The Boeing Company is one of the largest Aerospace and Defense enterprises in the world. Presently headquartered in Chicago, Illinois; they have contributed to some of the largest breakthroughs in aviation technology — breakthroughs that greatly enhance the lives of the world’s people. Boeing began as a small startup in 1916; but by the Korean War, defense efforts had grown Boeing to one of only 23 companies with $1 Billion in annual revenue. Boeing parlayed this growth into being one of the premier designers and manufacturers of commercial aircraft.
Designs such as the 707, 737, and 747 cemented their role as the leader in the industry until 2003 when Airbus first surpassed Boeing in annual sales and order backlog. (Nolan 2012) CEO Phil Condit saw Airbus making progress well prior to 2003, however. In 1996 Condit determined that the Boeing Company needed to be refocused in order to compete with the European conglomerate. Airbus had an advantage in innovation and manufacturing because it used collaboration amongst many suppliers to produce quality aircraft in the most cost effective way possible.
In order to continue in its global leadership position, Condit set Boeing along a path to leverage their core competencies, “with detailed customer knowledge and focus on operating lean and efficient systems. ” This plan would be called the “2016 Strategy” and it would see Boeing change its relationship with suppliers from third-party contract-based to close, strategic partners. (Nolan 2012) In future designs, Boeing would rely on these partners to not only build, but also design subcomponents for aircraft.
The Essay on The Following Paper Is Designed In Order To Discuss The
The following paper is designed in order to discuss the Effects of the Guest Worker Immigrants in the United States. We will consider the question of legal and illegal immigration and how it is connected with the guest workers, list the laws the United Stated has for guest workers and will give the recommendation. Effects of the Guest Worker Immigrant in the United States A lot of people from ...
Boeing knew that it must have a way of coordinating the design process among all suppliers, which cleared the way for a powerful Enterprise Resource Management (ERP) tool. Boeing selected Exostar’s supply chain Management Solution to coordinate the design and supply chain for the first project under the 2016 Strategy, the 787. (PRNewswire 2013) The 787 was conceived as a revolutionary design that would be a replacement for the aging 767, cost about the same, but be 20% more fuel efficient.
It would accomplish this by utilizing a construction of 50% composite – something never before attempted in the commercial aviation arena. In summary, Boeing was endeavoring to build a brand new clean-sheet aircraft from materials never used, using methods never attempted, and using a supply chain more far reaching than ever experienced by the plane maker. In retrospect, it may be easy to see why the 787 has had so many problems. The problems are so large that Forbes was prompted to publish an article titled, “What Went Wrong at Boeing.
” (Denning 2013) Boeing has worked through most of its supply chain woes and has delivered over 60 787s to date. Boeing is now designing a next generation version of its supremely popular 777, the 777-8/9. Boeing’s desire to reduce costs and production time by relying risk-taking suppliers to design and produce major aircraft components has led to many failures and cost overruns in the 787 program. In order for Boeing to avoid the pitfalls of the 787 program, Boeing must take the lessons of the past in concert with good technology to ensure good management of the new 777 supply chain.
Literature Review Boeing’s move toward a supply chain that relied on utilizing risk-taking suppliers for the 787 was meant to reduce the design timeframe and shorten the production cycle, however it actually placed the future competitive ability of Boeing in peril. The present paper specifically focuses on the practice of outsourcing design of the aircraft to the aforementioned suppliers and how improper oversight of the process led to delay, cost overruns, and the loss of intellectual property. The literature reviewed during this investigation is both peer-reviewed and journalistic in nature.
The Term Paper on Supply Chain Management 12
Supply chain management Supply chain management (SCM) is the process of organizing, operating, and controlling supply chains. The concept of supply chain management began in the early sixties; however, it has changed greatly since that time. The first stage in the development of supply chain management was called physical distribution management. (Handfield 47) This process integrated the ...
The following review is presented in a logical flow to show why Boeing chose this new strategy, some select major problems that occurred, and finally the actions that were taken to rectify those problems. Christopher S. Tang and Joshua D. Zimmerman (2009) begin their journal article, Managing New Product Development and Supply Chain Risks: The Boeing 787 Case, by laying out the drivers for the 787 design strategy. In the 1990s, Boeing had decided that it must offer more customer value to compete with EADS’ Airbus in the commercial aircraft industry.
Ultimately, Boeing settled on designing a new mid-size, wide body jet that would offer a superior passenger experience and burn 20% less fuel. To bring the jet to market faster and cheaper, Boeing wanted to move away from its role as a manufacturer and become more of a systems integrator. Tang, et al. say this strategy intended to save $4 billion in development cost and shave 2 years off the design period. (Tang, Zimmerman, & Nelson, 2009) Boeing refers to these risk-sharing partners as “Global Supply Partners” (GSP).
