Description
After you write your research paper, you will create a five minute narrated presentation
using Powerpoint.
Your presentation should meet this basic criterion.
Title slide with the topic, course number, and author (student) identified.
Overview or introduction slide to describe the presentation content.
A sufficient number of slides to convey the method and findings of the review.
Audio that further describes the slide content.
Summary or conclusion slide to close the presentation.
Reference list to show the sources cited within the presentation.
Video, animation, or other supporting elements as desired to enhance the presentation.
Running Head: SUPPLY CHAIN MANAGEMENT ISSUES
Supply Chain Management Issues
Kedrin Hood
Embry-Riddle Aeronautical University
MGMT 420
Professor Sussan
January 19, 2021
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SUPPLY CHAIN MANAGEMENT ISSUES
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Supply Chain Management Issues: A Case of Failure in the Boeing Industry
Overview
Aerospace industrial management is a critical component that guarantees the industrial’s
success. Proper management and production ensure customers’ safety and comfortability and
improve the overall competitiveness in the industry. Substantial challenges that airline
management faces are because of low operations actions. To achieve targeted operational and
financial targets, operations of the airline need to be a notch higher to detect and diagnose any
operational failures (Wisner et al., 2016). To successfully cope with these challenges, airlines
need to consider and comply with the safety regulations that the industry requires.
Abstract
Operations management in the supply chain impacts any aircraft manufacturing industry’s
production. Big industries such as Boeing are now open to the idea of receiving goods and
sourcing for services. Such opportunities open the possibility for businesses to cut costs by
accessing products at a lower price. It also offers differentiation of products by bringing in
unique products into the specific market (Khan, 2019).
Therefore, this paper will be a review of operational issues that were caused by a failure
in the airline industry’s operations management process, specifically in Boeing management. As
part of operations management, the failure in supply chain management decisions had a ripple
effect on the airline industry’s overall success. The paper will also discuss where the problems
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started in the operations department and how they were fixed or the mitigation steps they took to
overcome these challenges in line with the ten strategic management decisions (Wisner et al.,
2016).
Introduction
Boeing enthusiastically embraced outsourcing at the beginning of the millennium when
they launched the 787 Dreamliner. The project to launch these coveted aircraft delayed because
of several avoidable supply chain management failures. Worth notable was that the aircraft
manufacturer initially lost their market share to Airbus in the late 20th century. With these losses,
they should have focused on reducing the costs, but they went ahead to innovate new aircraft to
generate revenue and create value for their customers. They set out to grow their revenue and
improve market response (Collier, 2020).
The new Boeing 787 aircraft innovation was set to revolutionize the aircraft industry. The
aircraft used a composite material consisting of carbon fiber, aluminum, and titanium to improve
passengers’ flight experience by increasing humidity and pressure in the passenger cabin. The
aircraft manufacturer outsourced the services to manufacture these aircraft and was set to reduce
production cost by 4 billion (Khan, 2019). They were set to reduce development time from six to
four years by outsourcing for production services.
The convenience and ease of doing business that the innovation would guarantee was a
selling point for the innovation even before completing the initial project. Most airlines made
orders to the aircraft manufacturer. Overwhelmed by the numerous orders from its customers,
they began experiencing supply chain challenges that led to a delay in the launching of the
maiden flight aboard the Dreamliner 787. By 2008, Boeing had received up to 985 Dreamliner
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orders from 50 airlines (Haksever & Render, 2017). This paper will examine the supply chain
challenges that brought failure to the launching of the 787 Dreamliner.
Introduction
Aircraft manufacturing industries have evolved over the years. To maximize efficiency
while delivering value to their customers, these manufacturers have different operations
management strategies. Boeing decided to upscale its outsourcing capability to 70% when
planning to innovate on the 787 Dreamliner. The aim was to keep manufacturing and assembly
costs while spreading the financial risks between Boeing and the suppliers (Xin et al, 2019).
Common supply chain management issues contribute to organizational failure. They
range from operations to production challenges. The supply chain failures range from sourcing
decisions, risks of supply disruption, modernization, and emerging technologies, and skilled
workers shortage. A resilient supply chain department is vital for any organization’s success as
much as it is essential to have a top-notch manufacturing process (Hinsch, 2019).
