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Boeing 787

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  COURSE: INTERNATIONAL PURCHASING MANAGEMENT MGT - 634BATCH: MBA EVENING – VITH TERM MANIPAL UNIVERSITY - DUBAIASSIGNMENT 2 – THE BOEING 787 CASE STUDY  Submited By:  1. Jis Sara Varghese 2. Aishwarya Mohan 3. Shihabudheen. N1  BOEING 787 – INTRODUCTION In 2003, Boeing decided to focus on creating additional value for its customers (airlines) and their  passengers by developing an innovative aircraft: the 77 !reamliner  irst, Boeing#s value$creation strategy for the passengers %as:&' irstly, to improve their travel eperience through redesigning the aircraft and offering significantimprovements in comfort'2'econdly, Boeing#s value$creation strategy for its *ey immediate customers (the airlines) and its end customers (the passengers) %as to improve flight operational efficiency by providing big$+et ranges to midsie airplanes %hile flying at approimately the same speed' -his efficiency %ould allo% airlines to offer economical nonstop flights to and from more and smaller cities'In addition, the 77 !reamliner is designed to use 20. less fuel for comparable missions than today#s similarly sied airplanes' -he cost$per$seat mile is epected to be &0. lo%er than for any other aircraft' /lso, unli*e the traditional aluminum fuselages that tend to rust and fatigue, the 77#s fuselages are based on composite materials, %hich reduce airlines# maintenance and replacement costs 1.Need for change in Boeing’s procre!en s ra eg#  !ue to the above mentioned uniue value that the 77 provides to the airlines and their  passengers, the number of orders eceeded epectations'  -he !reamliner %as the fastest selling plane in aviation history %ith carriers attracted to its ne% largely composite design and innovative net generation +et engines that %ill allo% the %ide$ bodied plane to fly further on less fuel'  Boeing received orders from more than 10 airlines for a total of 1 !reamliners'  !espite significant capital investment and management effort, Boeing faced continual delays for more than t%o years in its schedule for the maiden flight and plane delivery to customers'  -here %ere also numerous failed attempts to get its 77#s composite rear fuselage supplier bac* on trac*'    -he !reamliner %as delayed by almost three years' Instead of 200, it made its first flight in 20&&' !espite the delay, not all issues %ere fied' -he plane %as grounded   due to the fire in the  batteries'  -o reduce the 77#s development time from si to four years and development cost from &0 to 4 billion, Boeing decided to develop and produce the !reamliner by using an unconventional supply chain ne% to the aircraft manufacturing industry'  5ne of the biggest decisions of the operations management that Boeing had to ma*e %as ho% to much to ma*e and ho% much to buy' /s a result of %hich, outsourcing %as adopted as a strategic measure' 2   -he aircraft manufacturing %as delayed and the company had to pay huge penalties to the customers' 6uge ependiture had to be incurred as the company sent the engineers all over the %orld to help the suppliers in providing the reuired material'  -he management %as reshuf    fled completely to ta*e care of the issue'  -herefore, it is in order to epedite its development and production processes and to resolve the above mentioned delay and to reduce the development cost, that the procurement strategy of Boeing had to be revamped'  $.Too%s ha Boeing sed in he procre!en for 787 Drea!%iner /' Cos es i!a ion     / cost estimation is the approimation of the cos  of a program, pro+ect, or operation'a'Boeing has utilied the cost estimation tools for their process' -hey have decided the  brea*$even techniues based on the cost estimation techniues in case of Boeing 77 !reamliner pro+ect'B'  &pp%ier 'anage!en   upplier management is the act of identifying, acuiring and managingthe resources and suppliers that are essential to the operations of an organiation'a'Boeing follo%s a stringent policy for supplier management' 8egular audits of the suppliers are done and the ris* of the pro+ect is transferred to the suppliers' Before finaliing the supplier, due care is ta*en to ensure that the supplier is technically acceptable and meets uality standards reuired'9' (ro)ec &ched%ing   ro+ect  sched%e  is the tool that communicates %hat %or* needs to be  performed, %hich resources of the organiation %ill perform the %or* and the timeframes in %hich that %or* needs to be performed' a'Boeing used ro+ect cheduling as a plan to manage the operations' D. (%anning and forecas ing   ;fficient forecasting euips the company to overcome challenging situations that may arise because the company %ould be prepared accordingly to tac*le the situation' 3. O sorcing as a & ra eg# in Boeing* Boeing outsourced design and manufacturing of aircraft sections to an international portfolio of vendors'-he 77 %as the first ma+or aircraft to ma*e use of a predominantly carbon fiber structure,  pro+ected to enable a 20. fuel efficiency improvement over comparably sied vehicles of the current generation and a 30. reduction in maintenance costs' -he composite materials %ould allo% relative simplicity of assembly' Boeing<s leadership envisioned snapping together !reamliner in as little as three days, much li*e plastic model airplanes' -o enable this, a portfolio of parts suppliers %ould design and build ma+or sections, %hich Boeing %ould then consolidate atits eattle$area facility' 3  +d,an ages* 1. -ocs on core : -his outsourced paradigm %ould allo% Boeing to focus on those activities itsa% as its core competencies and outsourcing %ould eliminate distractions' -heir core competencies included:  =arge$scale systems integration,  =ean and effective global design and production,  >or*ing %ith eotic metals li*e titanium and composites, and interpreting the needs of the airline industry' 2' +ccess o ne/ capa0i%i ies or no/%edge : 5utsourcing need not be about replicating eisting functions' -he outside vendors?parties could offer competencies that %ere simply not available in any other %ay' Boeing sought uic* access to capabilities that fell beyond eisting capital constraints' 3' Cos Efficiencie s@: >ith the promise of reductions in development time, cost, and capital investment, Boeing#s approach %as poised to usher in a ne% %ay of designing and producing commercial aircraft'  Disad,an ages* 1. I s par ners’ fac or# /orers %aced re2isi e si%%s : lo%$%age, trained$on$the$+ob %or*ers, no previous aerospace eperience' 2. Diffic% # of co!!nica ion and coordina ion : -he compleity, fragmented decision ma*ing and bro*en information flo%s %as often countered by process redesign and investments in additional human and information technology resources 3. Insfficien !a eria%s* ome of its suppliers could not produce enough parts and there %as consistent insufficient supply of frame, clips, brac*ets and floor beams' 4. Ina0i%i # o con ro% he 787 prodc ion sched%e : !eferred %or* %as found to be incomplete or lost in transfer and parts that did arrive complete to final assembly reuired re%or* .   Inade2a e 2a%i # assrance process : =ac* of ualified nondestructive inspection?uality assurance personnel and euipment at -ier$2 and $3 suppliers' 4
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