Supply chain report for Boeing 787 PDF

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this report tells the story behind the failure of Boeing 787 in its early stage of manufacturing. while the report will also share on what went wrong in their supply chain which was primary reason for the failure and heavy cost that Boeing incurs. ...

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CONSULTANCY REPORT FOR BOEING 787 SUPPLY CHAIN ISSUES

Anglia Ruskin University MOD004050 STUDENT ID: 1822801 Word: 2544, 2157 (excluding content and reference)

Table of Contents 1.Introduction

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1.1 evaluation of Boeing 787

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1.2 Evaluation of Scenario challenges and issues 2. Scenario Recommendation 2.1 First recommendation

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2.2 Second recommendation

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2.3 Third recommendation

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2.4 Fourth recommendation

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3. Project Plan and Risk Assessment 3.1 Risk management 9-10 3.2 Risk identifying

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3.3 Project plan

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3.4 Time-scale

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4. Conclusion

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5. Reference

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Table & Figures

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Figure 1

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Figure 2

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Figure 3

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Figure 4

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Figure 5

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Figure 6

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1. Introduction: A brief history of Boeing Aerospace Corporation and Dreamliner 787 and its high distinctive features.

1.1 Evaluation of Boeing 787 Dreamliner

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With all the success of Boeing in its hundred-year of business venture, the 787 was no than less expected to be a huge success, the great prospect of its presale would somehow suggest it. However, in reality, the 787 was nothing less than a cost burden for the Boeing Company, and the core reason being Boeing poor supply chain and innovation management. So, this report will aim at understanding the supply chain and innovation issues and use theoretical application of supply chain strategy and innovation management to provide recommendation for improving the overall performance and asses risk regarding it. 1.2 Evaluation of Scenario (Challenges / Issues): Evaluating the case study, one of the main reasons for Boeing struggle to deliver 787 Dreamliner is the Boeing supply chain management failing to create an appropriate incentive for supplier and for making it difficult to anticipate problems. Moreover, there was a lack of supply chain skill from Boeing as historically Boeing manufactures most of its aircraft in their facilities and use of outsourcing made the program slower. One of the biggest challenges that Boeing faced is due to the involvement of radical innovation which led to the intrinsic challenge of scaling up composite component to unprecedented size. Furthermore, radical 3

innovation required could not happen in the niche market of small components that the commercial aerospace industry was in that time. For the facilities in the U.S, the only parts that were manufactured for 787 were tail fin, in fact, they even produced that in collaboration with another company. The following are some parts that are manufactured as subassemblies by a myriad of external supplier around the world. The engine was made from Rolls-Royce (U.K) and General Electric (U.S), wings were manufactured from Mitsubishi (Japan) and central landing gear wheel well from Kawasaki (Japan). A more detailed structure of parts procured can be seen in figure 1.

Figure 1, Boeing 787 parts suppliers,

For streamline production, Boeing created a tiered supply chain that would deliver parts preintegrated. For example, Spirit Aero systems would deliver the forward portion of the fuselage to Everett with the cockpit fully “stuffed” with electronics and controls (Tang and Zimmerman, 2009). Boeing would then rapidly “snap-together” each aircraft from just seven parts—two wings, three fuselage sections, the horizontal stabilizer, and the vertical fin—and complete the systems integration in just two to three days (Mecham, 2003b) For Boeing to have a good supply chain performance, there was need of clear and quality innovation management required for the radical components of Boeing 787. And to succeed with an innovation approach or model, collaborations and knowledge sharing has shown playing a significant role and the key for gaining innovative abilities (Enkel, Gassmann, & Chesbrough, 2009). But in case of Boeing 787 there was clear lack of collaboration and sharing of information. With Boeing 787 being a radically innovative product, most of the supplier found themselves in a challenging situation concerning with new design and their engineering capabilities. Moreover, Boeing had sent its staff to help the suppliers sort out the problem and often parts that came to Everett facilities were incomplete and wrongly 4

manufactured, which required dissembling and reassembling. This shows a critical factor that there was lack of communication, coordination and sharing of information, as there would not be need of sending Boeing engineer if the information were shared at the beginning about the complexity of project and technology. As communication is an essential aspect to consider whilst operating innovation management (Medina, Lavado & Cabrera, 2005). Boeing promised ANA that the first aeroplane would be delivered in May 2008 (Mecham, 2011; Schofield, 2010b). However, in 2007, the schedule began to slip from a different supplier which led to the two-year delay of lunch of 787. The additional cost regarding design, dissembling and reassembling, delayed payment, all and all it cost Boeing billions of dollars. The vital cause for the delayed delivery of 787 and the cost add up is primarily due to 787 involving radical technology which led to the scale-up. In more detailed, the Boeing supplier needed to develop new technologies and techniques to manufacture composite fuselages and wings. For example, Kawasaki builds a 17 meters autoclave to cure fuselage section that was 9 or 10 meters, while Mitsubishi built an autoclave with an interior length of 36 meters in order to cure wing boxes. As most people would not understand the standard measurement, these length of autoclave at the time are more substantial and much more sophisticated to build. So, with most supplier involved in this radical innovation, many of supplier struggled to build the large composite parts: thus, leading to scaling up and delayed delivery; thus, poor overall supply chain performance. Based on the evaluation of the scenario with literature application the SWOT analysis would brief the scenario that Boeing 787 was involved in.

