Operations Management Of Boeing & Assessment Answer

Executive Summary

Boeing 787 Dreamliner was in reality was a dream project for the century old iconic aircraft manufacturer, as it aimed to solve a lot of issues which generally plague the aviation industry – fuel efficiency, maintenance cost, efficient fuel use, environment friendly design. Boeing wanted to create an aircraft made up of composite materials, and more fuel efficient and greener than its other models. In order to form this, Boeing adopted the strategy of large scale collaboration with a huge number of global suppliers and took the strategy of acting as the central integrator of all individual parts. It aimed to conduct the first roll out by the end of May 2008, but faced several delays and finally FAA and EASA certification was received on 2011 and the very first 787 – Dreamliner was delivered on 2011. Though it entered commercial aviation in 2011, it continuously faced issues and troubles and eventually, was grounded in 2013 by both JCAB or Japan Civil Aviation Bureau and FAA and later on grounding was lifted (Shenhar, Holzmann, Melamed, & Zhao, 2016).
For the purpose of this paper, Dreamliner failure of Boeing was analyzed and the supply chain and operations of both Boeing and Airbus was analyzed to understand the differences between the operations of both and how Boeing went wrong. Apart from having delays in delivery and consistent quality issues, Boeing 787 Dreamliner faced issues for its Li-Ion batteries. It was found that ineffective supply chain management and over dependence on outsourcing were the key issues which resulted in Boeing delivering a product which was not consistent with the strategic aim they had in mind. Similarly, Boeing also failed to conducted consistent repeated evaluation and testing of the final integrated product, or else the problems the model faced during commercial flights would have been caught at the very testing phase itself.
Certain strategies like, improvement of risk management strategies, improvement of integration testing, improved supplier management, improvement time management are suggested to Boeing which would have helped them in avoiding the delays they faced and repeated quality checks was fundamentally needed to be done to avoid the problems. It was found that Boeing managed its suppliers in three tiers – Tier 1, 2 and 3 and basically integrated the sub-assembled parts provided by the Tier 1 suppliers. This did not let the company exercise full control over the quality and timely delivery of parts supplier by Tier 2 and 3 suppliers, which resulted in the outcome of a product which was not up to the mark and needed several months of upgradation and quality improvement. Operations management strategies which would have avoided these issues have been mentioned in the following report along with continuous comparison with Airbus and how they conduct their operations with full control over their suppliers and supplied parts.
Lastly, it is shown, how information technology plays a critical part in the operations of both the manufacturing giants. Information technology is effectively used by Boeing and Airbus to help them deliver the best of products, to have effective supplier control, to directly associate with their customers and to promote aviation safety to the maximum. This paper aims to help the reader understand about the case of Boeing Dreamliner and how important supply chain management and overall operation management is in any business, of any stature operating in any industry.

