Information Systems Management: Boeing 787 - Case Study Example

Boeing 787 Boeing is a renowned global designer, manufacturer and seller of fixed-wing planes, rotorcraft, satellites as well as rockets, currently being faced by key information technology challenges leading to defects in its several electrical systems. Hence, its current grounding (Gates, 2013).These problems occurred when making a decision to build a “complex supply chain involving over 50 partners scattered in 103 locations all around the world” (Pearlson& Saunders, 2013, p. 166). Since Boeing is an aerospace company operating in five different segments in the airplane manufacturing industry must rely heavily on its information systems (IS) using technologies that are pertinent to the business’s environment, such as hardware, software, networking, and data. However, one of the information technology issues was found on the company’s software programs “which were designed by various manufacturers” and the lack of communication with each other led to a malfunction in the integrated supply chain (Pearlson& Saunders, 2013, p. 166). Other issues related to information technology (IT) was the information exchange that could create more problems for the company to be able to implement its business process. According to Pearlson& Saunders (2013), Boeing “tapped expertise of various companies in different areas such as composite materials, aerodynamics, and IT infrastructure to create a network in which partners’ skills complement each other” (p.166). Managing the services infrastructure in today’s digital world can be a challenge for organizations that depend on an elaborate information systems infrastructure. Maintaining such infrastructure could be very costly for most companies because of the fees associated for upgrading hardware and software, which might require hiring in-house experts for support. That is the reason organizations of any size are turning to outside service providers for their support needs. According to MISI (Citations), an organization’s management needs an infrastructure to support a variety of activities, including reliable communication net-works to promote collaboration between suppliers and customers (such as the case of Boeing and its outsourced suppliers), accurate and timely data and knowledge to gain business intelligence, and information systems to aid decision making and support business processes. “Boeing had outsourced the production on the two most critical parts of the plane- the wings and the fuselage” (Pearlson& Saunders, 2013 p.166). This move was intended to reduce "the financial risks in a $10 billion-plus project for designing and developing a new aircraft and reduce the new project development cycle time" (Pearlson& Saunders, 2013 p.166). Thus, Boeing decided eagerly to turn to outsourcing and offshoring providers, both locally and internationally, to handle the company’s global supply chain network (Tang &Zimmerman, 2009). Boeings supply chain to be handed to outsiders was not a smart move, especially in the way the outsourcing procedure was done.The company faced many problems concerning outsourcing. The lack of oversight caused Boeing to face an “indefinite grounding of the Dreamliner because of a battery fire on a 787 in Boston and the smoldering of another battery on a flight in Japan a week later” (Citations ). Most of the problems facing Boeing can be attributed to the design of an integrated supply chain. Contracting with so many suppliers, “handing them complete control of the design of their piece of the plane” was destined for failure (Citations). These information systems related to the organization should have been handled more carefully. Tang & Zimmerman in their 2013 paper argue that in order to generate more revenue as well as stimulate response from the market, Boeing made a strategic decision of building the 787 Dreamliner. Thus, the 787 is not only an innovative aircraft, but also makes use of an exceptional supply chain whose principal intention is drastic reduction of development time as well as cost. Nonetheless, Inspite of considerable capital investment as well as management endeavors, Boeing has been plagued by a sequence of delays for its maiden flight and its way back in its schedule for delivery of 787 to its customers. According to Tang & Zimmerman (2013), to stimulate revenue growth and market response, Boeing decided to develop the787 Dreamliner. The 787 Dreamliner is not only a revolutionary aircraft, but it also utilizes an unconventional supply chain intended to drastically reduce development cost and time. However, despite significant management efforts and capital investment, Boeing is currently facing a series of delays in its schedule for the maiden flight and plane delivery to customers. As things stand now, apart from the project being in over budget of billions of dollars, it is also behind schedule by three years. 