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2. Scenario Recommendation: Based on the evaluation of the scenario the primary cause for the challenges builds around 787 was the involvement of radical innovation. With the nature of radical innovation being a capital intensive under most cases and it involving very high risk, Boeing has most likely chosen to outsource for that matter. Through that outsourcing, the problem started to arise. So, to improve those, the recommendation for improving the supply chain performance will be largely based on innovation management and supply chain management.

2.1 The first recommendation will be based on policy around the niche market: (innovation management) For Boeing, the radical innovation required to overcome the challenges could not happen in the niche market of small components. So, the recommendation is that policies of Boeing in innovation management should not target niche innovation alone, based on the assumption that the rest of the market will adopt or select niche innovation when they are sufficiently mature. So, as the Boeing radical innovation cannot place in niche alone: thus, policies of 6

Boeing should sustain the ongoing innovation that is needed to scale up from niche to regime level and they could work on continuous innovation to improve other aspects of Boeing planes. The result of such would help Boeing contract manufacturer having the required technology to deliver high performance.

2.2 The second recommendation is adopting new technologies and embracing the industry 4.0:

Figure 2, Source: MAKA RFID (how RFID tags works)

This recommendation will support Boeing in different aspects of their business, involving supply chain management, customer satisfaction, and overall business performance. Boeing can adopt the RFID technology which is not new but has its benefit that it brings such as, tracking assets at all time, for Boeing the 787 parts could be tracked at all time and also helps to mitigate risk. While it is highly recommended that Boeing should adopt and embrace industry 4.0, which is a new digital industrial technology. The technology will enable Boeing to gather and analyse data across machines, enabling a faster and more efficient way to produce higher-quality goods at reduced costs. The Boeing 787 was designed at lowering cost at maintenance, fuel, and other functions of the plane, adopting the industry 4.0 technology it would further reduce the cost while maintaining or increasing its performance and quality. This adoption will lead Boeing to greater efficiencies and change traditional production relationships among suppliers, producers, and customers- as well as between human and machine. Furthermore, there is nine technology that has formed a building block for the industry 4.0 and Boeing is recommended to adopt all, but if not all, Boeing should aim at 7

adopting Big data and analytics, horizontal and vertical system integration, and industrial internet of things. The three of these will support increasing supply chain performance more than other technologies.

Figure 3. Nine building blocks technologies of industry 4.0. source: BCG analysis

2.3 The third recommendation is based on outsourcing management of Boeing: To have proper outsourcing management, consideration of outsourcing risk is vital, which Boeing does not seem to have done it at best, based on the case study. So, when considering an outsourcing risk, there are few factors that Boeing should understand; first, it is crucial to make a proper due diligence list of potential providers, and there should be accountability contract. Under that list potential providers, Boeing should have good knowledge and insight of supplier balance sheet and competence insurance cover; the reason is that based on the case study Boeing added up a considerable cost resulting from the scaling-up process. Through having accountability measures in place, the supplier would have to pay for delayed delivery and cost of dissembling and reassembling.

2.4 The fourth recommendation is vital for improving supply chain performance:

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It starts with appointing a new supply chain manager (leader) who would have the knowledge and ability to handle the task in hand and can lead the people working under or with him/her. Boeing can use the third recommended strategy of having proper due diligence list of potential managers that can handle and perform the task in hand. By having a good manager, it would start this chain that would overall improve the performance of the supply chain. Through appointing a good manager, there will be better communication which will potentially lead to better control, more coordination, sharing of information and more synchronisation.

Communication leading to control: through having effective communication Boeing can have control, for example, with skilful leader Boeing would send its manager to supplier facilities site and communicate directly while also overseeing the work progress with indirect control. Communication for coordination: an increased coordination can lead to reduction in lead times and costs, alignment of interdependent decision-making processes, and improvement in the overall performance of each member, as well as the supply-chain (group) (Chandra, 1997), (Poirier, 1999), (Tzafestas et al., 1994). Communication for sharing of information: sharing of information can lead to better synchronisation and more integration. In terms of contents of information, (Lee et al., 1998) suggested that inventory level, sales data, sales forecast, and production/delivery schedule should be shared among participating trades to reduce the bullwhip effect. 9

Web service integration: to support and have better communication, Boeing can use web service integration. A core concept of web service integration is the connectivity and interoperability of software components to perform different functions, described in (Min 2002), (Min et al., 2004). This idea can be applied to a business setting, primarily to supply chain management, see (Castro-Leon 2002). Furthermore, Boeing can apply the framework of Min 2002 (figure 3) of web service integration. Through web service integration, it will help in monitoring the status of manufacturing, problem prognosis, decision support for problem-solving and much more.