During an interview with World Trade; Steven Schaffer, then vice president of Boeing Commercial Airplanes’ Global Partners, said the name change “reflect[ed] a deeper business relationship. ” (Bernstein, 2006) In Chapter 8 of Cases on Supply Chain and Distribution Management: Issues and Principals, the nature of the relationship is further discussed. The suppliers are called “risk-sharing”, because they invest much of their own money into the success of the final assembled product. In fact, Boeing was able to get $4. 5 billion of the $10 billion design budget from GSPs around the world.
These suppliers have significant risk since they don’t see any income until the aircraft are delivered. (Garg & Gupta, 2012) In a seminal ex post analysis of the 787 outsourcing plan, Ehsan Elahi (2012) of the University of Massachusetts Boston asserts that improper monitoring and suboptimal supplier selection led to the appearance of many “hidden costs” and that Boeing didn’t have an adequate understanding of the operational risks associated with outsourcing new product development. He concludes that these oversights led to poor stock performance, a drop it Boeing’s credit rating, and late delivery penalty payments for customers.
The Term Paper on Human Factors Design System Control
A Technical Analysis of Ergonomics and Human Factors in Modern Flight Deck Design. Introduction Since the dawn of the aviation era, cockpit design has become increasingly complicated owing to the advent of new technologies enabling aircraft to fly farther and faster more efficiently than ever before. With greater workloads imposed on pilots as fleets modernize, the reality of he or she exceeding ...
The research by Elahi in the UMASS paper, along with his contribution to the Chapter in Miti Garg and Sumeet Gupta’s book, lays out a great case for how too much reliance on outside design can lead to a loss of intellectual property. On pages 167-169 of the book, Elahi discusses how these partners were given the opportunity to learn how to build aircraft from composites without Boeing retaining any exclusivity rights. One of the largest GSPs, Mitsubishi Heavy Industries, is now building its own aircraft — The Mitsubishi Regional Jet. The book notes that this will be the first
commercial passenger jet designed in Japan, largely due to the knowledge MHI gained through working on the 787. (Garg & Gupta, 2012) Because the Dreamliner is still in its infancy as a production aircraft, there isn’t yet a comprehensive top-to-bottom review of the current 787 supply chain. However, most peer-reviewed articles written about the early woes of the program have contained some suggestions for how the situation could have been handled differently. Tang, et al. (2009) suggests that a better risk-sharing contract that incentivized the sharing of information would have been advantageous.
Elahi (2012) goes further to point out the trouble caused by suppliers owning the design of contracted sections. This arrangement gives the suppliers incredible leverage. He also points out that, without incentive, delays are actually decreasing suppliers’ efforts towards on time delivery. E. g. once supplier “a” knows another supplier “b” is late, supplier “a” won’t spend the capital necessary to meet deadlines. This leads to suppliers making a “best guess” toward each other’s progress. The literature available on the 787 design and production supply chain has a lot of continuity.
The Review on Factors Affecting Supply Chain Management
An overview of the topicSupply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization. There are different people, which are involved in supply chain process. Managing this process can increase the performance of the firms and can help the firm to form long term bonds with different suppliers. SCM has gained importance in ...
Experts seem to agree that Boeing’s plan to create a new lightweight aircraft that saved 20% of fuel expenditures was well conceived. In fact the commercial aircraft market responded by awarding Boeing with the fastest-selling clean-sheet design in the history of aviation — over 500 orders in the year it was announced. (Garg & Gupta, 2012) Unfortunately, as much as experts agree that the plan was a good one, they also agree that the implementation was severely flawed, mostly from a managerial perspective. Discussion
Prior to the Dreamliner project, Boeing utilized its main core competency —designing airplanes — to manage mammoth projects that ultimately produced large profits for the enterprise. However, competitive pressures had caused Boeing to explore a new core competency in systems integration. Under this plan, Boeing would need three days to assemble the outsourced sections into a complete 787. That is a full 9 days less that the 777 assembly timeframe. (Tang et al. , 2009) Boeing’s decision to act as more of an integrator came with many potential rewards — but also risk.
In aircraft previous to the Dreamliner, Boeing had already moved to a lean, Six Sigma system based around the Toyota Production System (TPS).
The TPS popularized the principals of just in time component delivery to the assembly line. According to the Encyclopedia of Production and Manufacturing Management, TPS “highlight[s] the importance of quality since defective materials would disrupt the smooth flow [of the assembly process]”. (Toyota production system. 2000) Applying these principals to the 737, 767, and 777 supply chains had worked well for Boeing.
