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Boeing 787 Fulfilment Delay

2990 words (12 pages) Essay in Business

12/03/19 Business Reference this

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Introduction

Boeing Commercial Airplanes, a business unit of The Boeing Company, is committed to being the leader in commercial aviation by offering airplanes that deliver superior design, efficiency and value to customers around the world.  

There are more than 10,000 Boeing commercial jetliners in service, flying passengers and more than 5,700 Boeing airplanes are currently on order. The company is headquartered in Seattle, Wash and employs more than 60,000 people worldwide. (Boeing 2018)

According to Prezi, Odeh Loai (2015) the plane was designed to provide passengers with a better flying experience and more efficient commercial jetliner. Its aim was to have 20% less fuel per passenger, more environmental friendly and quieter taking offs and landings.

A plane known as the Dreamliner 787 has caused problems to company’s image. There was a delay in the planes being created in time for the launch date. There have been many reasons for the planes delay however the supply chain of the plane has been considered the core cause of the problem. Mohamed Farrag Soliman Al Okaily, Slideshare (2013)

Boeing 787 fulfilment delay occurred due to 3 reasons: its supply chain, outsourcing and development progress.

Boeing’s supply chain affected the manufacturing the plane. Considering Slack et al (2010) defines supply chain as a strand of linked operations. The three factors that affected the supply chain are control, communication and supplier collaboration. For example, the supplier relationship was different too 737 program used traditional supplier relationship while 787 program used strategic partners with tier 1 suppliers. (Tang, Zimmerman & Nelson 2015) Due to these reasons Boeing risked the launch of the plane causing delays and a bad relationship with its supplier’s due to lack of communication.

This is supported by Sodhi.S.M & Tang. C (2012) who states that 50 tier-1 suppliers to design and build entire sections of the plane and ship them to Boeing. By reducing its direct supply base from thousands for the 737 to 50 for the new 787, caused communication barrier due to Tier 1 suppliers being from all over the world in different time zones and who speak different languages. Boeing should have had a relationship with its suppliers for instance, team building and online training to achieve a solid cooperation.

To continue, Boeing decided to reduce development time from six to four years as much as extra costs from 10 to 6 billion by using unconventional supply chain new to the aircraft manufacturing industry. (Tang, Zimmerman & Nelson 2015)

Collins. M (2010) The Boeing Supply Chain Model supports that development for time and cost affected the planes progress when building it. For example, Boeing forced the Tier 1 suppliers to design and build all tooling for their part of the airplane without any compensation from Boeing. This is considered to be risky and also suggests that the company rushed the process of building the Dreamliner. Despite the work load dumped on the Tier 1 suppliers, there was an issue of money on the contract. Tang, Zimmerman & Nelson (2015) highlights that supply contracts were different from 737 programs had a fixed price contract with delay penalty while 787 program had risk sharing contracts. This made the workers strike causing delay on the Dreamliner. It can be argued that through specialization of labour work can be divided and performed better. Due to these reasons Boeing’s aim to reduce the development cost and development time caused a disaster to the supply chain. It can be argued this caused the company to rush when building the plane.

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Furthermore, according to Forbes, Denning S (2013) Boeing was outsourcing internationally and locally aiming to have lowering costs and rushing development. However, the end result was negative the project was billions of dollars over budget and three years behind schedule. “We spent a lot more money,” Jim Albaugh, Chief of Commercial Airplanes at Boeing, explained in January 2011, “in trying to recover than we ever would have spent if we’d tried to keep the key technologies closer to home.” It can be argued the company changing its supply chain model caused the downfall. New technology is only needed a company when need be for instance car industry. However, Boeing should have worked with what they know and what they do best.

This is supported by Tang, Zimmerman & Nelson (2015) Boeing 787 program sourcing strategy was 70% unlike the 737 program that was 35-50%. Boeing outsourced their core areas in business. This shows that they over budgeted, instead of lowering costs through outsourcing. Sodhi.S.M & Tang. C (2012) also states that as Boeing outsourced more it made communication and coordination between Boeing and its suppliers difficult for managing the progress of the 787-development program.

