In order to reduce the development time for the aircraft, Boeing decided to follow a modified, Toyota style, multi-tier supply chain model. The company wanted to play a role of systems integrator, rather than that of a manufacturer in the production of 787 Dreamliner.
Boeing found itself underprepared to manage such a complex supply chain model. A number of issues like delays in production, poor quality control, improper coordination among suppliers, mismanagement of subcontractors, disgruntled employees and production related issues were rampant.
All this resulted in rising costs, and huge delays in production of the 787 Dreamliner, which prompted the company to take up costly remedial actions like acquisition of Tier-1 suppliers, providing additional technical support to various Tier-2 and Tier-3 suppliers, etc..
This case study proposes to analyze the outsourcing strategy of Boeing vis-à-vis 787 Dreamliner. The report attempts to identify the issues faced by Boeing and what was done to overcome the same.
TABLE OF CONTENTS
Executive Summary 2
Introduction 4
History of Boeing 4
About Boeing 787 Dreamliner 4
Outsourcing strategy 6
Goals 6
Transformational Outsourcing 7
Structuring of the outsourcing plan 7
Management of Suppliers 9
Vendor selection 9
Vendor coordination 9
Drawbacks and Challenges 9
Issues 11
Cost and time overruns 11
Knowledge and Tech transfer 11
Conclusion 13
Works Cited 14
INTRODUCTION
HISTORY OF BOEING
Boeing is an American multinational corporation that designs, manufactures and sells aviation products. It is a pioneer in this field since 1916, and is the largest exporter by dollar value. The highly established status of Boeing was under threat when in 1977, US gove...
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...rofile Airbus A330 continues to pull in sales even as the 787 Dreamliner recovers momentum. Retrieved from http://centreforaviation.com/analysis/airbus-a330-continues-to-pull-in-sales-even-as-the-787-dreamliner-recovers-momentum-111317
Boeing. (2008). Boeing 787 From The Ground Up. Retrieved 3 18, 2014, from http://www.boeing.com/commercial/aeromagazine/articles/qtr_4_06/article_04_2.html
Cook, K. (2004, 9). TacAir team now gets components 'just in time' . Retrieved 3 22, 2014, from http://www.boeing.com/news/frontiers/archive/2004/september/i_ids1.html
Arkell, D. (2005, 3). As Boeing transforms into a large-scale systems integrator, the supplier’s role has fundamentally changed. Here’s a look at what’s different—and what these changes mean for Boeing people. . Retrieved 3 17, 2014, from http://www.boeing.com/news/frontiers/archive/2005/march/mainfeature1.html
The SWOT process will start by examining the internal strengths of the Boeing Company of today. One of the most dominant strengths possessed by Boeing is its ability to follow the changes in a market that is continually changing. The type of products produced by The Boeing Company demands the use of state of the art technology while maintaining all the proper safe guards for sa...
Every business has an evolutionary clock speed measuring the rate of change in products, processes and capability. At the core of everything is the organizations ability to design a sustainable supply chain. When this becomes an organizations core competency, they are then positioned to continually win the temporary advantage. By simultaneously working to improve products, process design/creation and supply chains (three dimensional concurrent engineering), a company can drive the “turn of the helix” thus changing the clock speed for the industry.
No matter how a business operates, change is inevitable and affects all businesses. CAMERON SMITH investigates the changes Qantas have had to undergo in order to keep up with their competitors, whilst navigating the challenges of low cost of fares.
The Boeing Corporation is one of the largest manufacturers in the world. Rivaled only by European giant Airbus in the aerospace industry, Boeing is a leader in research, design and manufacture of commercial jet airliners, for commercial, industrial and military customers. Despite enjoying immense success in its market and dominating an industry that solely recognizes engineering excellence, it is crucial for Boeing to ensure continued growth through consistent strategy formulation and execution to avoid falling behind in market share to close and coming rivals.
Christensen, C. M. (2006). Hewlett-Packard: The Flight of the Kittyhawk (A). Case Study, 5, 8.