By increasing the outsourcing potential, the development time would drastically reduce
by leveraging the supplier’s ability to develop different parts simultaneously. The aim was costeffective by reducing the developing costs by exploiting the supplier’s expertise. The suppliers
would form an integrator role where they assembled different parts and subsystems produced by
tier-2 suppliers. Tier-1 partners would deliver the complete sections, and Boeing was responsible
for the final assembly and delivery to its customers (Khan, 2019). This paper will review the
failure of Boeing because of the supply chain management issues that arose during the advent of
the 787 Dreamliner. The paper will further review these supply chain management issues
concerning the ten strategic management decisions.
Design of goods and services
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The composite material for the Dreamliner was a mixture of aluminum (15%), titanium (12%),
and composite material (carbon fiber reinforced plastic,50%). The composite material was
making an entrance into the market. The feasibility studies to settle for this material brought
about safety concerns for the flight and propulsion. Additionally, Boeing went outsourcing for
manufacturing in the US and beyond. They did not include any steps to mitigate the risks that the
feasibility brought about. They also did not coordinate the different partners to mitigate the
design’s risks (Wieteska, 2020).
Boeing, a leading aircraft manufacturer, did not provide on-site quality, supplier
management, and technical support when outsourcing from different partners. Outsourcing
reduces cost, increases efficiency, and saves on infrastructure and technology. In this case, poor
coordination of efforts and overlooking the feasibility studies’ risks brought design failures that
grounded the whole enterprise (Gudmundsson, 2015).
There were claims of an alarming overheating of the lithium-ion batteries, and the
lightning strikes brought about a safety concern for the wings because of the composite material
that went into creating the wings of the Dreamliner. Since customers do not have a say in the
design of the product, Boeing was to take maximum control of the production process to produce
designs that would create value for the customers (Wisner et al., 2016).
Managing quality
Managing quality in the supply chain integrates supply chain partners and leverages
opportunities created by upstream and downstream linkages to create value and achieving the
satisfaction of intermediate and final customers (Xin et al., 2019). Quality control in supply
chain management is essential to create a competitive advantage for the business and to reduce
operational costs. Achieving quality in supply chain management achieve sustainable success
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through optimizing stakeholder involvement. Quality management focuses on internal process
control and improvement.
Boeing failed to provide on-site support for its suppliers but instead left its subcontractors’ responsibility. When the sub-contractors did not perform according to the agreement,
Boeing brought its engineers to the various Tier-1,2 and three sites to solve various technical
problems that were causing production delays. Boeing redesigned the entire aircraft assembly
process causing an additional expense to the initial budget (Khan, 2019). Failure by Boeing to
coordinate efforts of the quality of work by the different sub-contractors brought technical
difficulties in the manufacturing and assembly of designing of the 787 Dreamliner.
There was a quality control challenge, especially with managing different companies,
such as in the case of Boeing. Some companies may produce products that did not match the
required quantity. There was also a risk of these outsourced companies outsourcing further from
other companies who were not delivering according to the expected standards and the stipulated
deadlines. The company found it difficult to monitor operations and make sure the delivered
parts from different countries were of good quality. They also lacked personnel to monitor all the
operations from different countries that were providing different parts for the Dreamliner
787(Haksever & Render, 2017). The intraorganizational challenge of lack of personnel to do the
due diligence to monitor subcontractor operations led to the delivery of sub-standard products as
the final phase before assembly. The result was a halt in operations and grounding of the
Dreamliner.
Process and capacity strategy
This involves getting the maximum output from the structure based on the selected design. It also
involves the resource capacity put in place to meet the manufacturer’s demand. Boeing’s strategy
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was to create value for its customers by improving flight efficiency. This was possible by
providing the big-jet ranges to midsize airplanes that would fly at the normal speed range (Xin et
al., 2019). The value creation would allow airlines to offer economic nonstop flights by
increasing passenger capacity and economizing on fuel usage.
