The Boeing 787 Dreamliner Program - Case Study Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxxx Title : The Boeing 787 Dreamliner Program Tutor : xxxxxxxxxxx @ 2009 Introduction Supply Chain Management relates to the way in which information, materials and funds are coordinated in the path from the manufacturer, assembler, distribution and consumer. The Supply Chain Management procedure therefore covers the ways in which raw materials and information are coordinated between multiple firms (Huggins & Olsen 2003). It involves coordinating a system of interconnected businesses so as to deliver a product or service to the end user (Cooper 1997). Present day business practice calls for the minimization of cost and maximization of efficiency. Efficiency and effectiveness therefore become necessary in any supply chain process (Ross 2002). This paper assesses the Boeing 787 Dreamliner program, in relation to Supply Chain Management issues. Literature Review All types of business ventures are trying to ensure that their supply chains attain the most efficient levels possible. The SCM aspects that have been adopted by Boeing’s 787 Dreamliner Program are based on the understanding that there is need to shrink inventories, streamline logistics, improve forecasts and eliminate unnecessary costs (Johnson 2006). Every one of the manufacturing points of the planes was made into a lean and effective learning environment. There were well-trained employees who could be relied upon for their workmanship at any time. However, the problem of lack of adequate skill was still prevalent. For instance, some of the staff at Vought and Global Aeronautica had areas of expertise that were not even within the aerospace field. The kind of skill that was introduced into the manufacturing process could not even be applicable to aircraft construction. The absence of adequate expertise within the workforce had a negative effect on the general state of workmanship. There was also the lack of a uniform procurement procedure throughout the program’s supply chain. This had the effect of making the shortage of parts even worse. The global economic arrangement as it is has led to challenges upon the functioning of organizations. The Boeing 787 Dreamliner Program is a good case study in the assessment of effectiveness in Supply Chain Management (SCM) due to the varied degrees of success and failure that have been observed (Lawrence & Thornton 2008). Although seemingly well structured to deal with the global and other business challenges that has faced it throughout time, the Boeing 787 Dreamliner programme has been noted as having faced a lot of challenges, and these have been due to an ineffective SCM. There have been several delays and these are blamed on such failures. The lean characteristic of manufacturing in the company was put in the initial stage of the plane production system instead of being put into the product when it reached maturity. There were challenges in terms of logistical challenges and cultural obstacles which had the effect of slowing the program’s progress. There is also a lack of traceability in the manufacturing source. There is the possibility of getting travel tags from partners with different languages from the local ones (Clery 2009). There are also various difficulties that have been faced, constituting an interesting characteristic of problems in a previously seeming well planned and unchallengeable program. In addition to the traveled work, there were also challenges in workmanship problems and shortage of aircraft parts. While initially the company was able to experience a considerable increase in the value of stocks and hence attractiveness, by 2008 that value had sharply fallen to about a mere 25% of what it was at its peak (Clery 2009). Partnerships and Supplier Networks The program is a major collaboration between the company and several suppliers. According to Bagshaw (2007), the program has all along been composed of operations in about 135 places across the globe. The company has eleven partners. The task of building the aircraft is indeed shared by many firms. For instance, Boeing is left with the responsibility of manufacturing only approximately 33% of the total aircraft structure (Newhouse 2008). The program gave out forty three of the world’s best supplier partners hence managed to finalize the plane's configuration extremely early. It has been actively trying to implement a complete and detailed design phase that is well coordinated within 135 places throughout the world (Ostrower 2008). During its designing stages, the Boeing 787 program pursued what may be viewed as a highly effective system of supplier networking. This was made possible by the adoption of telecommunications technologies and a combined supplier database. This made it possible to engage all the players in supply in the design process simultaneously. The main advantage of taking up such technology is that it makes communication easier and improves the operations of any supply chain (Lawrence & Thornton 2008). Technology and Use of Multiple Production Plants Technology plays a considerable role in defining the nature of any supply chain. It therefore exerts one of the greatest possible influences upon supply chain management. This is well illustrated by the fact that technological innovations tend to promote communications within and between organizations. The interactions between the participants in supply chain management are able to develop better working relations and promptness in the relay of orders and commodities. Through the application of competitive and effective technology, organizations and their partners are able to exchange information accurately and in a timely manner (Patterson et al 2003). The use of the internet, advanced logistic procedures and more efficient modes of transport are some of the aspects that are useful in this case (Cole 2002). The Boeing 787 program has been aware of the need to adapt to the new technologies. It has been