4-3 Short Paper: The Boeing Company
A supply chain is a series of integrated processes within and across a company that produce a product or service to meet the demands of a consumer (Krajewski, et. al., 2013). Every company has a specific supply chain design and this design is implemented to meet the company’s competitive priorities. Supply chain management refers to the coordination of the company’s processes with those of customers and suppliers to match the flow of services, materials, and information with customer demand. In today’s global market companies are choosing to outsource many of their processes in order to save time and money. While outsourcing and decentralizing many supply processes may seem to be more cost effective, this will also come with many new challenges.
The Boeing Company is the world’s largest aerospace company and one of the top aircraft manufacturers in the world (Boeing, 2014). The company employs over 170,000 people across 70 countries and exports products to 150 countries. In 2003, Boeing decided to adopt Toyota’s supply chain strategies for production of a new aircraft, the Boeing 787. This strategy involved moving all manufacturing to its Tier 1 suppliers who would be responsible for coordinating with all Tier 2 and Tier 3 suppliers and then the finished parts would be shipped to Boeing for assembly and distribution (Collins, 2010). This created an extreme shift in Boeing’s supply chain causing some significant issues for the company. They struggled with quality, delivery, communication, and control. This paper will outline the shortcomings of the 787 project and explore the significant changes Boeing has implemented as a result.
The Boeing Company decided to outsource close to 70 percent of their supply chain for the 787 project (Denning, 2013). This was nearly a fifty percent increase from previous production of the 737 and 747. The company projected that this approach would significantly decrease development time and save the company over 4 billion dollars. The supply chain strategy was supposed to be modeled after Toyota’s supply chain model however the implementation of the new strategy fell short. Some of the key elements of Toyota’s supply chain model are control, trust, and communication. Toyota only works with “suppliers who have proven their ability to deliver with the required timeliness, quality, cost reduction and continuous innovation” (Denning, 2013, para.22). In addition to this, Toyota maintains significant control over the design and engineering of their products. They have established a mutual trust relationship by responding to issues and concerns of their suppliers with integrity and mutual respect. Boeing did not properly implement these key elements into their supply chain model, resulting in inconsistent quality, missed deadlines, and a loss of billions of dollars for the company.
Boeing envisioned a supply chain strategy that would cut costs and improve efficiency while maintaining quality and reducing the companies risk. They planned to achieve this by transferring responsibility, cost, and risk to their Tier 1 suppliers. The tier one suppliers where to collaborate and communicate with Tier 2 and 3 suppliers in order to coordinate all manufacturing of all Boeing 787 parts. The Boeing Company ran into many different issues with this strategy. First the company chose a logistic software called Exostar network to communicate and synchronize their supply chain (Collins, 2010). While Exostar is designed to help manage challenging and complex supply chains, the company’s suppliers were not properly trained on the implementation of this system (Exostar, 2014). Many of these suppliers did not have the means nor the know how to solve issues with the program and Boeing did not anticipate these logistical problems (Dennings, 2013). The Exostar network is designed to increase visibility and control across the entire supply chain. The problems did not lie with the...
References: Boeing (2013). Boeing honors 17 suppliers for exceptional performance. Retrieved from http://boeing.mediaroom.com/index.php?s=20295&item=128662
Boeing (2014). Boeing in brief. Retrieved from http://www.boeing.com/boeing/companyoffices/aboutus/brief.page
Collins, M. (2010). The Boeing supply chain model. Manufacturing. Net. Retrieved from http://www.manufacturing.net/news/2010/07/the-boeing-supply-chain-model
Denning, S. (2013). What went wrong at Boeing? Forbes. Retrieved from http://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/
Exostar (2014).Business challenges. Retrieved from http://www.exostar.com/Business-Challenges/
Gates, D. (2012). Supply chain changes keep more 787 assembly work local. Further change for next new Boeing plane. The Seattle Times. Retrieved from http://seattletimes.com/html/boeingliveeventcoverage/2018663602_small_changes_to_the_787.html
Gates, D. (2013). McNerney: Boeing will squeeze suppliers and cut jobs. The Seattle times. Retrieved from http://seattletimes.com/html/businesstechnology/2021037931_boeingmcnerneyxml.html
Hiltzik, M.(2011). 787 Dreamliner teaches Boeing costly lesson on outsourcing. Los Angeles Times. Retrieved from http://articles.latimes.com/2011/feb/15/business/la-fi-hiltzik-20110215
Krajewski, L., Ritzman, L., & Malhortra, M. (2013). Operations Management: Processes and Supply Chains 10th Edition. Prentice Hall, Upper Saddle River, NJ.
The Boeing Company (2010). Boeing Quality Management System: Requirements for Suppliers. Retrieved from http://www.boeingsuppliers.com/supplier/index.html
Please join StudyMode to read the full document