Boeing Case Study 461k13

SECTION 1

Executive Summary The current paper discusses the different in the operation management strategy of Boeing and Airbus. Boeing 787 Dreamliner has been facing a lot of technical and logistic issues, and the paper tries to understand why these issues have been occurring. Airbus and Boeing form the duopoly of the aviation industry. Boeing is owned by an American company, while Airbus is from the European Union. These two have been in competition in the aviation industry for more than a decade now. This paper focuses on the dream project of both the companies: Boeing 787 Dreamliner and A80 Airbus. Taking into the current management strategy, the paper analyzes why the Dreamliner of Boeing is facing so many quality and supply related issues. Various factors of operation management emerge as the issue in the company. Supplier management emerges as the major area of concern. The company has too many suppliers which are spread across different geographical areas. The large number of suppliers makes it difficult for the company to control the quality and the delivery schedule of these products that are delivered. Another concern which emerges is the lack of proper control over the quality and safety issues associated with the project. Since the project of Dreamliner was already delayed, the company seems to be cutting corner with respect to the safety and quality. Keeping this in mind, a list of suggestions is recommended so as to resolve the issues. The comparison is also made in of the project management and IT tools used in both the companies to understand the reason for the difference in the performance of the company. This paper focuses on different concepts of operation management that can help the company in future.

Introduction to the Chosen Organizations Airbus and Boeing form two sides of the modern airline economic landscape. One represents the United States, while Airbus is from the European Union. These two have been in competition in the aviation industry for more than a decade now. This paper focuses on the dream project of both the companies: Boeing 787 Dreamliner and A80 Airbus. Taking the case of these two aircrafts, this case study tries to understand what went wrong with the Dreamliner to unseat it from its top position in the aviation industry. Operation management is essential for the success of any project: be it a simple project or the complicated project of development of the aircraft. This case study starts with the aspects of operation management as the root cause of the failure of the Boeing’s Dreamliner. Operation management, in simple words, is the process through which the management of the process that converts input to output takes place. It is a systematic approach which takes into different issues faced by the organizations. The basic idea behind the whole process of operation management is to lower the cost to the minimum value while earning the maximum profit from a system (Mahadevan, 2010). This paper studies the operation management system followed for the development of Airbus 380 and 787 and tries to understand the reason why Boeing 787 is losing share to its competitor. The last section of the paper will further suggest the methods through which Boeing 787 can control the different quality and schedule related issue it is facing in the development of the Dreamliner.

History of Boeing Boeing as a company was established by Mr. William Boeing in the year 1916 with its maiden flights being launched in the same year. After undergoing a lot of structural changes owing to the change in the law in US, the company’s largest aircraft Boeing 314 Clipper was first flown in June 1938. This aircraft could carry 90 engers on day flight and 40 during the night flight became huge success and allowed the flight all across the world. The next model launched was of307 Stratoliner, the world’s first pressurized-cabin transport aircraft. The specialty of this aircraft was that it could fly at the altitude of 20,000 feet (Krugman 1986). The journey of Boeing never stopped after that. It designed bombers during the world-war. Military aircraft became its another advanced specialty (Leary, 1995). In 1950s the company started its first jet airliner with a design of four engines meant for the 156 engers, making it a leader in the market. Next came Boeing 737 with three engines followed 727 with the twin engine concept. In 1970s, the Boeing 747 was launched which had increased capacity of 450 engers. Further versions were discovered to meet with the increased air traffic and engers load. The competition was quite stiff for Boeing from the beginning. In the year 2000 the competition had reached its pinnacle, and Boeing was feeling the heat of the competition. Airbus and Boeing were fighting tooth and nail for the market space, and the share prices of Boeing were falling. It was at such a time development of 787 Dreamliner was announced. The idea was to develop an aircraft which is more comfortable as well as more economical. The company tried to reduce the overall price of the product and at the same time tried to increase the value of the product offered. Boeing 787 offered the efficiency of the operations, ability to take larger number of engers, and more area for the better comfort of the engers. These features made the Dreamliner an apple of eye for the company as well as for the prospective buyers.

