Building the Boeing 787 - Term Paper Example

Building the Boeing 787 Building the Boeing 787 Introduction Being the newest commercial aircraft in the industry, Boeing wide-bodied 787 appears as the boldest expect of the plane making and airline travel of the future. It has a sitting capacity amounting to 250 seats and composite materials, which comprise of carbon fibers as opposed to traditional aircraft materials like aluminum, make the largest part of its building materials. This means that, the plane composes of 80 percent composite materials hence 20 percent lighter than the normal traditional aircraft specifically of the same size (Schniederjans, Schniederjans, & Schniederjans, 2005). The lightness of this Boeing 787 translates into large savings in terms of costs and fuel consumption. In addition to that, the Boeing 787 includes other notable innovations such as state-of-the-art electronics connected to the passenger compartment and to the flight deck, greater headroom, and larger windows. In order to accomplish the building of the Boeing 787, the company had to outsource part of its work (Hill, 2011). This paper will seek to provide the benefits of outsourcing to foreign suppliers and the risks involved in such dealings. Benefits of outsourcing To begin with, when a company outsources part of its work to either foreign or local suppliers, it reduces the risks involved in producing the intended materials. Since Boeing was dealing or otherwise gambling with very risky materials, it was a crucial step to have its suppliers manufacture part of the materials on the company’s behalf (McIvor, 2010). Particularly, risks involved in technological complexity are immense and can result to significant meltdown of a company’s resources. It is agreeable that manufacturing aircraft materials especially composite ones is expensive, time consuming, and technological irrational (Sparrow, 2003). Therefore, for Boeing to outsource 70 percent of the total content needed to build the jet to other manufacturers in other countries helped them minimize the risks it would stand to incur in case of mistakes. Therefore, outsourcing helped Boeing share among its suppliers the risks involved manufacturing such materials as well as in the building of such a risky technologically multifaceted aircraft (Brindley, 2005). Outsourcing makes the contracted companies feel being as part of the overall manufacturing process, which in turn brings a sense of contribution and ownership. Research findings show that such a feeling is pragmatic for business support (Hill, 2011). The Boeing’s outsourcing idea was critical. In fact, it made the partners feel included in the making of Boeing 787. When Boeing outsourced an unprecedented content (70 percent) of the 787 jet to its suppliers in other countries, it created a sense of return for a work share on the side of the partners (Hill & Jones, 2010). Outsourcing also increases expertise and swiftness. In many cases, companies outsource to vendors who happen to specialize in their specific field of expertise (Sparrow, 2003). Such vendors tend to have certain technical expertise and special equipment, which the outsourcing organization may not have. For instance, when the Israel supplier failed to avail some of the materials at Boeing Everett plant in Washington DC, Boeing had to send some of its experts to the Israel supplier’s factory in order to help with the manufacturing process (Schniederjans, Schniederjans, & Schniederjans, 2005). Such an action indicates that vendors provide not only technical expertise but also special equipment that helps in meeting the outsourcing organization’s manufacturing standards. Outsourcing helped Boeing reduce the cost of making the whole 787 aircraft (Brindley, 2005). Reliable sources maintain that, when an organization assigns part of its manufacturing activities to other suppliers, it minimizes the amount of money that it could have spent if it resolved to do all the work on its own (McIvor, 2010). Boeing drove down the costs of making 787 aircraft with a large margin indicated by the percentage of work that it outsourced to overseas suppliers. Apart from reducing the cost of production on the part of the outsourcing organization, it also enables the organization to concentrate more on its core processes as opposed to supporting ones. Outsourcing gave Boeing adequate time to concentrate on its interior processes instead which increases the aspect of good performance and strengthens the founding processes (Hill, 2011). Additionally, outsourcing reduces both recruitment and operational costs. Truthfully, the costs of maintaining employees and running operations in certain organizations such as those dealing with aircraft manufacturing are always high. However, the process of outsourcing enables a company to elude the need to hire people in-house; thus, it becomes possible to minimize the operational and recruitment largely (McIvor, 2005). Fact-findings reveal that this is the number one prime merit of offshore outsourcing to organizations. Specifically, Boeing realized untamable advantages when it outsourced to overseas firms since it reduced cost and burdens involved hiring, training, and maintaining employees (Schniederjans, Schniederjans, & Schniederjans, 2005). Outsourcing helps an organization to garner sales in the foreign countries in which it outsources. Via outsourcing, organizations create local market for their products hence enlarge their market share. With reference to Boeing, the company was resolute that it would tap into the local markets of those countries where it outsourced most its work. This could have increased its sales volume by big margins, as it would have garnered extra scale of market for its products (Sparrow, 2003). Outsourcing cuts down the time that an organization would