Introduction

Since the early 1990s, the global jet airliner industry has been characterized by the duopoly between two key players – Airbus and Boeing. These are the two largest defence and aerospace manufacturers in the globe with Boeing having revenue of 94.57 billion dollars and Airbus claiming 71 billion dollars as per data in 2015 (Statista, 2018).
The Boeing Company was founded in 1916 by W.E. Boeing and was based in Seattle, Washington and previously known as Pacific Aero Products Co. His background in designing of wooden structures is known to have inspired Boeing to build, design and assemble airplanes. In order to take advantage of the wild abundant spruce wood of the region, Seattle remained as the main location for manufacturing. Today, BCA or Boeing Commercial Airplanes is a division of The Boeing Company and designs, creates, assembles, promotes and sells business jets and jet airliners. Today headquartered at Renton, Washington the company’s main products are 737, 747, 767, 777, 78 and BBJs (Boeing, 2018).
The Airbus Group is the European counterpart to that of America’s Boeing. It is a European multinational corporation which too designs, manufactures, and sells military and civil products worldwide. During the middle of 1990s, a number of European defence contractors and aerospace institutions were intending to take advantage of the newly formed European Union and its Eurozone and as a result merged in July 2000 as a new company known as the European Aeronautic Defence and Space Company (EADS) (Statista, 2018). EADS recognized their company as the Airbus Group after 14 years of operation with three broad product lines – aircrafts, helicopters and airspace manufacturing. Now, the company is known as Airbus SE and is headquartered in Toulouse, France and serving under Denis Ranque and Tom Enders (Airbus, 2018).
Operations and supply chains are intrinsically linked to each other and have supreme importance in every business irrespective of the nature, size, and market of operations (Boyer & Verma, 2009). For aircraft manufacturers like Boeing and Airbus, an efficient and cutting edge operations management and supply chain management system are crucial for sustaining their competitive edge. In this report, we would present the operation management systems of both Boeing and Airbus and comment on their similarities and dissimilarities and highlight the plausible reasons for which the project of Boeing 8 Dreamliner suffered; explore the strategies used by both the aircraft manufacturers and review whether they are successful or not through literature review of published papers; investigate their supply chain management and operational tools used and finally would highlight the role of Information Technology in their daily operations. The last segment of this report would consist of a list of recommendation strategies and would conclude by summarizing the key findings of the paper.

Operations Management System

The main aim of the operations management is to control and monitor the production of goods / services of an organization, but its importance is critical as this system helps an organization achieve its strategic objectives by aligning individual aspects of daily operations to meet with the intermediate goals and ultimately achieve the vision (Hollins & Shinkins, 2006). Hence, OM is an integral part of any organization and oversees the processes involved in producing and distributing the products and the services; thus helps in adding value to daily operations and converts such to profitable bottom lines. Operation management is the very science and art of managing three aspects of an organization – people, systems and processes (Kachru, 2009).
When it comes to operations management of aircraft manufacturers, there are certain gross similarities and processes which are covered by all, irrespective of whether its Boeing or its Airbus or any other aircraft manufacturer. Namely, the planning is done of the production based on different forecasting tools, which directly aircraft productions namely, - the changing scenarios of markets, the flight demands across nations, the demands of the aircraft based on the changing economies, the anticipatory regulatory changes which might result in a change of pattern of flights, the very economic conditions of airlines who would make the purchases etc (Burgess, Singh, & Koroglu, 2006). Example, when Brexit was announced and the entire Eurozone flight free area became a question mark, airlines like Easyjet decided to move headquarters from its sole UK based on to having another at a European state (Powley, 2017). This resulted in fleet expansion, and resulted the company in dedicating a fleet for its new headquarters at Geneva, Austria. Aircraft manufacturers need to keep themselves abreast about these anticipatory moves by buying companies and plan their forecast as per (The Guardian, 2017).
Secondly, based on the plan they allocate and dedicate resources like men and machine for the production procedure. This organizing of resources involves identification and ordering of parts from their different suppliers present around the globe and give them purchase orders for the production process. Thirdly, it involves engagement and planning of manpower for sufficient presence of skilled workers for the lined up integration process (Gunasekaran & McGaughey, 2003).

This stage is followed by leading as well as controlling the detailed set of activities mentioned in the production plan so that, the product can be delivered as per the schedule and adequate time is kept for repeated quality control – both of the parts delivered and also for the final integrated product (Leeman, 2010). Hence, these key four stages of production of a finished product, which in this case is an aircraft, is followed by all major manufacturers of such; that is, forecasting, standardizing, making the decision of making or buying; lowering of procurement and inventory storage cost; ascertaining quality standards of the outsourced products and the final product; developing the supplier relationships and overall maintaining an information management system to help both the manufacturer and the supplier to keep up with the production line.
The key differences between Boeing and Airbus, and specifically between the operations of Boeing for 787 Dreamliners and Airbus is that, whereas Boeing gave outsourcing of its parts to suppliers all around the globe for approximate 70% of total parts, Airbus limits its outsourcing for a meagre 25% in comparison to that. It is not possible for airline manufacturers to completely produce the parts themselves as such leads to wastage and expenditure of resources beyond requirements. However, controlling and having a limit of outsourcing amount also helps them to maintain a quality standard and control over operations. Airbus outsources some of its parts but they are outsourced from Britain, Spain, Germany and France and the parts are assembled in their factories at either Germany or France. This saves time for transportation and the risk of delays is reduced to a great deal, whereas on the other hand Boeing outsources parts from its suppliers all around the globe (Tang & Zimmerman, Managing new product development and supply chain risks : The Boeing 787 case, 2009).