Keeping this in view, the company decided on the development of 787 Dreamliner. The aircraft promised the operational efficiency and improved comfort for the engers. The features resulted in pouring of huge number of orders for the aircraft. However, the Dreamliner was delayed by almost three years. Instead of 2008, it made its first flight in 2011. Despite the delay, not all issues were fixed. The plane was grounded due to the fire in the batteries in 2013 (Ray & Stone, 2013). History of Airbus The second competitor in the current case study is Airbus. This is the European counterpart of the company Boeing which has been giving competition to the company for quite some time. The company is a leading manufacturer of military airlifters and the commercial jetliners. The company was based on European agreement to develop the aircrafts in the continent. Since no single country could afford the budget at that time, a loose consortium was formed between the three countries of Britain, and to develop A300 (Airbus, n.d.). After a lot of initial difficult days in which the Britain put out, A300, the first aircraft of the company took flight in the year 1973. Since then the company has been growing and developing. The company launched A320 in 1981 which was the first “fly-by-the-wire” plane. They evolved the new design of the cockpit and introduced the two person concept for the cockpit. By 1998, the company had managed to acquire around 50% of the market share. Till 2000, the company was based on loose consortium of the agreement, but the company’s corporate structure underwent change in 2000. European Aeronautic Defense and Space Company became the 80% shareholder of the company along with 200% of the shares being held by the Britain.

Airbus 380 made came into operation in 2007, much before Boeing’s Dreamliner, and has been in direct competition with the company. The company started out on a low note, but when compared to Dreamliner, the company has been doing fairly well in of Airbus A 380.

Explain the aspects of Operations Management that both Boeing and Airbus have, how they differ and which aspect of their OM practices contribute to the failure of Boeing 787 Dreamliner. Introduction to Operation Management for airlines The operation management involves the management of the process through which the inputs are converted into outputs. For airline industries, the scope of operation management can be stated as the following: i)

Planning of the production based on the Forecasting of the different factors that affect the aircraft production like the demand for the flight, the changing market scenarios, the demand for the aircraft, economic conditions of the companies making the purchase etc. The plan should include all the major estimates of timeline for the

ii)

development of the product Organizing the activities as per the plan and allocating the man and machine for the production. This organizing involves allocating the suppliers for the different parts as

iii)

a part of the operation management.. Staffing involves ensuring that there are sufficient and skilled workers for the lined up

iv)

process. Leading and controlling the activities set out in the plan so that the product is delivered as per the schedule and with the expected quality of the product.

Figure 1: Operational Management Model (Mahadevan, 2010)

Thus keeping the above four main factors in mind, it can be clearly summarized that the operation management of the process includes the objectives of forecasting, standardizing, the decision regarding make or buy, low procurement and storage cost, maintaining quality of the product, maintaining good supplier relationships, maintaining an information system which can help both suppliers and the company etc. Boeing’s operation management and what went wrong One of the biggest decisions of the operation management that a company has to make is the make or buy decision. Sometimes, the decision of outsourcing is also taken. The reason for the outsourcing can be many. It can be because a company wants to save the cost, or it can be because the company does not have enough expertise to develop the products in-house, or it

could be because the company wants to focus on its core capabilities rather than focusing on the different areas. An aircraft manufacturing is a complex process which involves huge number of specialized parts. Boeing 747 was going to be an innovation in itself. The company in the past only had experience in making of the aircraft body of aluminium. Boeing 747 Dreamliner was intended to be an airplane which is quieter and efficient. Hence the switch was made to the carbon composite materials as the component for the main body. Since the company did not have any expertise in the handling of these newer materials, they decided to outsource the parts. The newer materials for which the company did not have the expertise were outsourced all across the world. The parts of the airlines came from as many as fifty different countries. It was expected that since the airplane is going to be purchased by many non-US companies such an outsourcing process will be helpful as it will help in building of the confidence among the customers. It is worthwhile to note that for Boeing Dreamliner, the company outsourced almost 65% of the airline body. On the other hand, Airbus also outsources, but all its parts are outsourced from Britain, , and Spain, and then these parts are assembled in or . The outsourcing percentage is limited to 25% only in this case (Jones & Robinson, 2012). The above comparison throws light at mainly what went wrong with Boeing. The fire of 2013 which resulted in grounding of the aircraft had been a result of battery problems, but the no company is able to recreate the similar scenario that will result in the problem. And hence as such, the quality of the battery has not been proved yet in the similar circumstances (Irving, 2014). One of the professors as MIT puts it that the system integration might have been the

problem (Eppinger, 2013). And if that’s the case, there is a red flag over quality and testing of the whole integrated equipment. In of operation management, the company’s problems can be listed out as follows: i)

Production of Boeing Dreamliner was delayed because of the outsourcing problems it

ii)

faced. In order to meet the timeline of the product, safety and quality norms were

iii) iv) v)

compromised which further resulted in the delay in the commercial operations. Control over the quality and manpower became the issue in such cases. Insufficient testing of integrated product after outsourcing. There was no proper follow up of the schedules in the whole scenario. All the follow ups were done online in which the information was mismanaged.