The value that the design and its efficiencies were creating attracted many customers who
preordered the design before manufacturing. To reduce cost and time, outsourcing manufacturing
services was wise but presented with few challenges. Different manufacturers were working
from within and without the USA presenting a communication barrier (Khan, 2019).
Additionally, the discovery that some of the tier-1 suppliers did not have the know-how on
developing different aircraft sections or on how to manage the tier-2 suppliers. It reflects on a
failure in strategic management of the manufacturing process. The resulting delay in production
also presents a failure in capacity to manufacture the coveted aircraft.
Maintaining tight control over the production process’s overall design and engineering
works creates mutual respect and trust between the suppliers and manufacturers. Boeing failed to
control the design works and vetting of suppliers, therefore creating communication and supply
chain mishaps (Hinsch, 2019). The suppliers’ production process was characterized by overriding
preoccupation with product quality and mistrust that eventually brought additional costs,
contrary to the initial aim of the designing process.
Location strategy
Based on the company’s needs and objectives, it is essential to obtain optimal operations’
ideal location. Boeing identified suppliers from different locations and the USA as the final
destination for the assembly of the 787 Dreamliner (Wieteska, 2020). There were different
locations for the raw materials that went into the Dreamliner’s design. Markets for these
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materials are widely distributed. The different suppliers for different parts of the aircraft also
resided in different parts of the globe, where some were supposed to get the raw materials from
different locations.
Timely delivery of the raw materials also depends on their physical location. Obtaining
the right quality of the different suppliers’ raw materials was also a daunting task. This coupled
with the different countries’ bureaucracies where the raw materials were located. Coordinating
the logistics for delivery of the raw materials also provided a challenge (Hinsch, 2019).
Transporting the finished products to Boeing for final assembly also provided another logistical
challenge that may have led to the eventuality of the Dreamliner 787.
Layout strategy
A business’s layout combined with the location provides the overall business strategy of
different, low cost, and market focus. The supplier assembly plan’s initial layout had no Boeing
personnel to monitor production at the supplier level. Due to the supplier’s inability to meet the
production deadline, Boeing sent personnel to fill the suppliers’ management vacuum
(Gudmundsson, 2015). The vacuum created in the initial supplier assembly plan shows a failure
in the layout strategy that led to the failure in the lifespan of the Dreamliner.
Human Resources and job design
Human Resources and job design involve the conscious efforts to organize
responsibilities to achieve certain objectives. Job design is a human resources function that
ensures efficiency, productivity, and job satisfaction. The Boeing case did not provide enough
information on employee involvement in the management decision to outsource manufacturing
services. The resulting failure reveals a failure on the management’s part to involve employees in
the outsourcing decision. After suppliers failed to meet the deadline, Boeing sent personnel to
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monitor the production process. This decision was not in line with these personnel’s job design
since they were removed from their duties to put out the fire that the ensuing scenario was.
Involving personnel with expertise in the supply chain would also have mitigated the disruption
in supply chain that this agreement brought and restore the customer confidence in Boeing
(Haksever & Render, 2017). Personnel with supply chain expertise would identify supply chain
mishaps and develop mitigation strategies to deal with these glitches. They will also coordinate.
Supply chain management
When Boeing realized that tier-1 suppliers did not have the technical knowledge on the
development of aircraft parts and management of tier-2 suppliers, they decided to regain control
of the manufacturing process. They acquired a unit of Vought aircraft in 2008 and another in
2009. The acquisition provided Boeing with direct control of Vought, tier-1 suppliers, and tier-2
suppliers (Collier, 2020). This way, they were in control of the fuselage development. To
mitigate the impending losses that Boeing would face due to the delay in production by the
suppliers, they paid them upfront to speed up the production process and stop the strike threats
by workers.
The business needs to understand the suppliers’ business for the business’s future. Boeing
did not involve itself in the supplier’s business until it could not meet customer expectations. It
needed to work with the suppliers from the get-go to review cost drivers and market trends to
mitigate inflation risks (Wieteska, 2020). Understanding the suppliers’ portfolio involves
understanding and reviewing current and future requirements and the availability of alternative
sources. By adopting the tiered outsourcing model without the values on which it rests, they
instead designed contractual agreements that brought about perverse incentives to work at the
slowest supplier’s speed and provide penalties for delays.