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 (Denning, 2013). Tang& Zimmerman (2013) provide a complete analysis about Boeing unconventional supply chain, identifying the risks associated as well as Boeing’s risks mitigation strategies in order to speed up its development and production processes. Sodhi& Tang (2009), there are many types of supply chain risks ranging from “technology to process risks, from demand to supply risks, and from IT system to labor risks” (p.79)A number of perils that led to main delays in the development program of the 787 comprised of the utilization of different unreliable technologies. Boeing thus suffered the following technical issues that led to a sequence of delays. Firstly there were issues pertaining to Composite Fuselage Safety, which was a material never before used in aviation history and therefore several concerns were raised for the safety of passengers. Secondly, there were issues regarding Engine Interchangeability, which was amongst principal benefits of the Dreamliner’s modular design notion and was to permit airlines to utilize 2 different kinds of engines (GE and Rolls-Royce) interchangeably. However because of the latest technical complications and incongruity of parts, it would take at least 15 days instead of the planned 24 hours to change engines from one model to the next(Leeham Co.205).The 3rd issue pertains Computer Network Security; the present 787 electronic configuration aligns the passenger’s electronic entertainment on similar computer network as the aircraft control system, raising serious security concerns for possible attack from terrorists(Zetter,2008). Some of the risks that caused major delays inthe Dreamliners development program involve the use of variousunreliable technologies. Boeing encountered thefollowing technical problems that led to a series ofdelays. First, the Composite Fuselage Safety Issues, a material that has never been used before in the industry and there were many concerns for the safety of passengers. Second, Engine Interchangeability Issues is one of the key benefits of the 787s modular design concept was to allow airlines to use two different types of engines (Rolls-Royce and GE) interchangeably. Due to recenttechnical difficulties and part incongruity, it wouldtake 15 days to change engines from one model to theother instead of the intended 24 hours (Leeham Co, 205). Third, Computer Network Security Issues: The current configuration of electronics on the Dreamliner putspassenger electronic entertainment on the samecomputer network as the flight control system. Thisraises a security concern for terrorist attacks (Zetter, 2008). Additionally, the following are some of the Dreamliner’s risk factors; supply process, technology, customer demand and management labor. Amongst the given risk factors, the process risk is most likely to lead to main delays since its effectiveness is dependent on the harmonized just-in-time deliveries of all key sections from 787’s tier one strategic partners. Thus, in case of delay in delivery of a section, there will be a corresponding delay in the delivery of the entire aircraft.Eventually, 787’s possible proactive mitigation of risk strategies is restoration of confidence in its ability of building innovative aircrafts like the 787, there are specific mitigation of risk strategies that Boeing may have embarked on at the program’s onset so as to proactively and effectively supervise possible risks. In addition, some of the risk factors of Boeing’s787 are the followings: technology, supply, process, management labor, and customer (Demand). Among these risk factors, the process risk is likely tocause major delays because its efficiency depends onthe synchronized just-in-time deliveries of all majorsections from Boeings tier-1 strategic partners. If thedelivery of a section is delayed, the delivery schedule ofthe whole aircraft is delayed. Finally, Boeings potential proactive risk mitigationstrategies is to restore confidence inits capability of developing innovative aircrafts such asthe Dreamliner, there are certain risk mitigationstrategies that Boeing could have embarked on at theoutset of the program to better manage potential risks proactively. Problem Identification 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 (Denning, 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 (Denning, 2013). This IT equipment was to offer improved control, supply chain visibility as well as integration of relevant business processes, thus reducing development cost and time (Denning, 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 (Gates 2013). This is entirely blamed on 787’s outsourcing of supply chain, which company engineers blame on poor quality elements emanating from subcontractors who have worked largely outside Boeing’s view (Gates, 2013).This basically implies that collaboration and communication are very important particularly for firms outsourcing their products. The capability to interconnect, leading to external and internal constituents to collaborate and communicate with one another, is one of the rationales why information systems in corporations have become such significant as well as powerful. The supporting infrastructure comprises of a wide