However, due to the reduction in the number of Tier-1 suppliers, who were in turn outsourcing their work, Boeing lost a lot of control over the supply chain and delays ensued. As the Chicago Tribune wrote in 2008: “The delays, caused by parts shortages and logistical logjams in Boeing’s production system, raise questions about Boeing’s strategic decision at the outset of the 787 program to restructure the company as a ‘systems integrator’. ” (Greising, 2008) One logjam that caused the first major delay to the aircraft in 2007 was a shortage of fasteners that are used to join aircraft components.
The supplier, Alcoa, had reduced its capacity by 41% due to the downturn in the aircraft manufacturing market. When Dreamliner production began, Alcoa was unable to react to all the various 787 sub-suppliers’ uncoordinated orders and a major shortage occurred. The program had to be delayed for 3 whole months before a solution could be found. (Garg & Gupta, 2012) This is only one example of how Boeing’s lack of supply chain control allowed small components to cause huge delays. Boeing was an experienced outsourcer. However, for the Dreamliner, they were outsourcing design as well as production.
The Term Paper on Supply Chain
H2>Introduction We have identified that any initiative aimed at improving the customer/ supplier relationship supports SCM this is true from an internal, individual organization perspective through to complex supply chain structures. Identify at least 1 initiative being implemented (or has been implemented) by your business that supports SCM thinking. For each initiative: Describe the aims ( ...
According to Eliah, Boeing overlooked the fact that its suppliers didn’t have a system of “best practices” in aircraft manufacturing. An example is Boeing’s habit of having a Designated Engineering Reviewer to, “guarantee the consistency of different parts of the detailed design”. (Elahi, 2012) One of the most glaring examples of the gap in manufacturing knowledge occurred at the Alenia Aeronautica facility in Italy. Alenia manufactures the middle section of the Dreamliner’s fuselage. Boeing was forced to issue an order to stop work after it was noticed that 23 fuselage sections were not up to standard.
Boeing was forced to take another delay and repair the sections at its Seattle factory. Scott Carson, head of Boeing’s Commercial Airplanes unit in 2009 is quoted as saying “Had we had adequate insight, we could have helped our suppliers understand the challenges” (Garg & Gupta, 2012).
Boeing isn’t alone in its troubles with supplier quality. The godfather of just in time, Toyota, was forced to recall 4. 1 million vehicles in 2010 due to a failure in the quality control function of the Toyota Production System. (Chung & Kleiner, n.
d) Chung and Kleiner explain that one of the main principals in the TPS is to immediately stop production once a quality issue is discovered. In the Alenia fuselage incident, Boeing followed this TPS principal. They stopped the process, fixed the problem, and then continued. Continuing without achieving adequate quality could certainly have exposed the company to additional unneeded risk, though the choice to delay was financially punishing. Conclusions and Recommendations Most major programs of the size of the Dreamliner will encounter many difficulties along the way.
It is actually more normal for things to be over budget and late. As Elahi (2012) states, “The extended delay and huge extra costs of [the] Dreamliner program…was unprecedented in the history of Boeing. ” From a supply chain management standpoint, the management of the supply chain should be called into question. Through the research conducted, it isn’t apparent that the actual plan was flawed — only Boeing’s implementation of the plan. In fact, in anticipation of this highly acclaimed plan, Purchasing Magazine recognized Boeing by awarding the manager of the Global Supply Partners the Supply Chain Manager of the Year award in 2007.
The Essay on Managing An Award Winning Supply Chain
In October 2008, LEGO won the prestigious European Supply Chain Excellence Award in the “Logistics and Fulfillment” category. The award recognized the supply chain changes that had been accomplished and which were seen as one of the key enablers of LEGO’s astonishing turnaround. LEGO had lost money for four out of seven years from 1998 to 2004, and with only 62 per cent of orders being ...
(Elahi, 2012) But, later that year the first delay was announced due to the fastener issue. Obviously this is a supply chain management issue. In the end, after reading much information on the Dreamliner project, it must be concluded that more project control by Boeing could have prevented many of the supply chain failures. It seems that Boeing has also recognized the deficiencies associated with reduced supplier oversight. Ultimately, hundreds of engineers have been sent into the field to work with suppliers on all tiers of the supply chain to help ensure quality and promote coordination amongst the suppliers. (Tang et al.
, 2009) These efforts have erased some of the expected cost savings expected from the original design, but those costs are easily justified when weighed against the liability of having faulty aircraft in the marketplace. In the coming decades, the case of the 787 will continue to be examined by students of supply chain management. Moving forward into Boeing’s future aircraft, such as the 777X, it would be expected to see many of these issues proactively mitigated. Boeing will ultimately develop a core competency as a systems integrator through proper oversight, better supplier incentives, and a more visible supply chain design.