quite innovative, and has for instance purchased and installed tracking and telecommunications systems that may at best be described as quite advanced. Product cycles have been made relatively shorter in this manner. The information Technology section has fully embraced data sharing through the acquisition of the relevant software. All the company’s supply chain components share a communications database. There is therefore better communication hence collaboration at all the supply chain stages (Flight International, 2008). As much as such effort is acknowledgeable however, there has been a limited general success in the area. This has mainly been attributed to the great complexity and span of the program’s supply chain throughout the world (Ostrower 2008). According to Dawson (2002), there is a disproportionate technological advancement in the world. As a result, an internationally spread supply chain is likely to suffer as some areas may not be adequately connected to the relevant information and trend in operations. Interactions and therefore transactions between the manufacturer and suppliers end up being limited. Excessive dependence on technology as has arguably been the case at Boeing also has its bad side. This is because it contributes to a drift away from the organization’s objectives and core operational processes. At Boeing, there was an excessive dwelling on efficiency and speed rather than the choice of the best possible suppliers and effectively managing the supply chain. In addition to technological innovation, outsourcing is also another notable feature of modern supply chain management. This aims at reducing risks, cost cutting and improvement of efficiency. Boeing undertook to outsource services and procedures and through over reliance on it, ended up becoming ineffective (Bhagwati et al 2004). The argument is supported by Brandes et al. (1997) according to whom there is need for the consideration of the outsourcing option so that it may be compared with others and the least costly one taken up. Caution should however be taken in outsourcing, otherwise the company may lose control of its supply chain issues (Barthelemy 2003). Ostrower (2008) notes that this caution was not taken by Boeing. Having a second assembly line for the Boeing 787 program had the effect of expanding the overall production capacity in order to cope with the market demand for the airplanes. The move enabled the continuation of an elaborate attempt to strengthen the partnerships that had already been set up in South Carolina between the Charleston subsidiary of Boeing and Global Aeronautica. This was an appropriate move as it has the ability of boosting the overall company sustainability and competitiveness, hence boosting the prospects for impressive long term growth (Thurlow & Aiello 2007). In the partnership, Charleston’s Boeing works on the fabrication, system installation and assembly parts for the 787’s fuselage sections. Global Aeronautica, a partial Boeing subsidiary on its part works on the integration and joining of the produced fuselage sections brought in from the other structural construction partners (Muellerleile 2009).  According to the program plan, the second assembly line was to be established in North Charleston, then be followed by the establishment of a transitional capability for surge at the Everett, Washington location in order to make sure that there is a successful implementation of the Boeing 787-9 series. As the Charleston plant begins growing in its capacity, Everett’s surge capability was to be phased out. There would be the implementation of effective approaches to serve the interests of customers to the best of the company’s ability with the introduction of the Boeing 787-9. The goal at this point would be the production of about 10 double-aisle jets of the 787 range every month (Muellerleile 2009) Globalization and Supply Issues The current rapidly changing globalized world has also seriously challenged the operations of Boeing in ways that were previously not the case before (White, Godart & Corona 2007). In response, the company had to take up new approaches, for instance the adoption of outsourcing, which was pursued at levels that had never been witnessed before (Lawrence & Thornton 2009). The air transport industry all over the world is in a constant state of change. This is necessitated by the related challenges and opportunities that keep emerging in the markets. There is a continuous development of new business models and management prescriptions for airlines, and a plane manufacturer such as Boeing always has to keep abreast of these. In addition to this, there is a swift growth in the globe’s emerging economies support the economic growth of the countries. Even when there is a general slowdown in the performance of such markets, there are some that have been noted as still growing due to economic growth at regional levels and lesser market regulation (Nolan & Liu 2008). The main highly valued advantage that is offered in terms of capability and efficiency of new planes that are produced has helped in maintaining a strong demand for the planes, and this has helped to maintain the relevance of the 787 development program. Beginning from noted record highs, there has been a general impressive holding up of manufacturer backlogs in spite of the present challenges that are being faced as a result of the global recession. The kind of fuel efficiency that is being pursued by the program is therefore a productive measure in trying to assert the position of the company in the market. This is because it provides a natural defense against the price volatility that has always been noted in jet fuel. The lower emissions are also known to assist airlines in meeting their desired goals for environmental performance (Lawrence & Thornton 2008). In relation to SCM, the company has the task of sourcing the best and lowest cost staff, find out and source materials and labor from credible and well established supply firms. These