OM Practices which failed Boeing 787 Dreamliner

Boeing’s operation decisions centred on the manufacturing procedure of 787 Dreamliners were considered to be too risky by certain experts. The company believed in outsourcing most of its products, and the designing and integration was done by the company itself. In other words, Boeing was in fact acting as a very complex and holistic integrator of systems rather than actually manufacturing the parts of the aircraft. Though the company received a voluminous number of orders, and in fact Dreamliner has been till date one of the fastest selling aircrafts in the history of aviation, the process which Boeing adopted for manufacturing and the final manufacturing and the delivery process was not up to the mark. The delivery dates were pushed back by Boeing more than 4 times and was already running at a delay of 2 years. The fuselage itself of Boeing Dreamliner consisted of more than 6000 components which were to be outsourced from around the globe. Many of these components failed to meet the Boeing’s standards and tolerances for engineering and resulted in delays in both schedules and proved to be very costly. When more of one’s operations has to depend on outsourcing of parts it automatically loses the control over the quality and standards of those parts. This was bound to happen for Boeing. It is worthwhile to note here that, the Dreamliner series of Boeing was about to be more fuel efficient and green and to achieve that the company designed the aircraft to have carbon composite compounds in its body to make the aircraft more quiet and more clean. As the company did not have any previous expertise on this, it decided to outsource the parts of the main body as well. It is now known that Boeing had involved suppliers of more than 50 countries to supply its parts for making Dreamliner. Too much dependence on sourcing led to the fall of Boeing. Lack of time control, lack of quality control, haphazard management of supply chain resulted in a failure. Along with this, the very first Dreamliner to arrive at the factory of Boeing was missing a lot of parts and resulted in a poor outcome. The entire fleet of Dreamliners got delayed by Boeing and the company faced immense loss of resources as a result of this (Kotha & Srikanth, 2013).
It can be commented that the OM practices which Boeing adopted for the management and operations and delivery of 787 Dreamliners did not work as the company failed to act as a holistic team and the strategies failed them to reach their vision on this particular product line. OM strategies like Just In Time also failed Boeing on certain degree, which will be discussed in detail in the later segments of this paper. However, the failure of Dreamliner product line in Boeing can also be attributed to the failure of its supply chain management which is a component of overall operations as well. Too much dependence on outsourcing, led to delayed delivery, poor parts management and poor control over the parts ordered. The strategy which Boeing felt would have saved them resources backfired and as a result Boeing ran billions of dollars behind budget and resulted in delays in delivery (Slayton & Spinardi, 2016).