At the July Association of the United States Army (AUSA) Conference, LTG Ostrowski, the Army Acquisition Executive Lead, conveyed the Army’s need for future network solutions. It was also shared in the FY16 Presidential Budget that the Army has several budget requests for Communications systems and upgrades totally over $1.2B (Keller, J. , 2015). This is an opportunity for the Comms BU to expand its customer base in the U.S. Army market place. Northrop Grumman was ranked in the Top 5 of Aerospace and Defense Companies in Forbes America’s Best Employers list (2017). They were ranked over larger companies such as Boeing, Lockheed Martin and Raytheon. Their commitment to their employees, diversity, their customer and even the environment drives their culture. Northrop Grumman’s competitive advantage is leveraging the technology already developed and tested for the services (Air Force and Navy). Their experience with the Army is via services work where our people have gained the expertise to be the right people for working with the Missile Defense Agency. After analyzing both the internal and external environment of Northrop, their competitors and the analysis of their financial position, Northrop has developed a sustainable competitive advantage. They have done this through the use of product differentiation. The value they receive, the knowledge they gain and patents they own by acquiring other companies expands their portfolio to offer products and services not comparable to their competitors. Their respective strategic position establishes a value to their customers that is differentiated amongst their competitors, allowing them to offer a higher premium for their products and
Boeing has looked at everything from the design of the anti-collision lights, to the reduction of small gaps in the airfoil. This has created an aircraft that is extremely aerodynamic and efficient at any task it performs. The 737 was originally created on May 11, 1964, however it wasn’t until November 9, 1964 that production was officially approved. On February 19th 1965 Lufthansa placed its first order for the 737-100, and on the 9th of April 1967 the 737 flew for the first time. In 1970, Boeing had less than 35 orders for the 737 and considered canceling the program.
Airbus and Boeing have developed similar capabilities, and an intense competition to be the number one in aviation. The market is a duopoly market, resulting in a low profit margin for both companies. There is slow industry growth in the aviation industry, and no clear market leader. The barrier to exit is high, which leads to intense rivalry between Airbus and Boeing.
Technology Innovation: - Boeing should carefully analyze the market to evaluate the trends in the airline industry and aggressively invest in a new product line (top dog strategy) that could counter Airbus’s A380.
Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive.
Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. These included esclating fuel prices, increased maintenance and repair costs, staff costs, low yield per available seat kilometer ("ASK") via poor yield management and an inefficient route network.
Quickly becoming apparent after only a few rounds of play was in the absence of coordinating direction the individual supply chain links immediately focused upon acting in their own best interests much more so than the organization as a whole. Whether the end use customer was satisfied became secondary to avoiding stock outages for the next link in the chain, or their specific “upstream customer”. The real world application of this example is that focus on the end use customer must be consistent and maintained throughout the process up to and including delivery. Undoubtedly internal customers, such as retailers to wholesalers and distributors to production, must be serviced along the way for the transaction to ultimately occur. However, unless an end use customer is involved no profit can be realized by anyone.
Boeing Commercial Aeroplanes – Why Projects Fail. 2014. Boeing Commercial Aeroplanes – Why Projects Fail. [ONLINE] Available at:http://calleam.com/WTPF/?p=4617. [Accessed 26 March 2014].
The business environment is increasingly becoming competitive and challenging. In the recent past, manufacturers have found themselves facing the threat of dwindling profit margins due to unfortunate global events such as the 2007 global financial crisis and the on going Europe economic crisis. The need to improve operation efficiency so as to ensure current and future investment yield the highest rate of return has therefore become extremely important. Manufacturers are now actively engaged in, managing their costs, Research and Development, adopting best procurement strategies, among other Actions. While such actions might eventually lead to positive results, additional business value can be achieved through proper management of the supply chain (Waymer, Ivanaj & Mussa 2009; Krivda 2004).
The 777 would be manufactured differently than previous Boeing aircraft. Various efforts would be undertaken to increase demand and reduce manufacturing costs of the 777 in an attempt to create positive cash flows sooner. To increase demand, the 777 would be the first fly-by-wire Boeing aircraft, a feature Boeing’s competitors already added to their aircraft. Boeing also made an effort to get their large customers involved in the design process from the beginning in an effort to increase its competitive advantage and long-term demand for the 777. As a cost saving measure, the design and manufacturing teams would work together to create a detailed simulation of the manufacturing process that would reduce the cost of “improvements” that were often made during manufacturing thereby reducing the overall manufacturing cost. Furthermore, Boeing would invest in more training for its engineers on the new CAD system. This new manufacturing process would lead to large capital outflows in the short-run. The challenge for Mr. Shrontz is determining whether these capital investments will lead to an increased return on equity for Boeing.