are all elements of a new and complex equation that a modern and highly successful company really needs to look at in developing its survival strategy. Boeing based its reaction to the situation on its long experience in the plane market. During its initial production year for Boeing 787’s, the company managed to establish equilibrium in the factors that exist and ensure that it did not work against market performance. As noted earlier it however lost especially in relation to oversight. The firm generally was not pleased with its supply chain performance and has therefore been on track to change the situation (Ostrower 2008). Yet another aspect of change that was experienced was a new emphasis on drawing the customers’ attention. The Boeing 787 program pursued a new strategy in which it sought both to provide a finished product to the target airline while also sought to satisfy the passengers’ needs. The 787 Dreamliner was the subject of a campaign in which it was portrayed as being consumer-oriented. It therefore had an emphasis on added features such as higher levels of in-cabin pressurization, mood lighting and others (Cunningham, Young & Lee 2006). This was however not effectively implemented (Ostrower 2008). Supply chain problems continued to affect the program even later on. For instance, during the third aircraft launch, the Boeing 3, there was still a shortage in spare parts, an issue that delayed its rollout by between three weeks and one month. This was again moved forward as the management felt that the rate at which progress was being made was not adequate to ensure that all deadlines are met (Lawrence & Thornton 2009). The identified challenges imply that passengers are calling for faster transport services and prefer more value-added services. This demands greater flexibility in the communication and coordination aspects. The program’s leaders seem to have managed to take up strategies that enable the making of better and quicker decisions. In addition to adopting technologies that facilitate the sharing of information across plants and even countries, there is the realization that having inflexible planning and forecasting tools limits the success of the supply chain hence performance in the market. This is with the realization that the airline industry and by extension plane manufacturing is in a continuous state of flux (Johnson 2006). Discussion The Boeing 787 Dreamliner program sought to maximize operational efficiency hence minimize costs. This obviously affected the way in which the company’s supply chain is structured, and eventually created the noted negative outcomes. The main issue surrounding the failure was arguably mismanagement. The mismanagement of the supply chain ended up changing the existing supply chain from its previous simple nature into being one of the most complex and risky in the manufacturing industry throughout the world (Flight International 2008). The programme’s strategy has a comprehensive provision for expendable spare parts of the airframe that is used in the new range of planes. These include both parts that are sourced from Boeing itself and others from other suppliers. Expendable parts are those that have to be replaced instead of being repaired when they are worn out. There are several of these, including floor panels, plane skins and fasteners. In spite of this, there remains the problem of expensive inefficiencies in inventories. Because of these, suppliers and airlines usually have to pay extra due to excessive inventory levels and duplication in distribution channels (Lawrence & Thornton 2008). The main strategy taken to deal with Supply Chain Inefficiencies is the use of the Global Airline Inventory Network. This provides both the suppliers and airlines with a better and highly efficient supply chain, eventually leading to savings on cost for all interested parties in the chain. The network has a number of defining characteristics. These include assigning Boeing the responsibility of purchase, logistics and inventory management for the airlines’ expendable parts. All the airframe parts available are also supposed to be forward deployed. This, done by Boeing itself, is done either near or exactly or near the respective point of use of the airline. Based on the kind of part that is in question, the forward deployment might be to some regional parts distribution center or an identified airline facility (Muellerleile 2009). Boeing and its appointed distributors also own whatever airframe parts are forward deployed before their actual use. There is the provision that the SCM system acts as the command center for the entire network. This enables a chance for monitoring an airline’s suppliers to be able to make a more accurate forecast of the demand aspect and hence plan their production even better. Boeing’s system of spare-part distribution comprises of seven main centers that are spread out in different parts of the world. These act as the main foundation of the network. The distribution centers also stock parts from other suppliers in addition to having Boeing’s proprietary parts. This is intended to create one channel for parts-distribution (Johnson 2006). Although it has been noted that technology is a crucial ingredient in the manufacturing process, there is the need to look at the management strategies that are put in place more. Conclusion The Boeing 787 Dreamliner program has sought to produce at the least cost, while optimizing the use of materials. It has also established effective coordination of suppliers and other parts of the supply chain. However, there have been challenges faced in the implementation of the plans as presented in the original program. An overemphasis on the role of technology may have been one of the sources of challenges with regard to the company’s supply chain (Johnson 2006). For the programme’s SCM to be effective, there is the need for more comprehensive systems in information exchange. 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