Table 1 (Sodhi and Tang, 2012)

Boeing’s problem in the supply chain occurs on the upstream supplier related issue. According to Robert J. Bowman, Supply Chain Brain (2009) buyers of the Dreamliner were upset but so were the suppliers of the company. The company decide to change how they paid their suppliers usually they would pay them when done developing a particular component. Boeing 787 paid suppliers when everybody finished doing their piece. This caused many suppliers to back out from the contract due to waiting for so long to paid. According to Chopra S & Meindl P (2004) a good contract should account for all factors that impact supply chain performance and should be designed to increase supply chain profits in a way that benefits both the supplier and buyer. The labour was dissatisfied as Boeing 787 also outsourced more and suppliers were worried about their job security. (Tang, Zimmerman & Nelson 2015)

According to Mohamed Farrag Soliman Al Okaily, Slideshare (2013) Boeing supply chain caused problems due to the whole supply chain model being changed. For instance, Tier 1 suppliers were given big responsibility on building the plane. Tier 1 supplier had lack of knowledge they outsourced development tasks to Tie 2 suppliers who did not have the skills required. This caused delay in development and manufacturing work. This causes process risk due to late delivery of a section, the delivery schedule of the whole aircraft is delayed. (Tang, Zimmerman & Nelson 2015)

Boeing 787 did not consider that failure of one supplier bringing in a part will lead to plane delay. Due to this Boeing 787 should have improve tier 1 supplier training and selection process. This avoids a single tier 1 supplier to drag the whole product quality down and also having a selection process ensures quality control. According to Chopra S & Meindl P (2004) supplier scoring and assessment is the process used to rate supplier performance. Supplier selection uses the output form supplier scoring and assessment to identify the appropriate supplier. This includes meeting expected quality, technical expertise and also delivery on time. Suppliers should have a close management, on site quality control and technical assistance when needed.

Figure 1 (Sodhi and Tang, 2012)
Figure 2 (Sodhi and Tang, 2012)

According toOdeh Loai, Prezi (2015) Boeing 787 supply chain issue was lack of communication and visibility skill and lack of power to control human resources. It can be argued that Boeing 787 needs risk management this helps the company to be able to communicate and train for problems that may occur. It also shows to the public that the company can solve its own problems portraying a strong stable company. There are factors that affect the supply chain such as market, development time, environment and social satisfactory. Boeing aim to be cost effective, high quality and comfortable aircraft, reduce development time and avoid extra costs however fuel cost and environment restriction make it challenging. The company needs to make sure they satisfy its customers but also maintain its stay ahead of competition. Boeing 787 also needs to be able to adapt to changes of the environment and technology.

Risk management 

According to Donald Waters (2009) risk in a supply chain is any threat of an event that might disturb the flow of materials or stop things happening as planned. Risk can either be internal or external it can be argued that Boeing 787 faced internal risks. Internal risks are considered to be late delivery, excess stock, financial risks, minor accidents and human error. The three core elements of risk management are identifying risks to the supply chain, analyse the risks and design appropriate responses to the risk. According to Supply Chain Digital, Pierce Freddie (2011) Boeing having been rushing the launch of the plane they were supposed to debut the 787 Dreamliner in a test flight in August 2007 and then achieve first delivery in May 2008. But there have pushing the date back in November 2010 there was fire and an emergency landed was requested, Boeing said they would have the plane operational 2011. But Boeing should launch the plane when its ready to avoid risks such as late delivery, minor accidents, financial risks and human error.

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TQM (Quality management)

Quality management process according to W. Edward Deming (1950) in the planning phase was referred to as PDCA cycle. Deming suggests you select a problem faced by the company in depth discuss the possible causes for the problem and generate an alternative to solve the problem (plan). The next stage you put into work the alternative suggested (do), on the (check) phase you work it if the solution worked out and lastly if it worked out the (act) phase states that you carry on this process with the solution. Boeing can improve quality and maintain it considering the following, according to the Project Management Institute’s Guide to the Project Management Body of Knowledge (PMBOK), in the company quality can be improved if it goes through quality planning basically the company makes sure it has documents that’s states the quality policy of the company and quality. Quality assurance is carried out to make sure that the quality planning falls through hence it is checked throughout internal and external to guarantee the improvement of quality. Quality control lastly makes sure that the management results and product results are monitored and checked if they are working together if not what can be done to improve results in order for them to work together. Boeing can also give workers bonuses and rewards depending on the work load produced this will boost workers to be motivated and improve quality.

Outsourcing

According to Chopra S & Meindl P Supply Chain Management strategy, planning and operation the following should be considered when out sourcing. Use multifunctional teams, ensure appropriate coordination across regions and business units, always evaluate the total costs of ownership and build long term relationships with key suppliers. Boeing can benefit from these factors and would have avoided out sourcing being a liability. Boeing should work on supply chain coordination this helps on global coordination considering they used 50 suppliers. Lastly a good relationship between a buyer and supplier encourages trust which is good for business. Boeing’s supplier performance lacked transparency and communication causing both parties to work independently instead of together as a team. This suggests that through training Boeing’s supplier and buyer can perform better and develop the company

Boeing managed to solve the problem although it is an ongoing process. According to Odeh Loai, Prezi (2015) Boeing paid out suppliers that were in financial risk. Boeing sent own staff to suppliers where knowledge/management was unavailable. Provided replacement aircraft to customers. Boeing updated progress regularly on website this keeps customers on loop on what is going on with the company showing they are developing and improving loyal customers will appreciate the update.