spent in developing the desired product. Boeing believed that, outsourcing it would minimize the time required by the organization to make an aircraft of such a kind from six years to four years. Time management is a factor in meeting the set goals of an organization (Hill & Jones, 2010). Therefore, cutting don the time needed to finish designing such amounts of components is a primary tool for attaining success as the company would be in apposition to do more within a short time. Outsourcing improves customer service (Hill, 2011). Generally, the paramount idea in starting any business is to have potential customers. Potential clients boost a company’s sales volume and profit margins when well managed. Through outsourcing, Boeing can service its clients faster and provide better as well as quality services, which is essential for business growth (McIvor, 2010). It is also important to indicate that outsourcing decreases turnaround time. Risks involved in outsourcing Boeing has more than 17 partners in 10 different countries. They produce some major aircraft parts. South Carolina’s Vought Aircraft Industries manufactures the rear fuselage. Italy’s Arena Aeronautical makes the horizontal tailpieces and the middle fuselage (McIvor, 2005). Three companies in Japan namely Mitsubishi, Kawasaki, and Fuji produce plane’s wings. Onex Corporation in Toronto produces the nose section. Using the modified 747 Boeing Dream lifters, Boeing ships these bulky materials to its main plant (Everett) in Washington, DC for assembling (Sparrow, 2003). Without a doubt, the outsourcing and assembling process has many virtually unimaginable risks involved. Boeing was risking a lot by outsourcing 70 percent of the work involved in making the Boeing 787 aircraft (Brindley, 2005). As noted, all was well until sometimes in the midst of 2007 when Boeing admitted that it was experiencing delay in the building of Boeing 787 mainly because it had problems with its supplier of the special fasteners used in the fuselage (Hill, 2011). After a short while, it reliable sources indicated that the problem was not that light or rather small but was indeed heavy and serious. Boeing noted that the release of the first Boeing 787 would delay by almost a year (Schniederjans, Schniederjans, & Schniederjans, 2005). It also announced that it needed an extra $2 billion in order to meet its development costs and the other end; Boeing faced a possibility of paying millions of dollars in penalty clause for late delivery to and among some of its leading clients. This entails that, sometimes, outsourcing can prove to be a very risky venture. This is so because Boeing ended up wasting a lot of time doing work supposedly outsourced to another company. Previous analysis shows that time is a sensitive facet of production. Boeing’s failure to keep up with the given period caused the company an additional development cost of $2 billion dollars (Hill & Jones, 2010). Furthermore, the report indicates that Boeing faced a possibility of paying its potential customers large sums of money predominantly because it defaulted in time. Measures set in place by time are susceptible to costs and brand destruction. Therefore, companies that resolve to outsource part of their work to foreign suppliers risk losing their potential customers due to time wastage (McIvor, 2010). Outsourcing can result to failed plans. Depending too much on offshore service providers can lead a company to face failed plans. Attributively, the outsourcing organizations cannot afford to keep watch or tab on the offshore management and operational activities (Sparrow, 2003). Consequently, the outsourcing organization can encounter difficulties in meeting the set objectives and fulfilling the noted plans. Boeing experienced delay in delivering the 787 aircraft since the Israel supplier delayed part of its provision services of the required components (Schniederjans, Schniederjans, & Schniederjans, 2005). Even though Boeing’s plan to produce Boeing 787 aircraft did not fail totally, it is seeable that it experienced bumpy activities on the way as it had to send a team of experts to monitor Israel’s development process (Hill, 2011). Outsourcing increases project risks. The success of an outsourced project depends on the methods employed by the parent company when dealing with its offshore company. Outsourcing makes a company risk succeeding on the outsourced project. When Boeing outsourced to Vought and Vought contracted an Israeli company, Boeing incurred surmountable risks commonly involved in outsourcing (Brindley, 2005). Unfortunately, the Israeli company contracted by Vought failed to meet the quality standards set in place by Boeing Industries. As a result, there were not only bottlenecks at Boeing, but also serious delays in delivering to Boeing’s potential clientele. In this case, Boeing stood to jeopardize its presence in the market and risked destroying its project by outsourcing to a company, which then outsourced to another (McIvor, 2005). In general, outsourcing has many risky effects but the most rampant ones are time wastage, low quality products, and exorbitant costs. Comparison of benefits and risks of outsourcing Candidly, the analytical response to this paper opines that the benefits of outsourcing are too many compared to the risks involved. In fact, through outsourcing, organizations achieve much more than just increased profits, technological expertise, and enlarged market share (McIvor, 2010). Chiefly, their operations run day and night. This is so because, some offshore companies are in different time zones from the mother organization thus even after it closes down at the end of the day, offshore firms in different time zones continues to work (Schniederjans, Schniederjans, & Schniederjans, 2005). Essentially, bearing in mind that