Examine the need for any suitable change in Boeing’s Operations plan. As we have seen above there is a huge need to change the operation plan of Boeing. This is not only necessary from the perspective of the company, but from the perspective of the engers as well. Since the company faced a lot of issues concerning the Dreamliner, it is understood that there is a need for the change in operation management. Following are the major areas of operation management of Boeing that needs to be changed: i)

Better Risk management: Since the company went overseas for their spare parts in order to save cost, it is essential for the company to implement the better plan for risk management. Hedging of financial risk is something company should look into

ii)

especially if it is focusing towards the new product development (Denning, 2013). Supplier Chain management: The second place that company needs to relook is its supplier chain management. Suppliers are essential part of the manufacturing process,

and better supplier change management will prevent the quality issues as well as the delays in the supply of the spare parts. Thus supplier chain management is something iii)

company should focus on (Denning, 2013). Better integration testing: This is the current major issue. In one of the articles in Harvard Business Review, the author explains that in developing a system as complex as Dreamliner, the company needs to check integration of the different elements and how well they work together. Anticipated problems and interdependencies can then be resolved easily. Otherwise the problem escalates during the operation stage. Better integration testing will ensure that all such problems are weeded out before the

iv)

aircraft is launched further (Allworth, 2013). Better Strategic management: An article in New Yorker explains that the whole issue regarding cost cutting emerged after McDonnell Douglas acquired the company. This resulted in the change in the strategy of the company. The cost-cutting became the new mantra, and the management failed to understand the different approach needed for a complex and new product like Dreamliner (Suroweiki, 2013). Hence it can be said that the strategic management which defines and understands the market and product better could have been a better idea in the company. Such strategic

v)

management will prevent such further problems in future. Better material management and production planning: The company can do better with the process of production planning and material management in order to make

vi)

up with the delays in the process of procuring the material and delays in production. Reengineering: This is another step the company can adopt in order to improve the quality of the product. Although in case of aircrafts, this can be quite expensive technique, the option is still available to the Company.

vii)

Preventing the bullwhip affect to avoid delays: This occurs when the information that is ed on regarding the supply is distorted. The companies need to prevent the bullwhip effect to avoid all kinds of delays in the project.

Develop an operations strategy that could solve the problems of Boeing in this 787 Dreamliner project. The biggest challenge before the company is to find the defective parts and make a system to correct/repair them without any time delay. In order to ensure that, two methods are suggested: i)

Checklist method to be used: Checklist method of checking the things before flight has been around for a long time, but the method was utilized commercially by Boeing first. In the year 1934, when US Army complained that the airplane crashed because of the difficulty in operation of the plane, Boeing utilized the checklists to mark off the things needed for the flight. That method proved so helpful that the same was utilized by Apollo Space program as well (Mitchell, 2016). The same checklist can be utilized to ensure the healthiness of the planes before flight and before releasing for

ii)

flight. This will ensure the safety of the flight. Fishbone technique for total quality management: The fishbone technique helps in analyzing the cause and effect for any situation. For different quality related issues, the fishbone technique should be utilized to develop the cause and effect diagram and find the reason for the different faults in the system. The causes can be either human, machine, material or method as shown in the diagram below.

Figure 2: Fishbone Analysis of Causes of Failure

Machine

Human

Fault in the machine supplier Wrong design developed Mistake in BOQ Generation

Wrong machine selected

Machine did not integrate well with other parts Technical Failure of Boeing Dreamliner.

Human error in testing at different phases

Wrong method of SCM selected

Improper vendor selection and approval process

Wrong material selected Expertise not available for selected material

Poor integration testing process Wrong specification and BOQ. Process

Materials

PDSA technique for the improvement in the quality: The company can follow PDSA technique to analyze the kinds of fault that are occurring and how these faults can be reduced.

Figure 3:PDSA Cycle

iii)

Flowcharts: Flowchart involves development of a block diagram which shows the steps of the process. This kind of process diagram helps the failure analysis team in knowing how the system of the product or the process development works. This further helps them in doing the detailed root cause analysis. The operational block diagram for the Boeing 787 in major blocks is as listed below:

Understanding the design requirement for Dreamliner

Finalization of the SCM strategy

Development of the specification.

