Boeing 787s Outsourcing Problems - Research Paper Example

Research paper: Information systems management Boeing 787’s Outsourcing Problems Boeing, which is a renowned global designer, manufacturer and seller of fixed-wing planes, rotorcraft, satellites as well as rockets, is currently being faced by key information technology challenges leading to defects in its electrical systems, hence its current grounding (Dominic, 2013).Boeing passionately embraced outsourcing, through the use of its Integrated Supplier Information System, both internationally as well as locally, as a strategy of accelerating development as well as cutting costs(Steve,2013). This move was intended to lower development expenditure from 10 to 6 billion dollars and development time from 6 to 4 years (Tang &Zimmerman, 2009).Supply chain integration is basically the “approach of technically linking supply chain of vendors and customers” so as to make sure the “process is streamlined and to increase efficiency and accuracy.”(Pearlson & Saunders, 2010, p.152).However the final outcome was a complete opposite. As things stand now, apart from the project being in over budget of billions of dollars, it is also behind schedule by 3 years (Steve, 2013). Boeing’s Chief of Commercial Airplanes, Jim Albaugh, explains that they have spent so much more money than anticipated trying to recover than they ever would have used had they tried keeping major technologies nearer home (Steve, 2013). Boeing 787 Information System Issues The main problem facing Boeing is shortfall in supplier oversight due to enthusiastic embrace of Integrated Supplier Information System, which allows suppliers to log in a portal, provided by Boeing, and thus need not necessarily meet with Boeing’s main team in US (Steve, 2013). Boeing further, rather than planning for face-to-face basis of communication, or on-site communication relied so much on their information systems with a web-based communications instrument known as Exostar that required suppliers to feed the latest information regarding their work progress (Steve, 2013). This IT equipment was to offer improved control, supply chain visibility as well as integration of important business processes, thus reducing development cost and time (Steve, 2013).Thus, instead of face-to-face kind of communication, the information technology tool was supposed to, in real time, flag problems. Not surprisingly, this technology miserably failed. As a result of this “remote control” outsourcing business, Boeing 787 encountered several Information systems problems that included electrical system faults in addition to battery issues that resulted to the Dreamliner’s grounding (Dominic, 2013). This is entirely blamed on 787’s tiered outsourcing which involved adoption of a new model of outsourcing, alongside new information technology system of supply chain, which company engineers blame on poor quality elements emanating from subcontractors who have worked largely outside Boeing’s view (Dominic, 2013).At the moment, several business executives are increasingly expecting “IT to not just provide technologies but provide the engine for efficiency” as well(Pearlson &Saunders,2010,p.145). Thus, as companies struggle to search for innovative and different approaches to increase efficiency as well as business value, executives increasingly anticipate to ride on IT as a major element of the solution(Pearlson & Saunders,2010).According to one electrical engineer privy to the information, the company’s risk is not mostly the battery but the power panels (Dominic, 2013) The engineer explains that unlike earlier aircrafts from Boeing, the insides of the plane’s power circulation panels-that are in charge of electricity flow to the various plane’s several systems- resemble ‘Radio Shack’- having elements that are plastic, cheap as well as prone to breakdown (Dominic, 2013). Problem identification Boeing never makes batteries. The aircraft maker has always outsourced from external suppliers, just as it does for landing gears and engines. The supply chain of any given corporation is a process that “begins with raw materials” ending with finished service or product ready for delivery(Pearlson & Saunders,2010,p.152) Supply chain management is another enterprise system commonly used to manage integrated supply chain. Thus, in that esteem, the 787 is just like the 737 and 777, which are renowned aircrafts for reliability (Dominic, 2013).The 787’s case is, however, took a very different turn, as far as Boeing’s previous outsourcing structure is concerned (Dominic, 2013).On 787 Dreamliner case, Boeing contracted with 50 top tier suppliers and handed them absolute control in designing their section of the aircraft (Dominic, 2013).Those key partners therefore, had to share in the risk, own design as well as ensure upfront investment. Each contractor was also tasked with administration of its own subcontractors (Dominic, 2013).The structure was however changed for 787,according to Christopher Tang who is a business administration professor at UCLA School of Management(Tang &Zimmerman, 2009). Generally, a company outsourcing is only aware of what is going on with its tier one supplier and has no coordination, real understanding, and visibility of how various parts fit together (Tang &Zimmerman, 2009).Tang argues that “with a brand new design and so many parts and so many players, it’s a major challenge,”. The management simply cannot trace the problem to each single unit and supplier (Dominic, 2013).Tang concludes, “That’s really difficult.”An electrical arcing and short circuiting caused by a malfunction in a component that regulates generator as well as plugging into the motherboard power panel (Dominic, 2013).Though the sparking within the boards was small, and produced no real threat to the safety of the passengers, it caused cockpit gadgets to show one of the 787’s 6 generators was not working (Steven, 2013). Whereas the 787’s multiple exchange power systems readily took care of that, the pilot was forced to divert as a precautionary measure. The vice president of Boeing, Mike Sinnett explained, “While we do not have the specific exact root, the issues have all been traced back to a single lot of (circuit) boards manufactured by a subtier supplier.” (Dominic, 2013).Three years prior to launching of 787, John Hart-Smith, an eminent aircraft structures engineer had predicted, in an internal paper to Boeing, the issues that would crop