array of elements, for instance, the networking software and hardware that make interconnection of various computers possible, literally facilitating collaboration around the globe. Lack of visibility of supply chain caused supply risk in Boeing. Thus, without timely and accurate information regarding structure of supply chain as well as the progress development at every supplier’s location, Exostar’s value would significantly have been compromised. In order to enhance accuracy of information, Boeing ought to have demanded that all her strategic suppliers as well as partners give all embedded information in the supply chain correlation instead of depending on alerts produced by the program simply after being affected directly. Boeing should also have provided enticements to all suppliers so that they could utilize Exostar in communicating accurate information in a manner that was timely. Therefore, Communications and Collaboration are very criticalespecially for organizations that outsourced their products. Oneof the reasons why information systems in organizations have become so powerful andimportant is the ability to interconnect, allowing internal and external constituents tocommunicate and collaborate with each other. The infrastructure supporting this consistsof a variety of components, such as the networking hardware and software that facilitate the interconnection of different computers,enabling collaboration literally around the world. Boeings supply risk was caused bythe lack of supply chain visibility. Without accurate andtimely information about the supply chain structure andthe development progress at each suppliers site, thevalue of Exostar has been compromised significantly. Toimprove information accuracy, Boeing should haverequired that all strategic partners and suppliersprovide all information imbedded in thesupply chainrelationships instead of relying on alerts generated fromthe program only after they were directly affected. Also,Boeing should provide incentives for all suppliers to useExostar to communicate accurate information in atimely manner. 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 parts that are plastic, cheap as well as prone to breakdown (Gates, 2013). Any slight dysfunction, therefore, in the main system, for instance, a fault in the power panel that led to a diversion of a flight of United 787 to New Orleans, ought to be made known to Federation Aviation Administration (FAA) (Gates, 2013). Boeing is also faced by an indefinite grounding of their aircraft due to a battery fire in Boston on a 787 as well as flaming of another battery a week later on a Japan flight. Another engineer claimed that the amount of such malfunctions accounted for the Dreamliner is approximately at par with the ones accounted for Boeing’s preceding new aircraft, the 777; however, the case of 787 is different since it has a lot of predominance of electrical malfunctioning systems (Denning, 2013). Boeing is essentially one of the top practitioners of system designing and management of complex systems principles and leads in information systems engineering (Steven,2013).However, given the complicated information and electrical system of Boeing 787, it is in fact quite commendable that only one failure has been reported (Eppingler, 2013). Boeing never makes batteries. The aircraft maker has always outsourced from external suppliers, just as it does for landing gears and engines. Thus, in that esteem, the 787 is just like the 737 and 777, which are renowned aircrafts for reliability (Gates, 2013). The 787’s case is, however, very different, as far as outsourcing structure is concerned (Gates, 2013). On 787 Dreamliner case, Boeing contracted with 50 top tier suppliers and handed them absolute control in designing their section of the aircraft (Gates, 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 management of its subcontractors (Gates, 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). 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 continues to argue that “with a brand new design and so many parts and so many players, it’s a major challenge,”. The management just cannot trace the problem to each single unit and supplier (Gates, 2013). 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 (Gates, 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 six generators was not working (Eppinger, 2013). Whereas the 787’s multiple exchanges control systems readily took care of that, the pilot was forced to divert as a precautionary measure. Three years prior to launching of 787, John Hart-Smith, an eminent aircraft structures engineer predicted the issues that would crop up due to excessive outsourcing (Steve, 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 (Gates, 2013). Possible solutions and implementation Traditionally, Boeing’s 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 monitor directly whether the presented work was up to the required specifications (Gates, 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 (Gates, 2013). Hart-Smith firmly believes this is what took place at