Boeing (USA) is a household name in the aviation industry. It is one of the largest commercial jet manufacturers. Boeing is also an active player in the USA defense aviation sector.
The Middle Eastern countries are well known for their annual air shows where Boeing signs sales deals worth billions of dollars. Boeing got an excellent market response to its commercial jet ‘737′. Boeing 737 comes in different variants with a “maximum seating capacity” that ranges from 149 passengers to 220 passengers. Lately, Boeing hit a snag in the delivery of its orders of commercial jet ‘737′.
One of the major factors that delay Boeing’s aircraft deliveries is manufacturing problems at its aircraft component suppliers’ facilities.
Exsyn Aviation Solutions (Netherlands) offer a variety of services in the aviation industry including consulting on aviation matters. One of their reports (7 March 2014 – though old, but the report is still relevant to address the present woes of Boeing) documents the operational oversight at Boeing which creates disruption in its supply chain. The report states,
“Boeing’s new approach (of outsourcing production of aircraft components) was based on the production system that the Japanese car manufacturer Toyota is applying. Production of Toyota cars is what is called an “integrated socio-technical system” which in essence means that the entire value chain (from suppliers to Toyota itself) is focused on joint optimisation of the whole production process of Toyota cars.
The joint optimisation even stretches as far as optimisation of the suppliers of Toyota. Essentially, Toyota is the precursor of what nowadays is called “lean manufacturing”.
However, two major aspects of Toyota’s production strategy are often missed:
1. Only existing and proven technologies and production steps are outsourced to suppliers and;
2. Toyota takes share in the companies that supply products/services and places young and promising managers at the head of those companies.
Boeing did not adhere to those two aspects. New technology was being produced by the suppliers (new engines, new electrical systems, new software, new fuselages, etc.) and Boeing kept to the classic customer-supplier model.
This is best proven by the problems Boeing had with Vought Aircraft Industries. This supplier was under contract to build the fuselage of the Boeing 787 but continuously delayed. Boeing did not have anyone in place in Vought Aircraft Industries who would keep track and recognise the problems occurring. Boeing had to rely on the reports they would get from Vought Aircraft Industries.
In the end, both Boeing and Vought fired their program managers and Boeing bought the Vought Aircraft Industries plant where the fuselage was produced.
In the same report, Exsyn Aviation Solutions (Netherlands) document their (suggested) business process outsourcing strategy. It is very important for our readers to note that “this strategy is not limited to the aviation industry. It must be applied to all business segments to achieve optimal results” from business process outsourcing.
“Outsourcing more responsibilities to suppliers and subcontractors can certainly make production (or maintenance) processes more efficient and cheaper, Toyota has proven this for many years. However, when outsourcing activities, it is important to make sure that only proven methods and/or technologies are outsourced to your suppliers. This gives the outsourcing organisation the possibility to transfer its knowledge of the existing method or technology to the supplier.
Additionally, it is of importance that the supplier is (in detail) familiar with your processes and company. The fastest way to achieve such awareness is to place your former or current employees in their organisation. Outsourcing activities without concern for taking these two aspects will ensure that you will have continuous struggles and issues with your suppliers and will reduce the efficiency of your supply chain.”
The present business strategy of Boeing
Seattle Times (16 January 2018) reports,
“Fed up with delays that have plagued production of luxury jetliner cabins, Boeing is forming its own company with a major seat supplier to the auto industry.
The joint venture with Adient will be based near Frankfurt, Germany, along with a technology centre and an initial production plant. It will market seats to airlines and leasing companies that are ordering new planes and retrofitting older ones.”
The most notable item in the above news report was,
“The strategy furthers Boeing’s foray into so-called vertical integration as CEO Dennis Muilenburg seeks to bring more work back in-house. That’s a reversal of the global outsourcing that dominated strategy at the Chicago-based plane maker a decade ago when the company was building the first 787 Dreamliner.”
Boeing – Latest News and Developments in Production of Commercial Jet ‘737′
On 9 October 2018 Reuters reported,
“Boeing Co delivered 61 of its best-selling 737 single-aisle aircraft in September, unexpectedly surging past numbers for August and suggesting manufacturing problems at suppliers may be easing.”
It is pertinent to mention here that even in the case of production and delivery of commercial jet ‘737′ the outsourcing partners were responsible for the delay.
Spirit Aero Systems Inc, which is responsible for almost 70% of the supply chain of commercial jet 737 and GE joint venture CFM International, the engine maker for the 737s were the suppliers that disrupted the commercial jet ‘737s’’ production supply chain.
Commenting on this latest development, an analyst of Jefferies, a global investment banking firm with its principal executive office in New York, USA said,
“Boeing’s quarterly numbers indicate ongoing progress with suppliers and set the world’s biggest aircraft producer up for a strong finish to the year. We expect a full recovery in the fourth quarter.”
Boeing CEO, Dennis Muilenburg, while speaking at the Morgan Stanley Laguna Conference in California (September 2018) said that the company aims to meet its delivery target (for the year 2018) of between 810 and 815 aircraft (across all models). In the first nine months of the year 2018, 568 aircrafts have been delivered.
Reuters also reports that Boeing is ahead in the order race with Airbus, booking 631 net (after cancellations) aircraft orders in the first nine months of the year while its rival Airbus has recorded 256 orders.
How did Boeing deal with the delivery crisis of commercial jet 737?
Boeing reached an agreement with the International Association of Machinists (IAM) in August 2018 for getting “temporary assistance” in coping with commercial jet 737 delivery issues.
IAM is one of the largest and most diverse labor unions in North America. It has around six hundred thousand (600,000) active and retired members which play an active role in operations of big aviation companies.
Boeing also approached its own retired workers and requested them to temporarily rejoin to finish the backlog of pending deliveries.
Key Takeaways from Boeing’s struggles and success
• Business Process Outsourcing will only be successful if done in a right manner (explained above).
• Before outsourcing business processes, companies must make sure that one or more of their staff member gets an operational role in their outsourcing partners’ company.
• The retired workforce should be considered as an asset. Suitable post-retirement benefits must be provisioned. In large scale industries, one never knows when the company might require the expertise of retired workforce.