  • Boeing 787 should not outsource the company’s core areas in business unless they have improved control. Supply Chain Digital, Pierce Freddie (2011) For example, when Boeing controls cost estimation by understanding all underlying costs. The company can have decision making meetings to avoid project over runs. Boeing will not repeat a mistake of having 50 suppliers around the world because it will lead to expense but also delay of products. This makes Boeing cost effective and capable of staying ahead of competitors’ due to control of how things run.
  • According to Robert J. Bowman, Supply Chain Brain (2009) buyers of the Dreamliner were upset but so were the suppliers of the company. Boeing should provide training and quality management. The company has a history of strike 2008 it should treat its labour as a stakeholder. This makes workers important in the company’s decision-making process. This helps the business grow as the workers know the company and work for it. Providing training helps them be motivated and also increase or improve their skills. For instance, if workers know each other’s part in the company they can help each other out in case one is not there. This helps the company to not rely on one person but business continues regardless of one worker’s absence. Also, Boeing should train staff in order to improve their skills this benefits the company also on the performance management. Finally, the success of training helps improve productivity and quality.
  • According to Mohamed Farrag Soliman Al Okaily, Slideshare (2013) Boeing supply chain caused problems that made the delay happen. Boeing should hire skilled supply chain specialists and engineers to avoid huge managerial risks. Failure to this management faces a risk of inexperienced management team without supply chain skill.
  • According to Mohamed Farrag Soliman Al Okaily, Slideshare (2013) Boeing supply chain caused problems that made the delay happen. There should be a frequent check in order to provide assistance to suppliers when needed. Boeing should reward tier 1 suppliers that meet milestones on time. This motivates people to work harder and better.

References

Odeh. L (6 November 2015) Boeing 787 case study (online)  https://prezi.com/nh8gjkqvtbmv/boeing-787-case-study/ 4th April 2018.

Telegraph (28 July 2013) Boeing 787 Dreamliner: a timeline of problems (online) https://www.telegraph.co.uk/travel/comment/Boeing-787-Dreamliner-a-timeline-of-problems/ 4th April 2018.

Bowman. R. J. (28th August 2009) Building Boeing’s Dreamliner: why all the delays?  http://www.supplychainbrain.com/nc/general-scm/single-article-page/article/building-boeings-dreamliner-why-all-the-delays-1/itd 6th April 2018.

Pierce. F (January 20, 2011) The Boeing 787 Dreamliner: a tale of terrible supply chain management (online) http://www.supplychaindigital.com/scm/boeing-787-dreamliner-tale-terrible-supply-chain-management 6th April 2018.

Denning. S (January 21st, 2013) What went wrong at Boeing? (online)  https://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/#25bf70cb7b1b 8th April 2018

Okaily Mohamed Farrag Soliman Al (September 28th, 2013) Boeing 787 Dreamliner project lesson learned (online), https://www.slideshare.net/farrag123456/boeing-787-dreamliner-project-lessson-learned 8th April 2018.

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Waters D. (2009) Supply Chain Management an Introduction to Logistics 2nd edition Palgrave Macmillan.

Chopra. S & Meindl P (2013) Supply Chain Management strategy, planning and operation 5th edition Pearson education limited.

Tang. C. S, Zimmerman. J.D & Nelson. J (2015) Managing new product development and supply chain risks: The Boeing 787 case. (online) https://eit.umd.edu/~austin/ense622.d/lecture-resources/Boeing787-Outsourcing2009.pdf 3rd April 2018.

Shift work Improving productivity (online) http://shift-work.com/shift-schedule-issues/improving-productivity/ 3rd April 2018.

Kelchner Luanne What is the purpose of Just in time inventory systems (online) http://smallbusiness.chron.com/purpose-justintime-inventory-systems-20342.html 10th April 2018.

Ahmed Muddassir March 26th, 2016 JIT system and supply chain management 5 salient features (online) http://muddassirism.com/jit-system-and-supply-chain-management/ 10th April 2018.

Boeing n.d Boeing in Brief (online) https://www.boeing.com/company/general-info/ 15th April 2018.

Collins. M (2010) The Boeing Supply Chain Model (online)https://www.manufacturing.net/news/2010/07/boeing-supply-chain-model 27th April 2018.

Sodhi.S.M & Tang. C (2012) Application: Mitigating New Product development risks- the case of the Boeing 787 Dreamliner. (online) https://www.researchgate.net/publication/279353389_Application_Mitigating_New_Product_Development_Risks-The_Case_of_the_Boeing_787_Dreamliner 27th April 2018.

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