Boeing Case Study

free essayAll huge companies and enterprises always think about how to improve their business activities with the purpose of maximizing own profits. One of the proven ways to achieve this aim is outsourcing. When some activities of a company are outsourced, it has a chance to save a significant amount of money on both production and salaries.

The Boeing Company is well-known to both experienced travelers and those people, who just plan their first airplane trip. As a rule, it is associated with high-quality equipment, stability, and passengers’ safety. However, in the past, the company faced some challenges with its 787 model (Collins, 2010).Boeing decided to boost its profits with the help of this new airplane and “planned to move manufacturing to its Tier 1 suppliers who would coordinate with Tier 2 and 3 suppliers, and all Boeing would have to do was assemble the parts.” (Collins, 2010, para.1). Therefore, the company thought that outsourcing activities and a new organization of its supply chain would allow saving a significant amount of money and effort.

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In spite of such bright outsourcing perspectives, Boeing faced a number of problems with the production process, namely bubbles in composites, the lack of fasteners in the market, and installation of improper substitutes, as well as a cockpit section being out of line with a fuselage and some other issues (Collins, 2010). Thus, advantages of the offered redesigned global supply chain were left only on paper. Denning (2013) asserts, “The approach was intended to reduce the 787′s development time from six to four years and development cost from $10 to $6 billion.” The company also planned to accelerate its production and delivery of composites. However, instead of all these advantages, Boeing developed technical problems and violations of delivery schedules, to which additionally contributed the lack of plane fasteners in the market (Collins, 2011). It is possible to state that advantages of Boeing’s supply chain were obvious with Boeing 747. Only 5% of the company’s activities were outsourced, and it had good control over its production (He, 2013). However, in regard to model 787, a redesigned supply chain did not show any practical advantages as it had been initially planned.
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Some problems and risks for the Boeing supply chain came up immediately. He (2013) calls a new supply chain management strategy of Boeing “aggressive” and is sure that it has significantly contributed to the quality and safety issues of the company. These two aspects are closely interrelated in the case of plane manufacturing because the low quality of a plane puts people’s safety at risk. Thus, “Boeing 787 Dreamliner has suffered numerous electrical system problems” (He, 2013, p. 17), to say nothing about the accident with the lithium-ion battery heating, which was popularly discussed by the mass media. This strategy also resulted in some financial losses for the company, which had to substitute some parts of its planes and send them back for redesigning and reassembling. In Boeing 787, it was decided to use the mentioned type of batteries only with the purpose of saving money on the fuel. This decision was not also well thought-out as it turned out to be. However, Boeing engineers stated that the failure of batteries could be caused by 80 different reasons (He, 2013). One of the possible causes could be the lack of control over the outsourced production of these batteries. Another important issue is the risk of coordination (Denning, 2013). The fact that a cockpit and a fuselage were not tightly linked together was already mentioned in this paper. Such issue caused additional financial expenses on returning the manufactured model and repairing it.

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It is possible to give some recommendations to the Boeing Company on how to avoid the discussed problems in the future. The main task of Boeing is to “take advantages of the global supply chain and, at the same time, maintain high quality products and overall U.S. competitiveness” (He, 2013, p. 14). The experience of Boeing demonstrates that the company used to have well-developed supply chain strategies, which brought significant benefits to it (He, 2013). Therefore, it is logic to recommend Boeing to return to the initial setup of its supply chain, at least partially. First of all, it is important to increase the professional level of its supply chain managers and to teach them to work proactively. Secondly, the current outsourcing (70% of all activities) should be reduced approximately by half. Supply chain managers should investigate and calculate the real financial benefits that Boeing can get from such a massive outsourcing. It is important to remember that the overall situation in the market may also affect the functioning of the whole supply chain. It will also be wise to locate the production powers of the main composites of Boeing 787 in the USA in order to control them better.

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In conclusion, it is worth noting that, regardless of how hard the financial situation of a business is, it should not compromise the quality of its goods for the sake of earning more money. The Boeing Company has reorganized its already effective supply chain and significantly expanded its outsourcing strategies. As a result, the quality of its planes has suffered, and the level of the passengers’ safety has considerably lowered, as well. Hopefully, Boeing will restore its good reputation and rethink its supply chain management strategies, because these actions will help the business make up losses, which it had to bear, because of manufacturing errors.