| Summary: | Fabrication of an individual jet engine component at Pratt & Whitney can go through upwards of 40 manufacturing processes, from an airfoil’s single crystal casting to thermal plasma spray coatings and wire EDM-drilled cooling holes. Many of these processes are extremely specialized, requiring special equipment, environmental controls, and expertise to produce at the precise tolerances required in aerospace.
Utilizing contract manufacturers is an attractive and cost-effective option when lower unit process costs outweigh the associated transaction costs. However, it is not clear that Pratt & Whitney is utilizing an integrated and cost-efficient strategy when making sourcing decisions. Decisions are made locally, by individual production areas with little visibility into overall company impact. Furthermore, outsourcing arrangements established to temporarily supplement capacity end up persisting and becoming longer term or permanent arrangements.
Based on research with Pratt Whitney, this project arrives at a methodology to operationalize continuous analysis of transaction costs in order to arrive an efficient sourcing decision.
|
|---|