Strategies used by Boeing

The strategies used by Boeing to create and deliver its 787 Dreamliner line of aircrafts surely was faulty, otherwise the entire project would not have been scrapped. Hence, there is a need for change in the operation plans of Boeing, not only from the perspective of the manufacturer but also from the perspective of the market and the buyers and eventually the passengers. The following are areas which need to be taken care of by Boeing in their overall operation management;
-    Improved Time Management: As the company depends on suppliers who are located overseas for its production of parts in order to save cost, it is of fundamental importance that Boeing manages its time and allocated enough buffering time from order to delivery. This is to avoid from any delay in the final integration and delivery of the finished products. Effective time management is critical as it saves face loss of a company (Varma, Wadhwa, & Deshmukh, 2006).
-    Improved management of risks is again another aspect which the company needs to take care of and as per experts, the company needs better financial risk management, if it wants to focus on development of new lines of products.
-    Effective supplier change management : This is of fundamental importance, as suppliers are an essential aspect of the entire manufacturing procedure (Wisner, 2011). Boeing must develop more rigid quality control methods for its suppliers as well, if it intends to keep a control over the quality management as well as avoid delays for the delivery of the outsourced parts.
-    Improved integration testing is one aspect, which cannot be stressed enough. Due to the sheer nature of business, an aircraft manufacturer has to place its first priority on testing of its integrated product numerous times, as what appears to be perfectly working in a plan can have innumerable problem in real life post integration. When dealing with new product lines, and especially a product as complex as Dreamliner, Boeing needed to check the very integration of its thousands of different elements and the manner in which they operate together. Interdependencies of the individual elements and anticipatory problems can be checked in repeated times, and then problems which can arise can be identified and resolved (Elahi, Sheikhzadeh, & Lamba, 2014). Or else, problem becomes even bigger during the stage of operations only. Improved testing pre and post integration will help the company in reducing the problems and the product line can move in an improved fashion
-    Improvement strategic management: This goes beyond saying, that due to a poor control and strategic vision and planning, Boeing faced a temporary setback in its Dreamliner project. As per a paper by New Yorker, it was identified that, post management change, focus was shifted to controlling costs and resources which diverted the management’s focus from technology development and smoother supply chain and operations to that of saving of resources. Of course, complete utilization of resources is required and cost control is very important strategies, but when a new product line is being developed focus should be prioritized on the product rather than on resource expenditure (Akintoye, McIntosh, & Fitzgerald, 2000).
-    Improved production planning and management of materials: Boeing can improve its production planning and as mentioned prior, it should take in to account plausible delays in spare parts delivery, changes in the countries of the suppliers, regulatory alterations etc, which will make up for the probable delays in the delivery of its spare parts and keep a buffer between the expected delivery and the actual delivery. This shall help the company in keeping its production schedule on time, and not waste further time in waiting for spare parts to arrive which disrupt the whole material management and operations project.
-    Reengineering initiatives Boeing can take to overall improve its system of operations and though it might prove to be very resource expensive in case for aircraft manufacturers, this is a strategy which the company can have in mind.
A number of strategies can be suggested to Boeing to help them improve their operations plan. Some of these strategies were already used by Boeing and still in use, but importance should be given by the company to adapt means by which it should focus more on such.
-    Fish bone technique of identifying all the plausible causes of an outcome, undesirable or not and then giving weightage to the different potential causes and individually solving each of them
-    Checklist method to be done in a more effective and full proof manner
-    PDCA to help the company have more control over each and every small operational aspect of the business (Abbaterusso, 2008)
-    Use of flowcharts and control charts which help in the identification and analysis of every failure and to gain detailed understanding of each failure phenomenon and root cause analysis (Zailani & Rajagopal, 2005)
-    Pareto Diagram to help them understand about the importance of each part and based on such the company can focus its attention on such (Christopher & Lee, 2004).
-    FMEA is a tool which Boeing can utilize to understand the problems which occurred and can solve it based on the weightage given to them as per frequency of such occurrences, impact, probability of occurrence etc.

