Case Study: Boeing Supply Chain Challenges during the Manufacture of Boeing 787 Aircraft

Contents

Case Study Background

Major supply challenges suffered by Boeing
Communication failure
Quality control challenges
Delivery time challenges
Managerial problems
Resources allocation challenge
Labour and technology challenges
Supplier’s Capability Assessment Challenge

Solutions to Supply Chain Problems
Supply Chain Managemen
Supply Chain Strategies
Leadership experience
Proactive supply chain managemen
Customer Relations Managemen

Conclusion

References

Case Study Background

Founded in 1916, at the Puget Sound location in Washington State USA, Boeing is the largest aircraft company in the world, manufacturing commercial aircrafts, military aircrafts, satellites, weapons and electronic defence systems. It has a history of being the best aircraft company in leadership and innovation to design leading aircraft designs. The company uses advanced technology, engineering skills and innovative leadership to design and develop its products. As a result, it is the best in the USA and worldwide, serving many other nations with commercial and military aircraft.

To remain innovative and competitive, in 1990s Boeing started considering a replacement of the Boeing 767, due to slow rate of sales. By 16^th December 2003, Boeing announce that it was going to assemble the 787 jet in its factory located at Everett Washington^[1]. In building this plane, the company focused on reducing the time line from 6 years to 4 years. Instead of contracting the plane from scratch, it was going to outsource parts and issue sub-contracts to other companies in other nations.

The process of production requires raw materials and labor, which take time to procure and manage for the companies to come up with the right products. For the Boeing company to produce the 787 parts in the USA, it would have incurred high costs in procurements and a lot of management logistics. To cut down these costs, outsourcing was a nice way out that provided the company with the ability to enjoy the availability of skilled labor and raw materials in the outsourcing companies.

When companies need to complete projects within limited time and meet specific quality, hiring and managing employees to produce might be expensive and not produce the right quality. Outsourcing would enable the company to benefit the available of experience from other countries. Through outsourcing from firm that were known to be the best producers of aircraft parts, Boeing was going to benefit from their expertise from wherever they were, without having to bring them to USA to work in Boeing company.

In this case, Boeing outsourced the rear fuselage from Vought Aircraft Industries, the middle fuselage from the Italian Alenia Aeronautical, the wings were outsourced from Fiji, Mitsubishi and Kawasaki in Japan and the nose was outsourced to the Toronto based Onex Corporation. In this case, Boeing would have spent a lot of money and time hiring people and managing them to produce these pars in USA. However, with outsourcing, the parts would be made by the best producers and according to the company’s specifications. Other outsourced companies were; Global Aeronautica, Kawasaki heavy Industries, Aero Systems Wichita Japan, Korea Air, HCL enterprise and Saab AB among others.

By outsourcing to other nations, Boeing was going to create a relationship and a market for the jet in other nations. Boeing’s outsourcing was also going to be beneficial in assisting the company to reduce the time used to manufacture the planes^[2]. Production time is an essential timeline for different company products as most of them are normally booked to be in the market. Earlier planes had been manufactured within a period of 6 years and the decision of to outsource 70% of the contents for the production of Boeing 787 was going to help in reduction of time from the normal 6 years to 4 years. The company was also to cut down costs, and enjoy the availability of skilled labor and raw materials from other nations^[3]. This was the largest form of outsourcing that the company had done as earlier; it had outsourced 50% of Boeing 777, 30% of 767 and 5% of 707.

The planed seemed to work well up to the year 2007 and the Boing marketing team had the 787 orders booked for more than 770 aircraft. In the history of commercial aviation, this was going to be the most successful aircraft launch. However, the company noted major problems in the supply chain that were negatively affecting the project, resulting in delays and poor quality work. The major challenges were tired around supply chain management and threatened to collapse the whole Boeing 787 project.

Major supply challenges suffered by Boeing

Communication failure

Communication is the basis of any business operations, and without good communication, business operations can fail. In the supply chain, communication is necessary for the companies to understand the requirements and to meet the demands of the customers. The larger and complex the supply chain, the harder it becomes for the communication among the parties to be coordinated. This poses a risk of miscommunication that can result in poor delivery times and quality.

Boeing 787 construction project faced communication failure problem due to the number of companies and countries that the company outsourced. Communication is an important element for any supply chain to be successful. In this case, Boeing was outsourcing from different companies located in different countries such as, Japan, Korea, France, and USA among others. This made communication system very complex leading to poor information sending from one point to another.

Communication challenge became a major threat to the Boeing 787 construction project, when it came to the assembly of the produced materials^[4]. A good example is that parts arrived at Boeing, and the company found out that many of the components was not installed as required. When Boeing engineers attempted to correct the installation errors, they discovered that all the installation manuals were written in Italian. This posed a major challenge, as the company had to wait for Italian engineers from the manufacturing company to come any correct the errors, therefore slowing the manufacture process

The communication problem was further escalated by the act of the outsourced companies outsourcing from other companies, making the communication chain long and hard to manage^[5]. An example is the Vought Company, which was responsible for the creation of the floor part, but went ahead to outsource to an Israeli company. This made it impossible for the Boeing Company to communicate with the manufacturer. This made it even hard to the Israeli company, as it did not report direct to the Boeing but reported to the Vought Company, making it hard to get direct instructions.

Quality control challenges

Managing a supply chain involves making sure that all those involved comply with the laid down quality measures. Quality control is a major risk when dealing with many companies to provide material for production^[6]. This is because some of the company might produce products that do not match the required quantity or go ahead and outsource to other companies in order to meet their deadline. Due to the number of nations and the companies that Boeing outsourced to, it became a major challenge for the company to monitor operations and make sure that the delivered parts were of high quality. This is because it would have required a lot of personnel to monitor all the companies in the supply chain.

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^[1] Turner, E. The birth of the 787 Dreamliner. Kansas City, Mo. London: Andrews McMeel Simon & Schuster distributor, 2010.

^[2] Blanchard, D. Supply chain management best practices. Hoboken, N.J: Wiley, 2007.

^[3] Sodhi, M. Managing supply chain risk. New York: Springer, 2012.

^[4] Turner, E. The birth of the 787 Dreamliner. Kansas City, Mo. London: Andrews McMeel Simon & Schuster distributor, 2010.

^[5] Blanchard, D. Supply chain management best practices. Hoboken, N.J: Wiley, 2007.

^[6] Beamon, B. Supply Chain Design and Analysis: Models and Methods. International, Journal of Production Economics, Vol. 55, No. 3, pp. 281-294, 1998.