risks are also part of outsourcing, effects related to it are still minimal and cannot outweigh benefits involved. Causes of Boeing management problems According to the research, Boeing Industries found itself in the middle of management crisis in both 2007 and 2008. One of the major causes of these problems was Boeing’s idea to outsource 70 percent of the building materials required (Hill & Jones, 2010). Such a percentage is not something small and in that case, the company risked falling into management issues, which it did. It was not easy to manage the amount of workload outsourced by Boeing to offshore companies (Hill, 2011). All of its suppliers, which were contracted to make the components allocated, were in far distances, a factor that made Boeing management team find costly and difficult to monitor. Certainly, it can prove costly, time consuming, and sophisticated for the mother organization to manage offshore companies. Boeing had suppliers in different locations particularly dispersed globally. Managing such a dispersed and huge supply chain became a nightmare at the time when the company realized some of its operations were lagging behind because of laxity on the side of one of Boeing’s suppliers (Sparrow, 2003). Distance is mainly what led Boeing Industries into such problems. As indicated at some point, Boeing had outsourced all the work that involved manufacture and design of the floor pieces. Unfortunately, Vought resolved to pass on such a responsibility to an Israeli company that ended up building and designing floor pieces that were of substandard eminence to Boeing (McIvor, 2005). Initially, this would not have resulted if only the Boeing’s management system was effective. Accordingly, stating that distance coupled with ineffective supplier management system caused poor managerial effects on the side of the pare3nt company (Brindley, 2005). Language barrier is yet another cause of Boeing’s management problems. After Boeing Industries’ staff found out that the fuselage section materials were of low quality, it became even harder to carry out the assembling process since the assembling instructions were only available in Italian (Bragg, 2006). Ideally, it would be easier to manage its operations hence maintain suitable management system only if Boeing was to avoid outsourcing to suppliers in nations where English is not the first language. It is believable that part of the delays in delivering the 787 were partially cause by a language barrier (Hill & Jones, 2010). On that note, it is true to say that, Boeing’s management crises resulted from failure to have knowledge of Italian language. Another cause of Boeing’s management problems emanated from failure to monitor the activities and progress of the Boeing 787 building materials. It seems that Boeing just relaxes after it outsources most of its workload to the so-called technologically equipped suppliers (McIvor, 2010). Well, that feature proved to be one of the central problems facing the company’s management system. Boeing outsourced all the work that involved designing, building, and fixing of the necessary fuselage materials to Vought. Vought decided to sub-contract another firm in Israel to do the job on behalf of Vought (Schniederjans, Schniederjans, & Schniederjans, 2005). At first, Boeing failed to notice or find out about the deal between Vought and the Israeli company until sometimes during the last minutes towards assembling of the aircraft. Boeing Industries’ staff established that the company that designed and manufactured those fuselage sections did not install some of its congruent features (Hill, 2011). Moreover, the materials were of low quality and could not meet the required standards. After that, Boeing had to send some of its experts to go and work as well as monitor the production of other fuselage materials with high quality standards. In effect, the company had both management problems and financial issues as it had to request for an extra amount in order to meet its development expenses (Brindley, 2005). At such a point, it is okay to say that incompetency and laxity on the side of Boeing Industries led to overall management problems. Based on that multifaceted task of outsourcing, Boeing became a victim of management problems because the other enterprises contracted by the Boeing suppliers did have a case to answer to the Boeing management team (Sparrow, 2003). For this reason, the parent company, which is Boeing Industries, ran into management problems due to multifaceted outsourcing. Boeing ran into management problems because of outsourcing to companies without the relevant or adequate space to carry out the tasked operations. For example, when Boeing tasked the Italian supplier Alenia, it took much more time than required to start its operations since it had to construct a new factory for producing the required materials (McIvor, 2010). The local authorities were not willing to allow Alenia establish a new factory in an olive grove that was 300 years old. Even if the local authorities, surprisingly, came to agree with the company, it was already late and Boeing felt the effects (Hill, 2011). Pointing out that Boeing ran into management problems in 2007 and 2008 because of outsourcing to companies without the relevant, adequate, or ready location to work on the project is acceptable (McIvor, 2005). Recommendations for future reference In order for any other company like to avoid ever getting into such management and other related problems, it is recommendable to avoid outsourcing at all. As analyzed, chances of facing most of the problems and losses that Boeing stood to face or face were consequences of outsourcing. Boeing would not have requested for an additional $ 2 billion to cater for the extended development procedure for were it not for outsourcing (Schniederjans, Schniederjans, & Schniederjans, 2005). The company could not have gone to the extent of facing penalties due to delay in deliveries if it had not outsourced 70 percent of its workload to its suppliers. Therefore, recommending that other companies should never outsource is a matter-of-fact (Hill & Jones, 2010). Further, for other companies to evade what befell Boeing it is advisable for them to monitor progress of operations at the supplier’s factory (Sparrow, 2003) Through systemic management practices, companies that opt to outsource can ensure that they do not face challenges such as delays and low quality products in the future. This is possible through posting a team of the companies finest experts to lead operations in the contracted firm. Ensuring that the sub-contracted company does not entrust another company with its task is substantial as it reduces cases related to the blame game (Hill, 2011). Principally, the parent organization has no right to and cannot question a third party contracted by the prioritized supplier of the parent company. It can prove hectic to handle such a scenario; thus, it is essential to deter the supplier from contracting another supplier with the aim of avoiding problems, which comprise of those faced by Boeing in the future (Brindley, 2005). Criticism based on outsourcing by Boeing Some critics of outsourcing dictate that by outsourcing 70 percent of building of the Boeing 787, the company is exporting American work. On one end, such criticism is fair because, 70 percent is a large amount of work (McIvor, 2005). Taken to a different country yet America is crying loud due to lack of employment opportunities is unfair. As of today, the rate of unemployment in the American job market is becoming uncontrollable and econometrics in association with other advocates for a better living are spending sleepless nights trying to set policies that will see this problem leave Americans free (McIvor, 2010). Therefore, it is very fair to criticize Boeing’s idea of outsourcing by claiming that the company is exporting American jobs. Likewise, it is fair to criticize Boeing’s outsourcing services to offshore companies because, America needs the revenue collected from operations involved in the building and assembling of aircrafts in order to continue growing its economy (Bragg, 2006). On the other end, outsourcing to other countries like Japan and Italy is not exactly exporting American jobs. Before criticizing, it is however useful to understand that Boeing does not export its workload to its suppliers located in different countries possibly it does not care about American unemployment rate. It does so mainly because of the level of technical expertise provided by these suppliers (Hill & Jones, 2010). Additionally, it outsources since it finds it necessary to share risks involved in handling such technologically complex operations on its own. It is also acceptable to say that America may not have the relevant, qualified personnel, and specific equipment and sites needed for carrying out aircraft designing, manufacturing, and supplying. By outsourcing, the Boeing Industries helps America obtain more money through revenue generation (Hill, 2011). Taxation also makes a large portion of the money that the country gets from Boeing’s operations. Based on that fact, criticizing Boeing on the grounds that by outsourcing is exporting American jobs is without a doubt unfair and misleading. Respond to such criticism The company should respond to such criticism by making it clear to the public that outsourcing saves both the company and the American population a big deal of losses in case of adverse mistakes. Calculations show that, every supplier contracted by Boeing to aid in building the Boeing 787 bears a large responsibility (Hill, 2011). The supplier helps the parent company reduce the risks that might fall on the company’s financial base by sharing the costs of production and maintenance (Schniederjans, Schniederjans, & Schniederjans, 2005). The company should therefore respond by telling Americans that the country may not be able to bear any losses that may result from delays, malfunction, or other deficiencies. Conclusion In conclusion, stressing that outsourcing facilitates the flow of production and reduces cases that may erupt from dealing with complex business activities is cognitive (McIvor, 2010). Definitely, for Boeing’s idea to outsource 70 percent of its workload pertaining the building of the 787 aircraft was substantial as it saved the company the possibility of running bankrupt and facing closure or court cases after it announced delays in delivering the supposed products (Hill & Jones, 2010). This paper has tackled the aspect of outsourcing in depth by focusing on the building of Boeing 787. In it are the causes and effects and of outsourcing to the parent company. References Bragg, S. (2006). Outsourcing: A guide to-- selecting the correct business unit-- negotiating the contract-- maintaining control of the process. Hoboken,N.J: John Wiley. Brindley, C. (2005). Supply chain risk. Aldershot: Ashgate. Hill, C. & Jones, G. (2010). Strategic management theory: An integrated approach. Boston, MA: Houghton Mifflin. Hill, C. (2011). International business: Competing in the global marketplace. (8th ed.). New York: Irwin/McGraw-Hill. McIvor, R. (2005). The outsourcing process: Strategies for evaluation and management. Cambridge: Cambridge University Press. McIvor, R. (2010). Global services outsourcing. Cambridge: Cambridge University Press. Schniederjans, M., Schniederjans, A., & Schniederjans, D. (2005). Outsourcing and insourcing in an international context. Armonk, NY [u.a.: Sharpe. Sparrow, E. (2003). Successful IT outsourcing: From choosing a provider to managing the project. London: Springer. Read More