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Inventory and Constraints in the Aerospace Industry Case Study

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Updated: Apr 25th, 2021

Introduction

In the aerospace industry, each component is time-critical. In addition, scores of management tools are used to improve the efficiency of material management. Like other sectors, the aerospace industry is faced with various inventory problems. For example, firms have to determine the number of raw materials needed to meet clients’ needs.

In this paper, the author will provide a report on an article touching on the application of the constraints theory in the management of inventory problems in the aerospace industry. Among other issues, the pros and cons of applying the theory of constraints (TOC) will be analyzed. The article is authored by Chou, Lu, and Tang (2012). It is titled Identifying inventory problems in the aerospace industry using the theory of constraints.

Inventory Problems in the Aerospace Industry: A Critical Analysis

Application of the Theory of Constraints in the Aerospace Industry

Most aircraft manufacturers acknowledge the need to improve their operations. However, they face numerous problems in their daily activities. Such issues include the high costs of warehousing components and materials (Bhatija 2013). In their article, Chou et al. (2012) hold that TOC helps aerospace managers to identify these problems and find appropriate strategies to resolve them. The theory helps in production improvements, inventory control, and logistics (Fitzsimmons & Fitzsimmons 2007).

According to Chou et al. (2012), TOC is a thinking process. The system-based approach to management uses elementary logic to determine the primary relations affecting performance (Gupta & Snyder 2009). The supposition’s effectiveness in resolving constraints is facilitated by its three major components. They include a five-step focusing process, a set of system-oriented principles, and robust logic tools. Typically, TOC views a corporation as a system of interconnected components (Chou et al. 2012).

The five-step procedure guides the management of an organization’s leverage points. To this end, managers in the aerospace industry should focus on system constraints (Schroeder 2008). As a result, the overall performance of the organization is improved. The five steps start by identifying key constraints. It is followed by finding ways to exploit them, subordination, obliteration, and a repeat of step one (Chou et al. 2012).

In the article, Chou et al. (2012) are of the opinion that robust logistic tools enable managers to identify major problems in the organization and their core causes. They are significant in the representation of opportunities for administrative improvements. For TOC to effectively resolve the problems, three main aspects must be analyzed (Chase, Jacobs & Aquilano 2006). They include the elements that need to be changed, the goal of the modification, and the mode of implementing the change (Haksever et al. 1999). The robust tools employ sufficiency or necessity logic to help managers understand the outcomes of the current situation.

Inventory Problems and Appropriate Strategies

In the aerospace industry, TOC involves the use of logic diagrams to manage the current system (Bhatija 2013). Most inventory setbacks result from poor management of records turnover, delayed delivery because of material scarcity, and losses from configuration changes. According to Chou et al. (2012), these problems must be addressed to enhance the achievement of goals set by organizations in the aerospace industry.

To ensure effective turnover, managers should facilitate speedy internal inventory flows (Chou et al. 2012). The inventory storage time is reduced significantly. Failure to do this leads to supply chain delays (Chase et al. 2006). As a result, the production process is affected, leading to delays in delivery. Consequently, the company is forced to compensate clients according to the contractual agreements (Chou et al. 2012).

To resolve the inventory problem resulting from configuration changes, companies should use appropriate procurement means. They include flexible ordering and purchasing in batches. Acquisition of excess materials should be avoided (Schroeder 2008). The reason is that surplus products turn into waste and occupy space that could be used for other purposes. As a result, they lead to prolonged inventory storage and increased costs (Chou et al. 2012). To facilitate procuring the right amounts of materials, companies can apply the Economic Order Quantity (EOQ) approach.

Pros and Cons of Applying the Theory of Constraints

Pros

TOC helps to identify problems in inventory management and understand the challenges associated with high inventory administration costs (Gupta & Snyder 2009). The theory helps aerospace companies to improve processes, delivery rates, production time, and inventory turnover (Chou et al. 2012).

Cons

TOC involves identifying the major constraints of impacting performance (Chou et al. 2012). However, it can be a challenge to identify the constrictions. The theory can help resolve a constraint caused by another restraining factor. In addition, it may focus on one that is unrelated to the current hold-up. As a result, managers may waste resources on setbacks that are not critical to the success of the corporation (Chou et al. 2012).

According to Chou et al. (2012), TOC only works efficiently in tackling the current time frame issues affecting a business. It deals with actual situations. As a result, it limits itself to short-term consequences. Consequently, managers must analyze the long-term effects of their work on the constraints identified (Haksever et al. 1999). In instances where the short-term outcome remains valid for a long time, the strategy specified by TOC may be suitable (Schroeder 2008). However, if the short-term effect does not last, the manager is required to identify other constraints that need to be eased. Another limitation of TOC is that it does not consider variable factors. Certain constraints may vary independently from the action applied (Chou et al. 2012). As a result, a manager might be forced to use additional data.

Conclusion

The primary goal of an aerospace company is to meet the needs of clients and minimize costs. However, a shortage of materials and inventory problems impact negatively on the performance of companies. TOC helps managers to analyze their business. Possible weaknesses are identified and addressed. Due to its effectiveness, the theory has been applied by a wide range of companies. They include Boeing and Delta Airlines. In addition, it is used in academic disciplines, for example, in project management.

References

Bhatija, N 2013, Aerospace industry, Random Publications, New Delhi.

Chase, R, Jacobs, R & Aquilano, N 2006, Operations management for competitive advantage, 11th edn, McGraw-Hill, New York.

Chou, Y, Lu, C & Tang, Y 2012, ‘Identifying inventory problems in the aerospace industry using the theory of constraints’, International Journal of Production Research, vol. 50 no. 15, 4686-4698.

Fitzsimmons, J & Fitzsimmons, M 2007, Service management: operations, strategy, information technology, 6th edn, McGraw-Hill, New York.

Gupta, M & Snyder, D 2009, ‘Comparing TOC with MRP and JIT: a literature review’, International Journal of Production Research, vol. 47 no. 13, pp. 3705-3739.

Haksever, C, Render, B, Russell, R & Murdick, R 1999, Service management and operations, 2nd edn, Prentice Hall, New Jersey.

Schroeder, R 2008, Operations management: contemporary concepts and cases, 4th edn, McGraw-Hill, New York.

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IvyPanda. 2021. "Inventory and Constraints in the Aerospace Industry." April 25, 2021. https://ivypanda.com/essays/inventory-and-constraints-in-the-aerospace-industry/.

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IvyPanda. (2021) 'Inventory and Constraints in the Aerospace Industry'. 25 April.

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