Building the Boeing 787 Case Study

Excerpt from Case Study :

Building the Boeing 787

Boeing is a maker of airplanes and other related items. It is the leading company where aerospace makers are concerned, and manufacturers both military and commercial jetliners. Satellites, defense systems, missiles, and many other electronics and components are also made by Boeing. It contracts with NASA, and provides components for the International Space Station (ISS). Customers in 150 countries use products and support services supplied by the company to meet their aerospace needs. It is headquartered in Chicago, Illinois, and employs more than 170,000 people. The majority of them have degrees, and many of those degrees are high-level. These employees are in the United States and 70 countries throughout the world. Boeing is a publicly-held company and traded on the New York Stock Exchange. It was founded by William Boeing in 1916 in Seattle, Washington, and has grown steadily since that time. Revenue in 2012 was $81.70 billion.

There are benefits to Boeing when it comes to outsourcing so much work on the 787 to foreign suppliers. These included a shorter time frame for production and a lower cost of development. Those were both significant, since the cost of development and the time for production were the largest issues the company faced. Normally, it takes six years to bring planes of that size to production, but Boeing predicted that it could be done in four years. That is what it sold to its customers, and what it took orders for. The company believed that outsourcing was the way to do that, because it could have the different components all being built at once. Then it would have them all shipped to one facility in Everett, Washington, where the components would be put together into the finished product. By getting everything done so quickly and keeping the cost of development down, Boeing would be able to impress its customers and make a good profit.

Of course, there were also risks. These involved the concerns over what would happen if the planes were not delivered on time and on budget. As it was, this was what took place. The planes ending up costing millions more to develop than expected, and they were also delayed. The first estimate was that they would only be delayed for a couple of months. The second estimate was that they would be delayed for a full 12 months. Because of the delays in getting the planes to its customers, Boeing also had to incur a large number of penalties and costs. These added to the production costs that the company was trying to keep low by outsourcing. Having companies in other countries make large portions of the airplane became a problem in another way, as well. Keeping control of what was happening and staying abreast of all of it was difficult. Boeing often did not know right away that there was any kind of problem, which made correcting it that much more difficult and led to even further delays. Additionally, people were not happy that so much was being outsourced because they were concerned about the U.S. economy.

The benefits, however, outweighed the risks for Boeing because the company is so large and could afford to bounce back from the problems it faced. Additionally, Boeing learned a great deal about how to outsource to other countries successfully. Everything the company learned will be used in the future to create new airplanes and other items, and that can only help Boeing grow and develop further. While there were delays, cost overruns, and some backlash for outsourcing, Boeing is still at the forefront of its profession. That is very important, because it ensures that the company will continue to be successful for a long period of time. The company has had issues in the past, as well, which is important to take note of in order to understand the thought processes of those who operate Boeing and who are working to make it the most successful company it can be in the aerospace market.

In 2007 and 2008, Boeing ran into several well-publicized issues regarding the management of its globally dispersed supply chain. The causes of these problems were due to various factors. One of the main issues was that the companies to which Boeing outsourced turned around and outsourced the work to other companies. Then, those companies could not meet the exacting quality standards that Boeing required for its 787s. Unfortunately, Boeing did not find out about that until the delay was already several months old. That put them behind more than they would have been if they would have known right away about the extra outsourcing and the lack of ability to meet quality standards. It appeared as though it did not occur to Boeing that the companies to which it outsourced 70% of the work on the 787s might, themselves, outsource the work. That is an issue to which Boeing will have to give careful consideration in the future.

Another serious problem with Boeing's outsourcing of so many items was that they did not always get completed properly or on time. It was not just about quality standards, but about the parts being made correctly so that they could be assembled when they arrived at the Everett, Washington plant. Many of the parts were not what they were supposed to be in terms of size and design, and some of the assembly instructions were not sent or available in English. That caused Boeing to have to go back and have things redone. That delayed the airplane further, costing more money. There was a lack of control of the supply chain, which cost the company much more than it likely would have if the company would have just chosen to work with local (or at least U.S.) suppliers. This was a large part of the issue that was faced by Boeing, and something it had to work through so that the airplanes could be completed and sent to their purchasers. Despite the delays and other problems, Boeing stood by its decision to outsource so much of the plane to companies in other countries.

To make sure these kinds of problems do not occur in the future, Boeing and companies like it can be more focused on how to handle their outsourcing. There is not necessarily anything wrong with having parts and components made in other countries. This is often done, especially on large projects. One of the reasons Boeing did it was to utilize the diversity and talents of so many different people throughout the world. The company wanted only the best, and they were able to get that, for the most part, by choosing to work with a multitude of companies all around the world. However, one thing they should have made clear was that the companies with which they contracted were not supposed to outsource anything to other companies. Boeing contracted with specific companies because those were the companies they wanted to work with and the companies they trusted to handle the job correctly. Having those companies choose other companies to actually do the work was not in Boeing's plan, and it ended up costing them a lot of time and money.

Another way to avoid these kinds of problems is to more closely oversee what it taking place with outsourced work. While it is up to the company to which the work was outsourced to get the job done properly, Boeing could have sent more quality control and other supervisory individuals to the companies that were doing the work. This would have helped them spot potential problems more easily, which would have been highly beneficial because it would have caught problems before they became serious and significant delays. With that in mind, all companies that outsource their work, especially if that work is for very expensive and/or very large components of a major project, should have a relatively tight rein on the companies that are actually creating the components, raw materials, or products. By doing that, issues will be caught and resolved quickly and the entire project is less likely to end up being delayed or costing more than anticipated.

Critics have claimed that Boeing has been exporting American jobs overseas by outsourcing so much of its work. They have taken the company to task because each time it created a new plane it outsourced more of the work. It started with the 707, which had only a small percentage of outsourced components. The last plane that was built before the 787 had 50% of its components outsourced. Then came the 787 at 70%. Basically, Boeing designed the plane, marketed and sold it, and put the components together at its Everett, Washington plant. It also made sure the planes were delivered to the customers. As for actually building the plane, though, Boeing outsourced nearly all the work to a variety of companies in numerous countries. Those who want to keep jobs in the U.S. are concerned about the number of…

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