Bombardier Aviation: The Front Substructure Decision
(4 pages of text)
In December 2018, the procurement director at Bombardier Aerostructures (Bombardier) was tasked with deciding whether to support the manufacturing department’s proposal to expand capacity in order to produce the front substructure for the A220 aircraft in house or to instead propose that Bombardier outsource the production of this critical assembly. Demand had been growing steadily for the A220. Engineers had determined that expanding the current production capacity at Bombardier’s headquarters in Montreal, Canada, was the least capital-intensive solution. However, the front substructure was a prime candidate for outsourcing, and the procurement director wanted to be sure she had considered all options before she made a final recommendation to the senior management team in two weeks.
The case can be used in undergraduate- and graduate-level courses on operations or supply chain management. It can also be used as an exam at the end of a module on supply chain management. This case explores the many facets of a classic “make versus buy” decision. In addition, the case examines the relative risks of two suppliers and explores supply risks under management pressure to turn a profit. Students will need to look at capital costs versus variable costs, lead times and working capital, cash flow, and qualitative factors such as responsiveness, quality, and risk. After working through the case and assignment questions, students will be able to do the following:
- Outline the financial implications of a “make versus buy” decision.
- Describe the nature of supply risk, and explain how risk changes over time.
- Develop an implementation plan that balances risk and reward for a “make versus buy” decision.
Canada; Germany; Poland, Large, 2018
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