Boeing: the company simply let so much capability glide away from them (Gates, 2013). First and foremost, Boeing has since come up with an entirely new plan to test as well as certify enhancements to Dreamlimer’s battery system (Gates, 2013). The 3- pronged program, such as 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 can keep any intensity of overheating of the 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 (Gates, 2013). Boeing has made a substantial effort with its suppliers to address issues related to reliability so as to assist in the reduction of frequency of replacements of parts (Eppinger, 2013). After analyzing Boeing’s outsourced vendor supply chain, another alternative can be for Boeing to take back in-house its supply chain and implement principles and IT concepts (Tang &Zimmerman, 2009). Boeing could have further averted the problems they 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). 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 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. Boeing, therefore, must finally get to the root of its Dreamliner’s battery problem and fix it, the same 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 (Eppinger, 2013). Conclusion Boeing’s 787 program entails spectacular shift in terms of strategy in supply chain from conventional approaches utilized in the aerospace engineering. Additionally, Boeing bragged about its original manufacturing procedure as well as technological wonders. However such spectacular shifts from traditional involve considerable potential for coming across risks during the process. This is to say that the current issues going on at Boeing as far as meeting delivery deadlines are concerned are a direct consequence of its choice to formulate radical modifications in the design, development procedure as well as the supply chain related to the 787program, concurrently without necessarily having the appropriate management team ready. Furthermore, this team did not actively evaluate the risks that were to be discovered later nor did it come up with consistent strategies for effective mitigation of the same. Whereas it is not possible to discover all possible risks and generate emergency plans for any potential eventualities before the start of any project, Boeing could somehow have done several things in a different way. It is advisable and imperative for managers in any industry to evaluate these issues faced by Boeing as well as analyze how such issues were taken care of so that they may effectively learn from mistakes that were committed before they undertake a similar restructuring in supply chain. Boeings Dreamliner program involves dramatic shifts insupply chain strategy from traditional methods used inthe aerospace industry. In addition, Boeing boastedabout its novel manufacturing techniques and itstechnological marvels. Such dramatic shifts fromconvention involve significant potential for encountering risks throughout the process. Boeingsongoing issues with meeting delivery deadlines are adirect result of its decision to make drastic changes in the design, the development process, and the supplychain associated with the Dreamliner program simultaneously without having the proper management team in place. Further, this team did not proactively assess the risks that were later realized and did not develop coherent strategies for effectively mitigating them. Although it may be impossible to identify allpotential risks and create contingency plans for alleventualities before a project begins, Boeing could havedone many things differently. It is instructive formanagers in any industry to view the issues that Boeing faced and analyze how these issues were handled sothat they can learn from mistakes that were made beforeengaging in similar supply chain restructuring. References Rencher, R., Integrated IT for Improved Airplane Support: Aero Magazine. Retrieved from: http://www.boeing.com/commercial/aeromagazine/articles/qtr_01_09/pdfs/AERO_Q10.pdf Managing the Information System Infrastructure, Chapter 4. Retrieved from: http://www.prenhall.com/behindthebook/0132335069/pdf/Jessup_CH04.pdf Gates, D. (2013). Boeing 787s problems blamed on outsourcing,lack of oversight. The Seattle Times , np. Retrieved from: https://search.yahoo.com/search?p=Boeing+787s+problems+blamed+on+outsourcing%2Clack+of+oversight.&ei=UTF-8&fr=c 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. Retrieved from: http://www.boeingblogs.com/randy/archives/2013/03/testing_our_solution.html Steve, D. (2013). What went wrong at Boeing?Forbes , np. Retrieved from http://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/ Steve, E. (2013). A systems engineering view of the boeing 787 Dreamliner. MIT Sloan Management, np. Retrieved from: https://search.yahoo.com/search?p=A+Systems+Engineering+View+of+the+Boeing+787+Dreamliner.&ei=UTF-8&fr=chr-greentree_ff&ilc=12&type=937811 Tang, C., S., & Zimmerman, J. D. (2009). Managing new product development and supply chain risks. Supply Chain Forum, pg1-14. 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