Commercial aerospace and aircraft producer Boeing has recently initiated some supply chain risk mitigation and strategic sourcing moves which demonstrate responses to important business needs.
Many headlines of late report on the continuing tensions among Russia and the United States concerning ongoing events in the Ukraine. Today’s Wall Street Journal reports (paid subscription or metered view) that certain aerospace manufacturers, namely Boeing and United Technologies, have been augmenting safety stock supplies of titanium, a critical material utilized in the fabrication of critical aircraft components. One of the world’s largest producers of this material is VSMPO-Avisma, which has a parent company with direct ties to the government of Russia. VSMPO is reported as supplying upwards of 30 percent of the total volume requirements used in the aerospace industry each year. Ukraine, currently involved in political and social unrest, provides almost all of the concentrates used by VSMPO. The combination of severe economic sanctions being placed on the Russian economy and the unrest in Ukraine has logically prompted concerns about the continuity of titanium supply.
In its reporting, the WSJ cites sources as indicating that Boeing and UA have been stockpiling as much as six months of safety stock supply of highly customized titanium forgings, which are supplied by a single provider such as VSMPO. Boeing confirmed to the WSJ the existence of the strategic reserves from its Russian supplier, with the material accounting for 15 percent of the airframe weight of the Boeing 787 Dreamliner. UA utilizes the subject titanium forgings to produce landing gears for Boeing and other producers, as well aircraft engine components for its Pratt & Whitney division. VSMPO further confirmed that customers had placed buffers in place as part of their risk management planning and that customers would go back to buying as needed for standard production. The WSJ further reports that Airbus has not acknowledged a safety stock strategy for titanium forgings.
Inventory management strategies are often a flash point among discussions involving supply chain planners and finance. However, insuring continuity of strategic supply components can be a far different dialogue. Supply Chain Matters has made note of other previous decisions made within industry supply chains to insure strategic continuity of supply when significant risk conditions are present.
South Carolina Facility Tapped
Electing to further dual source production, Boeing announced that the largest to date Dreamliner model, the 787-10 aircraft, scheduled for market delivery in 2018, will be built solely within the company’s non-union production assembly facility in North Charleston South Carolina. Statements to business and general media indicate that the sourcing decision was prompted by the stretched length of the aircraft’s fuselage. The suppliers of this 114 foot long stretch fuselage are within Italy and Japan, and normally the fuselage components are flown in on a special fitted Boeing-owned 747 Dreamlifter cargo plane. Boeing indicates that the elongated fuselage components required for the 787-10 will not fit the existing cargo aircraft.
Regarding the South Carolina sourcing decision, a published report by the Seattle Times reports: “It makes clearer the profound impact of Boeing’s 2009 decision to bypass its unionized stronghold in Washington in favor of building a second 787 assembly line in nonunion South Carolina. In six years, Dreamliner final assembly will be equally divided between the East and West Coast sites.” The Times report further notes: “So by the end of the decade, the prospect for Boeing widebody-jet production is that North Charleston and Everett will each be rolling out seven Dreamliners per month, while Everett will in addition be producing up to eight 777s per month, plus two 767 tankers for the Air Force.”
Meanwhile, a labor union among Boeing’s Everett Washington production facilities were naturally not pleased with the sourcing decision, indicating that while not surprised, they were certainly disappointed in the final decision.
Reports indicate that the Everett facility will continue to sustain a production level of seven Dreamliners per month while the North Charleston facility will ramp-up from three aircraft per-month today, to five in 2016 and seven by the end of the decade. According to Boeing, both production facilities will have similar production practices and standards.