Scanning of the market for potential suppliers

Development of Bill of Quantities

Finalization of the vendors for different tiers

Floating of the enquiry to the potential bidders.

Technical and Financial Analysis of the vendors.

Competitive bidding

Finalization of potential subvendors.

Finalization of the suppliers

Communication with the venodors regarding the project.

Ordering of different parts.

Finalization of vendor.

Detail design of the project

Follow-up and monitoring of selected vendors

Alteration in BOQ as per the drawing/document review.

Quality check at suppliers' work.

Manufacturing clearance .

Technical help in development of the suppliers.

Receipt of the integrated parts.

Testing of the different parts integrated. Final integration of airplane at the shop floor. Integrated testing of the plane.

Identification and rectification of faults.

Release of the aircraft in the market.

iv)

Control Charts: Control charts are the quality management tools that can be utilized to see if the product or the process is working within the prescribed limits. This will

v)

help in judging the whether the aircraft and its various functions are in control or not. Pareto Technique: Pareto technique is used to identify how important each item is to its impact on the quality of the whole product.

Figure 4: Example of Pareto Analysis

vi)

Failure Mode and Effect Analysis: FMEA is a structured approach to root cause analysis that starts by listing out all the things that can go wrong. Each of them are then rated based on the frequency of occurrence, probability of occurrence and severity of the impact. These are then rated in order to find the most critical of failures that can occur.

Furthermore, the company needs to improve its supplier management. Following is mainly suggested to improve the supplier management for Boeing:

i

Maintaining the closer to home suppliers: A lot of suppliers of the Company were from foreign land. In fact the research showed that these suppliers from as many as 50 countries. This became a logistics nightmare for the company. Moreover as many of the suppliers were not technically suitable, company had to send its own engineers to these countries. This added to the total budget as well as the total time of the

ii

production for the company. In house Development: The development of aircraft calls for a lot of parts of different technical expertise. Outsourcing them looks good on the paper, but in the longer run proved disastrous for the company. It would have been better had the company

iii

worked in house to develop the core competencies as in other project of theirs. Assessment of the Technical Expertise of the Suppliers: Many of the technical suppliers of the company were technically not expert enough to develop the required sensitive parts for the Dreamliner. This added to the problems faced by the company. Proper assessment of the suppliers will help the company as they will be able to outsource the product to the companies which are expert. This will improve the quality, reduce the overhead cost of the development of technical skills, and will

iv

reduce the lead time for these parts as well. (Forbes, 2013). Reducing the Supplier Complexity: The company divided the suppliers into three different tiers. Tier I were the suppliers who took the supplies from tier 2 suppliers and integrated the major parts. Tier 3 suppliers were basically the supplier of Tier 2 suppliers. This reduced the control of the company over tier 2 and tier 3 suppliers. It also called for technical expertise of Tier 3 suppliers. Thus it is essential for the company to reduce the complexity so that they can control the situation of the suppliers better. (Forbes, 2013).

v

Close Tie-Ups with the Suppliers: Close tie-up with the suppliers will help the company in keeping the quality control over the products manufactured. The company tried to use the model of Toyota, but could not adopt it fully. Adopting such a model will be very helpful for the company as the quality of the components will

vi

not be compromised (Forbes, 2013). Better communication: Communication is the key to success in such a supplier chain network. Thus the company should focus on the better communication technique so that it allows the company to get the real time information about what is happening with the suppliers. The current software used by the company had many loopholes and was misused by the suppliers by giving the wrong information. Steps should be

vii

taken to avoid such problems (Forbes, 2013). Better Team Involvement: Better communication within the team will also be helpful as it will help in the development of the product and coordination better. Rather than the blame game, which is evident in company’s management interview, the focus will be on finding the solution to the problems (Forbes, 2013).

Many companies believe that outsourcing can be a big breakthrough in the saving process. Boeing made the same mistake. But it should be understood that outsourcing does not result in profit always. The decision of make or buy is dependent upon many factors and one of the factors is the complexity of the items, and the technical expertise that is available for them in the market. Boeing’s biggest failure lies in not understanding this fact. The parts outsourced were fairly complex and called for the technical expertise which nobody else in the market had. Had the company focused on developing the core parts in-house, they would have been better able to solve the quality related concerns, do the testing, and save the overall time and cost. Besides they would also have had the skill for the future.

