University of Michigan
Digital Technologies and the Future of Manufacturing MOOC Specialization
Digital Twins Case Project
INTRODUCTION
Wendy Smith sinks into her office chair wondering what went wrong. CEO of Engines-R-Us, an
international manufacturer of jet engines, Wendy just received a report on Q4 earnings, and things
aren’t looking good. The thirty year-old company’s earnings have been declining quarter over quarter for
four years now. Wendy is rounding the corner on her first year leading the company, and is well aware
that if performance doesn’t improve, it may be her last. Gazing outside the window, Wendy reminisces
over her first days as a mechanical engineer, and how excited she was to work at a company that prided
itself as the aviation industry’s most trusted supplier of jet engines. Over the next 15 years Wendy’s
excitement and passion for the industry galvanized those around her, from the plant floor to the c-suite.
With experience in manufacturing, supply chain operations and sales, Wendy is respected for her
rounded understanding of the business and her ability to recognize great ideas from her employees.
Drifting back to reality, the company’s CEO remembers that she has a meeting with her leadership team
to discuss strategy for turning the company around.
BACKGROUND:
For 30 years, Engines-R-Us has been the main supplier of jet engines of the world’s largest aircraft
manufacturers. The company is reputed for the quality of its engines, which historically have lasted
longer and require less maintenance than those of competing suppliers. Today, the company specializes
in manufacturing turbofan engines (image), a propulsion system used in most modern commercial
planes due to its fuel efficiency and relatively higher thrust.
As demand for commercial air travel has surged over the past decade, Engines-R-Us has needed to scale
their operations significantly. In an effort to scale, among company initiatives was to build a new
manufacturing plant located in the eastern U.S. Completed 5 years ago, the plant is almost an exact
replication of Engines-R-Us’s existing, 30 year old manufacturing plant. In response to why
advancements in technology haven’t been leveraged at both the old and new plants, Bill, the tenured VP
of Manufacturing, keeps his response brief: “If it ain’t broken, don’t fix it!”.
Around the same time, Engines-R-Us realized that trusted raw material suppliers were no longer able to
keep up with demand. In response, the company initiated bidding wars for its business, contracting out
with a number of suppliers who offered the best price. Although a necessary decision to expand
suppliers, reports from the manufacturing plants indicate that the quality of materials supplied might not
meet the standards of Engines-R-Us’s past suppliers.
Over these five years, Engines-R-Us has lost two of its five major customers. Major airlines have been
reporting increased downtime from aircraft due to increased frequency of maintaining the aircraft’s
engines, particularly from replacing damaged components within turbofan engines. For example, airline
maintenance teams have reported a more rapid than expected rate of degradation of newer turbine
blades due to heat from the engine’s combustion chamber. Maintenance has also reported that the
engine fans are less resilient to harsh weather, resulting in replacing fan blades at twice the rate of the
industry average. As other issues regarding the engine’s components continued to surface, Engines-R-Us
has not found a solution to the problem.
PRESENT:
As Wendy walks to the boardroom, she reminds herself that although dialogue can often get tense
among her leadership team, holistic perspectives usually provide conclusions that are considered
reasonable among each member. With this in mind, Wendy walks into her boardroom and surveys the
environment. Meticulously reviewing the quarter’s earnings report is each member of her leadership
team:
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Bill, the Vice President (VP) of Manufacturing
Shauna, VP of Sales
Roberto, VP of Finance
Tina, VP of Vendor Management & Strategic Sourcing
Bill is the first to speak: “I've been saying this for years and will say it again: we need to scale back our
operations! Back in the day, I knew our suppliers like the back of my hand! They knew better than to
provide less than the highest quality materials. Now we receive materials from wherever we can get! No
wonder our engines aren’t what they used to be. I have an old saying - if it ain’t broken, don’t fix it. Well,
bringing in new suppliers fixed something that ain’t broke. Let’s do us all a favor and go back to our old
suppliers. They’ve promised enough supply to support 60% of our plants’ production capacity combined.
Not ideal, but as it is, 20% of assembled parts are considered obsolete upon inspection.
Flustered, Tina responds, “Bill, you’re not with the times. We can’t just scale back operations. Our
reputation isn’t what it was -- we can’t charge a premium for our engines like we used to. Expanding
suppliers was inevitable. Besides, isn’t quality assurance and risk assessment part of your job? I know
that other manufacturers incorporate all sorts of technology that hold suppliers accountable for
defective materials. Also, I think it’s time you move on from the “If it ain’t broke don’t fix it” motto. We
both know that your manufacturing lines contribute to defective parts, irrespective of who the supplier
is.”
Roberto interjects before Bill can speak. “Bill, Tina’s right. We can’t just cut our suppliers and scale down
production. The new plant that we built was an expenditure that, as it is, won’t break even for another
10 years. Our competitors are already champing at the bit to take over our remaining customers.
Reporting a reduction in production will appear as a death sentence. Not to mention, the shareholders!
We must report growth in any way possible!”
Wendy considers the variables presented by her leadership team. Bill is right -- continuing to produce
less than quality engines is both a hit to revenue and margin. But as Roberto said, scaling back
production will scare off shareholders and invite competition to steal remaining customers. Wendy
pauses to consider Tina’s insights.
“Tina, tell me more about the technology you’re referring to.”