parts, minor/major subassemblies etc. The BOM for airplane product Inventory policies are used to replenish and manage the parts inventory.

Sourcing policies determine the selection of specific suppliers to provide certain parts. Transportation policies determine the time, method and route of transportation. End-item demand drives the downstream requirements in the supply chain. To completely describe S.C. network, software requires data on initial inventory levels, cost, price, weight etc. Data composed of 200 suppliers, 40 material types, tons of thousands of parts & assemblies and ten years of record. This enabled researcher to observe the behaviour of SC when changes are made.

In Practicum
Figure 18.1 is an output from the simulation model. It can be seen in the figure that processing shops experience ups and downs of the delivery of planes. Figure 18.13 shows the result of inventory policies for suppliers of Tiers 1 through 5. Shortage or surpluses are observed. Purchasing ordering habits of Boeings Global Supply Base are studied. Due to long lead time nature of industry under study, the supply base must place its orders far into the future. Boeing should anticipate problems rather than react to problems, the serious perturbations in the supply chain can be mitigated.

Figure 18.11 : When the mill adjusts its production capacity as a response to a doubling in demand, the mill experiences a low percentage increase in its lead-time

Figure 18.12 : Raw material shipped to Processing House XYZ and Machine Shop ABC.

Figure 18.13 : Inventory policies using various safety stocks levels for Tiers 1 through 5 in the supply chain.