What supply chain management problems did Boeing face in the development of the Dreamliner PDF

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Group Assignment exploring supply chain management strategies and their application to the Boeing Dreamliner...

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What supply chain management problems did Boeing face in the development of the Dreamliner?

During the development of the 787 Dreamliner, Boeing faced a series of critical problems. By focusing on improving efficiency and reducing costs, they only increased their budget and extended their lead times significantly. Boeing adopted the strategy of outsourcing both locally and internationally in an attempt to lower expenses from $10 to $6 billion and reduce development time from six to four years. (Forbes, 2013). However, the result was quite the contrary. With outsourcing comes the challenges associated with physical distance and virtual communication, as well as escalated costs. (Forbes, 2017). Due to not being able to oversee operations, Boeing had a lack of managerial control. The online communications tool, Exostar was intended to overcome this problem in which suppliers were to put real-time information about their current stage of work. Nevertheless, this tool did not succeed. (Design News, 2009). Boeing and Tier-1 suppliers were never aware of problems in a timely manner due to cultural differences that come with international suppliers. Although Boeing’s outsourcing model was a take on Toyota’s successful supply chain, they did not have the key elements which provided Toyota with such prosperity. Toyota maintains close control over the design and engineering of their vehicles, whilst ensuring their suppliers have a proven ability to deliver quality. By working closely alongside suppliers, mutual respect and professional trust is obtained, which is an aspect Boeing was deficient in. (Forbes, 2013). Boeing did not cultivate binding relationships with their suppliers nor did they monitor them closely. 9This supply chain management predicament delayed production and increased costs as unaccounted for problems arose. If face-to-face interactions were regulated, Boeing and the Tier-1 suppliers would be completely informed with work progress and be able to identify potential problems early. Another supply chain management problem Boeing encountered with the development of the Dreamliner was the fact they were using a number of major technologies unknown to the aviation world. Although innovation comes with its benefits, utilising technologies that haven’t been proven in an airplane before is extremely risky. The risk of innovation requires a higher involvement by Boeing in the manufacturing and development process to ensure operations are running smoothly. However, Boeing decided to become less involved by diverting these heavy responsibilities to subcontractors. This caused significant problems to keep occurring, delaying the project and heightening expenses. By trying to improve efficiencies, Boeing utilised Lithium-ion batteries which are known to overheat and cause fires that are difficult to stop. (Scientific American, 2014). The unknown risks of whether these technologies could safely withstand international travel was a problem Boeing did not address appropriately. Due to their inability to account for potential risks and costs, their supply chain was heavily impacted. With manufacturing planes comes the expertise required to carry it out and some exist exclusively in certain countries. For Boeing, more than 30% of their components were outsourced overseas. Due to this high level of international involvement, cultural and language difficulties are presented. These problems cause trustworthy relationships to be difficult to establish with not only the physical distance but cultural distance separating them. For global supply chains especially, there is a need to maintain strong outsourceroutsourcee association as operations are essentially put into their hands. Boeing did not have the correct measures in place to cater to the loss of control and cultural barriers. If they had predetermined measures to overcome these hurdles, Boeing could perhaps not be the failure it is known for today.

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outsourcing: physical distance, lack of managerial control/ overseeing operations. Communication face-to-face could not be done which brought about the app, Exostar that was supposed to provide real-time feedback on current operations. The app failed and Boeing and Tier-1 suppliers were not aware of any complications. (References: why outsourcing increases risks and costs)- Boeing is many billions over budget with the first planes delivered three years late. Tiered Outsourcing: Tiered outsourcing allows for Tier-1 strategic partners to serve as integrators, assembling different parts and subsystems produced by Tier-2 and Tier-3 suppliers. Hart Smith predicted some Tier-1 strategic partners did not have the kow-how to develop different sections of the aircraft or the experience to manage Tier-2 suppliers. To regain control of the development process, Boeing was forced to BUY one tier-1 suppliers and supply expertise to others. Overheating batteries: Boeing tried to improve efficiencies by utilizing an electrical system made of lithium-ion batteries. Lithium batteries are known to overheat, cause fires and them to be hard to put out. Boeing’s cost-cutting manner did not predict the risks or steps to mitigate them in their planning process. Coordination: Boeing did not provide on-site support for its suppliers, but gave the responsibility to subcontractors who did not carry this job out. Boeing sent hundreds of its engineers to the sites of all tier suppliers to solve various technical problems. Boeing essentially had to redesign the entire aircraft sub-assembly process. Innovation Risk: Boeing 787 involved a combination of technologies, unknown to the aviation world. These technologies had never been proven in any airplane before. This innovation risk requires a greater involvement by Boeing in the development and manufacture of the aircraft. HOWEVER, Boeing chose to be less involved, giving much of the detailed engineering and procurement to subcontractors. - This caused unexpected problems, delaying the project and increasing its costs. Risk of partially implementing the Toyota Model: Boeing’s outsourcing model was a take on Toyota’s supply chain which has allowed the company to be hugely successful. However, Boeing did not implement the key elements of Toyota’s outsourcing model that provided the success. Toyota maintains a tight control over the overall design and engineering of its vehicles and only outsources to suppliers who have proven their ability to deliver with the required timeliness, quality, cost reduction and continuous innovation. Toyota works very closely with their suppliers, developing integrity and mutual respect, providing professional trust. Offshoring Risk: There is the inevitable aspect that comes with manufacturing an airplane and that is some expertise only exists in certain countries. For Boeing, more than 30% of their components came from overseas. This presents cultural and language differences along with the physical distances involved in a lengthy supply chain.

REFERENCES:

Forbes. (2013, January 17). The Boeing Debacle: Seven Lessons Every CEO Must Learn. https://www.forbes.com/sites/stevedenning/2013/01/17/the-boeing-debacle-seven-lessonsevery-ceo-must-learn/#610f05aa15c1 Forbes. (2017, July 17). The Pros and Cons of Outsourcing. https://www.forbes.com/sites/deeppatel/2017/07/17/the-pros-and-cons-of-outsourcing-andthe-effect-on-company-culture/#2c134184562d Design News. (2009, August 24). What’s Causing Huge Delays for the Boeing 787 Dreamliner? https://www.designnews.com/materials-assembly/whats-causing-huge-delaysboeing-787-dreamliner/62172041838334 Scientific American. (2014, December 18). How Lithium Batteries Grounded the Dreamliner. https://www.scientificamerican.com/article/how-lithium-ion-batteries-grounded-thedreamliner/ Forbes. (2013, January 21). What went wrong at Boeing? https://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-atboeing/#7022e3c67b1b...