The five year planning and production controls
are important factors for determining the long term outlook. Even using a basic
build-up model will help determine a direction Boeing will take in its
productivity scheduling. For the sake of simplicity the below chart is just a segue
into the fine details as to how Boeing may plan its production or how Boeing
will perform in the near term of each year’s production goals based on past
data.
A build-up becomes complex when using
just-in-time strategy for controlling resources for making something big.
Boeing only needs parts at a specific time and does not want storage of parts
in over abundance. It just wants parts for the next thirty days for this
example. Storing too much supplies for building airplanes cost production
dollars. The ideal lean production model would seek a just in time parts bin. A
build-up planner only uses parts in predetermined optimal availability for
building an airplane over the next 30 days.
The
ideas in this example looks at 30 days and how many airplanes it may build
during this period of time. If it tends to build 42 single aisle in a 30 day
period then a build-up chart may call for a two week supply of parts in storage
allowing time for parts delivery delays without shortages to the production
floor. In this case two weeks represents 21 sets of 737 parts on hand in
storage. Everyday a computer tracks the supply inventory and makes an order
based on how many 737 sets are on hand. If only 18 sets are on hand it auto
orders 3 more sets. Each day this occurs its suppliers can respond in a two
week period supplying those complete sets for building aircraft. This is an
over simplification example. It gets more complex than this in a hurry.
Below
is a chart using five years of past data for formulating how much production
resources are needed going forward. Each model is represented whether it’s a
prior generation unit or next generation unit. A 737 is a 737. If it’s a NG or
Max its counted as a 737 and so forth for all other models. The element
identified are as follows:
·
The
past five years of orders combined by model
·
Dividing
total orders by five years
·
Total
of deliveries for five years by model
·
An
average of deliveries made over the same five years.
The above Fig. 1
chart is historical data from Boeing's website. Using the 737 column for
simplification of its production flows. The five year period is important
standard since it is a relevant business time period range. It is very
difficult to project a forecast with any degree of accuracy beyond five years.
Most customers update its outlook through its annual reporting which would include the next five years of
planning. A moving statistical base uses prior years for formulating future years trends statistically.
· A total of 5,349
737's were ordered since January 2011 through December 2016. This is the five
year basis for which averages are taken. During this time Boeing Averaged 1,070
single aisle orders a year it is also delivering 539 a year of its
737 during this same period.
· The orders to
delivery ratio for this period is 1.98 or better stated for every two 737's ordered one 737 was delivered. The ideal orders-to-delivery is a 1 to 1 one
relationship, thus maintaining a static backlog. The .98 factor suggests
increasing production by some calculated build-up amount. The .98 factor is the amount
above the one to one ratio goal.
· In the 747 column the
ratio has dipped below one by a negative .52 factor. This suggest Boeing needs
to reduce its production output significantly.
Going
across the table a picture quickly emerges for Boeing. Increase 737 production and implement leveling the 787 production capacity until additional sales are added. The marketing team has its
gauntlet thrown down across the board. It must increase orders during the next
five years for all models. Where it is likely the 747 will retire. This year in
2017, a slow order period will strain the backlog and production build-up.
This
basic view demonstrates Boeing has its work cut out in the near term within its several market segments. Production decisions rely on pre-set production build-up
requirements, otherwise adjustments may occur during the year. Boeing has
reduced the 747 to only one frame a month and it may go lower to .5 frames a
month.
The 787 program may curb its production
capacity from 145 units over the next two years and then could reduce
productivity to only about ten 787's a month until sales pick up. The world's
largest producer of aircraft will run out of productivity backlog before Airbus
does at this time. Boeing is making inroads with Airbus in the single aisle
segment. It leads airbus in the wide body segment but an end is in sight for
some of its bigger models such as the 747.