Framework for developing a co-production strategy in a vertically integrated operation

Abstract

The Boeing Company is consolidating its operations for their wing components in order to be more profitable during lower production volumes due to higher utilization rates. In order to support higher production rates moving forward and to mitigate capacity/capability constraints, Boeing will be working more closely with the supply base to implement a new strategic outsourcing relationship -- co-production. Critical elements of a successful supply chain design for Boeing include optimizing the total value stream and validating the capacity and capability of this value stream. The challenge exists to develop this co-production strategy that achieving the strategic objectives. The framework consists of identifying the main objectives for co-production such as risk mitigation and level employment. Next, analysis of the operations based on the main objectives is performed. This involves developing a baseline cost and capacity model of the wing components. Finally, a preliminary co-production scenario is tested and used to validate the effectiveness of co-production in achieving the strategic objectives. The results show that even with the increased asset utilization, the operations are still very costly. When certain product families are compared on a cost per foot basis, an interesting relationship develops where shorter parts are much more costly than longer parts. Another finding is that the required utilization of certain tools is quite high and is beginning to become at risk for meeting demand. A co-production strategy is shown to be favorable in achieving many of the strategic objectives.