Understand and evaluate the current supply chain management practices and suggest any improvement if needed. Before the Dreamliner came into the picture, Boeing was a pioneer in manufacturing the aircraft. They had the expertise as well as the capability to perform even the most difficult of the tasks associated with the manufacturing process. Many of the subparts were manufactured in-house only giving the company an advantage of controlling the quality. The company was not much dependent upon the suppliers. But the Dreamliner, the company changed its position and focused on outsourcing of the products. The sub parts and sub assemblies were taken from a global supply chain model. The product suffered from the process complexity as well as the supplier complexity. While the parts needed were to be precise and as per the specifications, the manufacturers/suppliers of the parts did not have enough expertise or experience in supplying such products. This caused huge delays in the project and the companies lost a huge amount of money as well (Denning, 2013). In Boeing’s supply chain, three kinds of outsourcing emerge: the Tier 1, Tier 2 and Tier 3 outsourcing. The following figure shows the outsourcing process of the company. The products were purchased by the sub vendors which were then assembled by some other suppliers. These subassemblies were then sent for the integration to the central hub of the Boeing (Tang, Zimmerman, & & Nelson, 2009). .

But this outsourcing became a huge problem for the company. The company had expected to develop the aircraft much before the time and to provide the value creation without any financial risk, but the results were much different. i)

The aircraft manufacturing was delayed and the company had to pay huge penalties to the customers. Huge expenditure had to incur as the company sent the engineers all

ii)

over the world to help the suppliers in providing the required material. The management was reshuffled completely to take care of the issue, and the company also had to promise their labour about reducing the dependence on the outsourcing system. Overall, the company suffered quite a huge amount of loss in the

iii)

process. Earlier when the product was manufactured or outsourced, a tight control was kept over the quality of the product. The engineers understood how the products will respond to one another. The quality checks were stringent and the overall process was

better. But now, in the current scenario, the huge amount of outsourcing resulted in difficulty in controlling the quality or ing the integrated performance of vast number of outsourced products. This has been called as one of the reason for the company’s failure (Cohan, 2013). The Airbus works with the contrasting facility. The core competency and development of the core skills have been kept in-house in the company. The subassemblies are outsourced from mainly four different countries: , , Britain and Spain, They work in closer cooperation with their suppliers and usually associated with them during the Tier 1 stage itself. This allows company to involve the suppliers during the design stage itself and smooth out any lingering issues of the manufacturing. The suppliers undergo a manufacturing watching in which the company keeps track of the financial as well as the technical performance of the suppliers (Mocenco, 2015). Thus it can be seen that the supplier chain for both the companies is quite different. For Boeing, the supply chain is spread across huge global areas, while for the Airbus, it is limited to some 30 suppliers.

Project management that has to be designed to ensure Boeing completes the defects on time with the help of a PERT / M diagram and a GANTT Chart In order to control the defect analysis and ensures all the changes are done in time, the company need to follow the tight schedules. The first thing that the company needs is to identify the reason for the problems. Fishbone diagram can be helpful in analyzing that reason for the problems. Integration testing and field testing can also be helpful in finding the cause. Following are the major tools the company can use for the process of completing the project in time:

i)

Project forecasting: This is carried out to forecast the timeframe for each activity in the project as well as the cost of the activities. The historical data can be used for the process, and the quantitative model of cost and time forecast can be prepared. This is then developed into extrapolated to the future to develop the forecast. Different forecasting methods can be used for the project. Some of these are listed below: a. Delphi method: This is a qualitative method in which a third party is hired to do the forecasting of the project b. Time Series Analysis: This can be done by using the past historical data, weighted average method or exponential smoothing method. c. Regression forecasting: This can also be used to develop the demand and the

ii)

various factors that affect the demand of the product. Project Planning: Once the forecast is made, planning is the next step. In this step, different task is allocated to different authorities/departments/individuals and the timeline is prepared for the same. The tools used for the process are Gantt Charts. To analyze the critical activities, M/PERT is also produced, which helps in analyzing the most critical activities. Primavera can be used for making the process of planning easier and smoother. Project budgeting also needs to be assured so that each of the individual is aware about the project. Other options that can be used for the same is development of assembly drawing, the bill of material, operation process charts etc. WBS shall be developed for the project so as to divide the responsibilities among the

iii)

different parties. Project Monitoring and Control: Monitoring and control of the project is essential for the company. The monitoring will allow the company to see if they are lagging in the schedule, and the control will allow them to take the corrective actions. These two together will ensure that the company stays within the schedule (Badirul, Badiru, & Badiru, 2011).

