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BOEING: THE FIGHT FOR FASTENERS

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

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Boeing - The Fight for Fasteners

BOEING ORDERS AND DELIVERIES (1995-2007)

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Boeing - The Fight for Fasteners

7X7 TO 787

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Boeing - The Fight for Fasteners

787 SUPPLY CHAIN

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Boeing - The Fight for Fasteners

FASTENER TYPES

Hi-Locks

Washers

Pins

Rivets

Nuts

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Collars

Spacers

Boeing - The Fight for Fasteners

DIRECT VS. INDIRECT CONSUMPTION OF FASTENERS BY PROGRAM

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Boeing - The Fight for Fasteners

DISCRETE FASTENER TYPES BY VOLUME

6,000

5,608

5,000
4,322

4,000
3,000
2,000
1,227

1,000

961
388
206

145

101

62

53

49

43

193

102

34

Source: Boeing Forecasting Model

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Average Quantity Per Airplane (n = 150)

Boeing - The Fight for Fasteners

FASTENER INDUSTRY
SUPPLY CHAIN

Raw Material
Suppliers

Consumption demand signal

Aggregated demand signal

Brokerage
house

Fastener
OEMs

BCA and
Partner A
provide the only
consumption
based signal to
suppliers

BCA

Tier 1
partners

Qualified
suppliers

Brokerage houses
may be doubleordering through
different channels

Partner C

considering
going
through
distributors
for all

Bar and coil

orders by
material type
and diameter
with >1 year
lead times

Partner A

Partner D

Partner B

outsourced
fastener
procurement
and stocking

Distributors
speculating

BCA: Boeing
Commercial
Aircraft
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Tier 2/3
supplier

Sales of
fasteners
between
BCA and
partners
IDS

Distributors

Boeing - The Fight for Fasteners

BOEINGS TIER-1 PARTNER ORDERING

METHODOLOGIES FOR FASTENERS
Current Ordering Methodology
Partner A

Partner B

Partner C

Partner D

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
Outsources fastener procurement and ordering to
third party distributors
Order through brokerage houses for logistics and
currency exchange risk
Purchase at market rates with 1-2 large orders a year
Uses distributors and manufacturers
Places quarterly aggregated orders

*Average Monthly Usage

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Boeing - The Fight for Fasteners

DISCUSSION
What

were the causes of the fastener crisis in

Boeing? Why was the problem ignored for so
long?

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Boeing - The Fight for Fasteners

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ACTIVE LEARNING I: KEY ELEMENTS OF THE NEW

FASTENER PROCUREMENT MODEL (FPM)?

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11

PLANNED INFORMATION & MATERIAL

FLOWS

BOEING
ENTITY

TIER-1
PARTNERS
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FASTENER
SUPPLIERS
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12

PLANNED INFORMATION & MATERIAL

FLOWS

BOEING
1. Partner
Min/Max
Signals

TIER-1
PARTNERS
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ENTITY

FASTENER
SUPPLIERS

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13

PLANNED INFORMATION & MATERIAL

FLOWS
2. Aggregated
Min/Max
Signal

BOEING
1. Partner
Min/Max
Signals

TIER-1
PARTNERS
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ENTITY

FASTENER
SUPPLIERS
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PLANNED INFORMATION & MATERIAL

FLOWS
2. Aggregated
Min/Max
Signal

BOEING
1. Partner
Min/Max
Signals

4b. ISSUE /
SHIP
(Low Volume)

TIER-1
PARTNERS
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3. DIRECT SHIP
(High Volume)

ENTITY

4a. DIRECT
SHIP
(Low Volume)

5. DROP SHIP
(High Volume)

FASTENER
SUPPLIERS

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EVALUATION OF FPM BY BOEING:

Pro

Con

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EVALUATION OF FPM BY TIER-1 PARTNERS:

Pro

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Con

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EVALUATION OF FPM BY FASTENER

MANUFACTURERS:
Pro

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Con

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EVALUATION OF FPM BY OTHER

STAKEHOLDERS:
Pro

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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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21

SHARING THE GAINS?

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BOEINGS 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)
suppliers wont be paid for development
costs until Boeing delivers its first 787 to a
customer
Intention: provide incentive to collaborate and
coordinate all development efforts
Your analysis?
T-1

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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 can
source components

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Boeing - The Fight for Fasteners

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