Supply Chain Management

Prior to the Dreamliner project, Boeing managed its supply chain a little differently. They were an iconic name in the aircraft manufacturing and had the expertise to perform the most difficult of tasks of their manufacturing process (Barratt & Dowd, 2006). A number of the subparts and parts were directly created by the company giving them a control over their quality. However, with Dreamliner the company changed its strategy of producing parts themselves. They depended on their suppliers resulting in extreme supplier complexity directly affecting the overall supply chain management. A probable cause of such is, the suppliers chosen by the company lacked the expertise and experience which the manufacturer itself had. Boeing’s supply chain was governed by three segments of outsourcing – the Tier 1, Tier 2 and lastly Tier 3 processes of outsourcing. Certain products were purchased by vendors which were assembled by certain suppliers. These assembled parts were then sent to the main integration hub of Boeing and final integration occurred. This process itself complicates the whole integration, as the supplier who assembled certain subparts did not probably have the quality measures, control procedures and overall technical expertise to check the quality of assembling and resulting product’s suitability with the order (Tang, Zimmerman, & Nelson, 2009).
On the other hand Airbus works in a slightly different procedure. The main development of core parts has been kept under the control of the manufacturer directly. Subassemblies of certain parts are outsourced from four nations – Britain, Spain, Germany and France. They operate directly with suppliers who are in the Tier 1 stage and this lets the manufacturer to work with suppliers in the very design stage itself and further remove all issues during manufacturing. These Tier 1 suppliers, observe the manufacturing in which Airbus directly tracks all of its resources and strongly controls the quality issues and technical performance of their own suppliers. This automatically reduces the quality issues at the very onset itself and saves time and effort. Secondly, as Airbus has a very limited number of suppliers, supplier control management can be done more effectively than Boeing, who has suppliers all around the globe. Over-dependency on suppliers resulted Boeing having face so many troubles (Chaudhuri, Mohanty, & Singh, 2013). Following are certain strategies which are recommended to Boeing to have better control over its supplier management tactics.
-    Boeing should have suppliers who are geographically closer to its headquarters. A large number of the suppliers of Boeing came from as many as fifty different countries. Quite obviously this became a logistics issue for the company. More the suppliers, more will be the complexity of controlling such suppliers, and farther away from the headquarters means that the company had to spend immense travelling cost to send its engineers to those supply countries. This is not an ideal situation for any manufacturing company and should be controlled.
-    Focus on more in house development: Creating an aircraft is an extremely complex process and major parts of its operations needs to be done in house for quality control and to achieve product specification. Outsourcing might apparently prove to be cost effective, but for Boeing it proved disastrous. Had the company, allocated major parts of its product to be developed in house, it would have helped it have better control on the quality and keeping up with the production schedule.
-    Expertise of the supplier checks – More the suppliers, more complexities arise and more processes are needed to check the expertise of the suppliers and the quality control of their supplied parts. Boeing can aim at collaborating with certain suppliers and provide them complete training to develop products which are only suitable for Boeing’s specifications. Training and quality checks can be performed by Boeing itself to avoid any kind of gaps.
-    Reducing the complexities of suppliers: As mentioned earlier, Boeing used to divide its total suppliers into three categories – tier 1, tier 2 and tier 3. Tier 1 supplier obtained products from tier 2 suppliers and assembled and integrated parts. Tier 2 suppliers in turn took spare parts from Tier 3 suppliers and assembled parts and supplied to Tier 1 suppliers. This reduced control and quality checks. This should be immediately stopped by Boeing and keep suppliers in one tier only and personally should check all the assembling of spare parts.
-    Better tie ups and close relations should be maintained with the suppliers which will help Boeing remove the problems it faced with its Dreamliner project. Boeing tried to implement Toyota’s model but failed to completely implement it. Further better communication should be built amongst the manufacturer with every component of its supply chain. This will ascertain in gaining real time information and will avoid the delays it faced. Boeing can use information technology to develop to collaborate with all its suppliers and other parts of its supply chain for real time update of progress and project process. Focus on communication will also help the company in improved engagement of team and better involvement of such.
-    Operational Strategy Map should be utilized by the company and this will help them to create an infrastructure of leadership which will help them associate what is required to be done with the actual development of a project and process. The Operational Strategy Mapping helps in synthesizing elements from three core domains – dynamics of system, balanced score card and facilitation for skills. It creates a process and a product which enhances the creation and the implementation of efforts of organizational change (Soderquist & Shimada, 2018).

To be continued..