Figure 4: proposed framework (Min 2002)

3.Project plan for supply chain and risk assessment 3.1 Risk management: Risk management is the process that attempts to manage the uncertainty that influences the achievement of objectives, with the goal of reaching the objectives and thus creating value for the organisation in which it is applied (COSO, 2004). The figure 4, shows the process or steps when managing risk. To have a successful risk management there are several measures that could be taken, the following are some: 1.

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Involve all levels of staff and management in the process.

2. Check controls of relevant and effective. 3.

Ensure risk owner takes responsibility for management of risks under their control.

4. Fourth, focus on risk cause, not its symptoms.

While there are also possibilities that the risk management could fail, the following are some of the reason. Not undermining this would increase the chance of successful risk management. 1. Lack of top management support. 2. Did not engage all stakeholders. 3. Failure to share information. 4. Risk management not embedded within planning and management system.

3.2 Risk identifying: In this paper multiple risk are identified, it shows the probability, the level of impact and the response that could be implemented. The possible response for risks is termination (avoidance), treatment (reduction), transfer (sharing) and toleration (acceptance) (COSO, 2004).

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3.3 Project plan The project management is an area of management that helps in handling project. The theory of project is provided by the transformation view on operations where project is conceptualised as a transformation of inputs to outputs. The project plan for Boeing aims to achieve higher performance on overall basis through achieving multiple others objective which are listed below: 1. Improving customer satisfaction and value 12

2. Reducing complexity 3. Re-designing the supply network 4. Improving integration/synchronisation in the supply chain 5. Selecting and implementing a new information system Project activities, output and objective:

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3.4 Time scale: project plan (see figure 6) To understand the practicality and to have a smooth implementation of the plan, the excel graph supports that aim effectively and efficiently. The excel graph helps out practical aspect of the project, such as minimum time it will take to deliver, and which tasks need to be completed before others can start. Months Weeks

January 1st -2nd week 3rd-4th week

Febuary March 1st -2nd week 3rd-4th week 1st -2nd week 3rd-4th week

April 1st -2nd week 3rd-4th week

May 1st -2nd week 3rd-4th week

Appointing new supply chain manager Re-assesing outsourcing network Creating accountibilty Employing web service integration tech Adopting industry 4.0 Employ RFID system Sharing of information Creating coordination Building control Execute innovation management

Figure 6: project plan

4.Conclusion: The main supply chain issues that Boeing has faced came from the radical component parts that 787 was involved in and the poor outsourcing management resulting in components delay and wrongly assembled components. While recommendations are provided to improve the supply chain performance, along with the project plan to implement the recommendation, but it has its own limitation or risk assessed to it.

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5. Reference: Castro-Leon

E.,

“A

perspective

on

Web

Services”:

http://www.webservices.org/index.php/article/articleview/113/1/24/, 2002 Chandy RK, Tellis GJ. Organizing for radical product innovation: the overlooked role of willingness to cannibalize. J Market Res 1998; XXXV:474–87. Chandra, C., A formal system analysis methodology for a cooperative supply chain, COSO. (2004). Enterprise risk management - Integrated framework, executive summary, framework.

Enkel, E., Gassmann, O., & Chesbrough, H. (2009). Open R&D and open innovation: exploring the phenomenon. R&d Management, 39(4), 311-316. Medina, C. C., Lavado, A. C., & Cabrera, R. V. (2005). Characteristics of innovative companies: a case study of companies in different sectors. Creativity and Innovation Management, 14(3), 272-287. Mecham, Michael, June 16, 2003b. The three-day airplane. Aviaion Week and Space Technology. Mecham, Michael, January 24, 2011. 87 months and counting. Aviation Week and Space Technology Min J. U., Supply chain visualisation through Web service integration, PhD report, 2002. Min J. U., Bjornsson H., Construction supply chain visualisation through web services integration, CIFE TR #149, Stanford University, 2004. Proceedings of the 2nd Annual International Conference on Industrial Engineering Applications and Practice, November 12-15, San Diego, CA., 1997. Poirier C.C., Advanced Supply Chain Management: How to Build a Sustained Competitive Advantage, BarrettKoehler Publishers, Inc., San Francisco, CA. 1999. Schofield, Adrian, December 20, 2010b. Dream meets reality. Aviation Week and Space Technology Tang, Christopher S., Zimmerman, Joshua D., 2009. Managing new product development and supply chain risks: Supply Chain Forum 10 (2), 74-86.

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Tzafestas S. and Kapsiotis G., Coordinated control of manufacturing/supply chains using multilevel techniques, Computer Integrated Manufacturing Systems, Vol. 7 No. 3, 1994. Van der Waal, D. (2010). Introduction micromanagement.

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