up due to excessive outsourcing(Steve,2013). Hart-Smith now retired and residing in Australia, claimed that his outsourcing underlying conclusions still apply (Dominic, 2013).Hart-Smith claims that the problem with Boeing management is their thinking that they could outsource responsibility and risk alongside nearly all of the work. This is something that is not possible, since if anything malfunctions in a vital element from any supplier, the FAA holds Boeing responsible for problem resolution as well as paying a large amount of the related costs (Dominic, 2013). Possible solutions and implementation Traditionally, Boeing used in-house experts to create specifications for each part of the aircraft prepared by suppliers and in addition had internal technical capability which enabled it to directly monitor whether the presented work was up to the required specifications (Dominic, 2013).The company thus needed absolute knowledge of the happenings and Hart-Smith had warned that if Boeing outsourced so much work, a day would finally come when internal capability would not be adequate to even write down the specifications (Dominic, 2013).Hart-Smith strongly believes this is what took place at Boeing: the company simply let so much capability glide away from them (Dominic, 2013).First and foremost Boeing has since come up with a completely new plan to test as well as certify enhancements to the Dreamliner’s battery system (Dominic, 2013)This was a 3 pronged plan that comprised of; foremost, improving battery design features so as to prevent malfunctioning from occurring as well as isolating any battery that do(Randy,2013). Secondly, there has been an improvement of operating, testing and production processes so as to ensure the best levels of performance and quality of the battery together with its components(Randy,2013).Lastly, Boeing has introduced an innovative enclosure system, which is able to keep any intensity of overheating of battery from being noticed by the travelers or affecting the aircraft, in case there is unlikely incident of battery failure (Randy, 2013).The management has also acknowledged the shortfall in oversight of supplier a few years back and has significantly staffed up Boeing’s supplier management group since then (Dominic, 2013).Boeing has also had an important effort with its suppliers to address issues related to reliability so as to assist in reduction of frequency of replacements of parts(Steve,2013) After analyzing the Boeing’s outsourced vendor supply chain to see what went wrong, another alternative can be for Boeing to back source its supply chain and implement principles and IT concepts (Tang &Zimmerman, 2009). Boeing could have further averted the problems that she experienced through selective outsourcing or rather strategic sourcing by choosing which system capabilities to retain internally and the ones to entrust with an outsider (Pearlson & Saunders, 2013).Additionally, Boeing could have utilized information systems in a better way by including product planning, product design, contract management, logistics as well as sourcing (Pearlson & Saunders, 2010) “Globalization of business as well as ubiquity of communication networks and information technology has enabled businesses to use suppliers from almost anywhere in the world” (Pearlson & Saunders, 2010, p.152).Boeing should thus have used “best-of-breed” technique whereby they could have chosen suppliers purely on their expertise in particular technology such as battery manufacture and electrical systems design management (Pearlson & Saunders, 2013). Justification Integration of information technology in supply chain has consequently led to creation of “an additional level of complexity for managing the supply chain.”(Pearlson & Saunders, 2010, p153). Based on the current issues plaguing Boeing it is imperative that it gets to the bottom of the matter very quickly. It is tremendously difficult to design a reliable and safe complex system and this is a challenge that cuts across the board from aerospace to automobile systems. Integrated supply chains usually have got “several challenges”, basically emanating from “different degrees of integration and coordination” amongst members of supply chain(Pearlson & Saunders,2010,p152).At the most primary stage, the issue of information integration exists and partners ought to be in agreement on the kind of information to share, the format of that information ,technological standards to be utilized in sharing, as well as the security to be employed so as to “ensure that only authorized partners access it.”(Pearlson & Saunders, 2010, p152).Finally there must be establishment of trust between the partners so that they can “solve higher-level issues” that may crop up, like the ones being faced by Boeing (Pearlson & Saunders, 2010, p.152).Boeing and partners therefore must finally get to the root of the Dreamliner’s electrical system malfunctioning as well as battery issues and fix them, just the way Toyota got to the root of its acceleration pedal issue. It is the expectation of everybody that the 787s will safely be on air again as a result of profound systems engineering as well as more comprehensive testing (Steven, 2013).This analysis clearly highlights the dangers of relying on a widespread supply chain whereby information exchange issues may not only create extensive problems but also dangerously compromise an organization’s capability of executing its business as planned(Pearlson & Saunders,2010).Thus creating a drastically different approach may lead to encountering unanticipated issues. In some instances, it would set a company so behind their competitor that it may destined for doom (Pearlson & Saunders, 2010). References Dominic, G. (2013). Boeing 787"s problems blamed on outsourcing,lack of oversight. The Seattle Times , np. Pearlson,K., & Saunders, C. (2010). Managing and Using Information Systems:A Strategic Ap[proach-4th Edition. New York,NY: John Wiley & Sons. Pearlson,K., & Saunders, C. (2013). Managing and Using Information Systems:A Strategic Ap[proach-5th Edition. New York,NY: John Wiley & Sons. Randy, T. (2013). Testing Our Solution. Randys Journal , np. Steve, D. (2013). What Went Wrong At Boeing? Forbes , np. Steven, E. (2013). A Systems Engineering View of the Boeing 787 Dreamliner. MIT Sloan Management , np. Tang Christopher, Z. J. (2009). Managing New Product Development and Supply Chain Risks. Supply Chain Forum , pg1-14. Read More