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Inventory management
Good inventory management saves time and ensures the delivery of goods in good
condition to the customers. Boeing set out to synchronize demand and supply order and
inventory information to achieve success while developing the 787 Dreamliner. They established
partner managed inventory programs and managed contracts to share the risk and improve
supply availability (Khan, 2019). Having global visibility to process exceptions is vital for
delivery performance. Exostar Supply Management Solution helped in managing inventory with
tier-2 partners. While the software would allow Boeing and partners to collaborate and plan
schedules, Boeing was not proactive enough to identify the partners’ inventory problems when
they failed to deliver on the agreed time. Boeing failed to track projected inventory balances and
supply availability against production schedules.
Scheduling
Scheduling helps plan activities to achieve the desired goals. Boeing applied the
unconventional supply chain model in developing the 787 Dreamliner was scheduled to reduce
production costs by 4 billion dollars. The risk-sharing supply contract was scheduled to reduce
production time from 6 to four years. The problem of sourcing for critical raw materials such as
fasteners also resulted in delays in the maiden flight’s development and launching. This, in
addition to the complicated unconventional supply chain they had adopted, brought a revision in
the scheduling of the launching of the maiden flight and subsequent delivery to the customers
(Wisner et al., 2016). The new schedule would then be built on achievable, high confidence
plans that incorporated technology. The new scheduling incorporated an additional schedule
margin to deal with unexpected issues that the flight test would have brought. Additionally, the
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scheduling would also have provided a window to deal with the arising issues that the flight
testing may have brought.
Maintenance
Maintenance creates efficiency by reducing wastage of resources or the time wastage that
faulty equipment creates. The sharing of risk between the suppliers and Boeing guaranteed that
the two entities would have coordinated efforts to achieve success. Having virtual
communication between the two entities was purely based on each end’s trust to deliver their end
of the bargain. Suppliers were to supply the manufacturers with up-to-date information on work
progress. The software would flag problems according to the suppliers’ information fed to it.
Since the suppliers were not honest enough, and due to cultural differences, neither of the two
were aware of the arising problems in real-time (Collier, 2020). When Boeing realized there
were challenges in this supplier-manufacturer relationship, it was too late to work within the
schedules. Maintenance efforts costed the aircraft manufacturer an extra dime and delays in
delivering to their customers within the agreed timelines.
Conclusion
The multi-tiered supply chain relationship was aimed at creating partners instead of
suppliers. While this was a brilliant idea, the resulting mistrust, breakdown in communication,
and lack of proactiveness resulted in failure to meet the customers’ needs and
expectations.Creating partnerships in a supply chain relationship includes establishing the value
proposition that these relationships will be bringing. Identifying the value proposition of
suppliers will go a long way in determining the future of the supplier-manufacturer relationships
and the business’s overall success.
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References
COLLIER, D. A. V. I. D. A. L. A. N. (2020). Operations And Supply Chain Management. Place of
publication not identified: South-Western.
Gudmundsson, S. V. (2015). Global partnering: The Boeing 787 Dreamliner and beyond. SSRN
Electronic Journal. doi:10.2139/ssrn.2654993
Haksever, C., & Render, B. (2017). Service and operations management. World Scientific Publishing
Company.
Hinsch, M. (2019). Industrial aviation management: A primer in European design, production, and
maintenance organisations.
Khan, S. A. R., & Yu, Z. (2019). Strategic supply chain management.
Wieteska, G. (2020). The impact of supplier involvement in product development on supply
chain risks and supply chain resilience. Operations and Supply Chain Management: An
International Journal, 359-374. doi:10.31387/oscm0430276
Wisner, J. D., Tan, K.-C., & Leong, G. K. (2016). Principles of supply chain management: A balanced
approach. Boston, MA: Cengage Learning.
Xin, A., Jiang, D., Yu, B., & Hang, L. (2019). Research on knowledge management of aviation
manufacturing industry based on association rules. Proceedings of the 2019
International Conference on Precision Machining, Non-Traditional Machining and
Intelligent Manufacturing (PNTIM 2019). doi:10.2991/pntim-19.2019.18
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