M/PERT diagram for the activities List of activities thus can be listed out as the following list: i) ii)

Development of the process flowchart: 1 month. Finding of fault using the techniques described like checklist, FEMA, Cause and

iii) iv) v) vi) vii) viii) ix) x) xi)

Effect analysis, flowchart, control diagram etc. : 6 months Analysis of the vendors and the facility from where the parts were taken: 1 month. Preparation of final fault report: 1 month. Reengineering of the faulty part: 2 months Reassessment of the vendors and their sub-vendors: 1 month. Ordering and supply of the part of the faulty part(s): 3 months Testing of the parts in the facility: 1 month Reintegration of these parts: 1 month. Final Testing: 1 month Final launch in the market: End of the project.

Process numbers and precedence 1

Start

Most Likely time

Delaye d time

5

3-5

Flow chart Development Finding of fault Vendor and facility analysis Final Report

6

5-6

Reengg

7

4-7

Reassement

0.5

1

1.5

8

6-8

Ordering and supply

0.5

1

1.5

9

7-8

Ordering and supply

2

3

4

10

8-9

Testing of the parts

0.5

1

1.5

11

9-10

Reintegration

0.5

1

1.5

12

10-11

Final Testing

0.5

1

1.5

2 3 4

1-2

Earliest Finish Time

2-3 1-4

Finish

0.5

1

1.5

2

6

8

0.5

1

2

0.5

1

1.5

1

2

5

Expect ed Activit y Time(T )

Varianc e(V)

1.00 5.67

0.03 1.00

1.08 1.00 2.33 1.00 1.00 3.00 1.00 1.00 1.00

0.06 0.03 0.44 0.03 0.03 0.11 0.03 0.03 0.03

11 2

3

5

6

10

1 4

Acitivit y No.

Name of the work

1-2 2-3 1-4 3-5 5-6 4-7 6-8 7-8 8-9 9-10 10-11

Flow chart Development Finding of fault Vendor and facility analysis Final Report Reengg Reassement Ordering and supply Ordering and supply Testing of the parts Reintegration Final Testing

7

Expected time=T 1 5.67 1.08 1 2.33 1 3 3 1 1 1

8

ES

9

EF 0 1 0 6.67 7.67 1 10 2 5 14 15

LS 1 6.67 1 7.67 10 2 13 5 6 15 16

LF 0 1 0 6.67 7.67 1 10 2 13 14 15

Slack 1 6.67 1 7.67 10 2 13 5 14 15 16

Thus M for the project is 1-2-3-4-5-6-7-8-10-11 with total time period of 16 month as the optimum time. The average value of the variance in the time comes to 1.78 months.

0 0 0 0 0 0 0 0 6 0 0

Gantt Chart for the activities

Critical analysis of the tools that Boeing and Airbus make use of Boeing Boeing has utilized a large number of tools already to manage their project better. A few of these are listed below: i)

Cost Estimation: The Company has utilized the cost estimation tools for their process. They have decided the break even techniques based on the cost estimation techniques

ii)

in past as well in case of Boeing 787 (Gardiner, 2005). Supplier Management: The Company has set up the supplier management plan which distributes the risk to the suppliers. As a lesson learnt from Boeing, the company has developed better supplier management plan (Mahadevan, 2010).

iii)

Project Scheduling: The Company uses project scheduling as a plan to manage the operation of the project. Although it had not been successful in case of the

iv)

Dreamliner, the project schedule is evident in all the communications of the company. Project Communication: Although communication is not necessarily an operational activity, it does form an important part of the operation as it helps in retaining the trust of the shareholders. The current schedule clearly indicates that the company is committed to the communication.

Airbus i.

Lean Management: Airbus follows the policy of the lean management. The company has adopted the lessons from the other car manufacturers like Porsche and Toyota and

ii.

adopted the lean management techniques to manage their operation (Mocenco, 2015). Supplier Management: The Company, like Boeing, follows a stringent policy for supplier management. Regular audit of the suppliers is done and the risk of the project is transferred to the suppliers as well. Before finalizing the supplier, due care is taken to ensure that the supplier is technically acceptable and can meet the quality standards

iii.

(Mocenco, 2015). Production management: The Company has utilized the better production management features to ensure that the products supplied by them meets the demand and are efficient in nature. The process efficiency and effectiveness is regularly evaluated. This production management takes into full cross-functional alignment and even more teamwork

iv.

so as to improve the existing production process (Airbus, n.d.). Standardization: The Company has utilized standardization as a major tool to manufacture the products so that the operation can be streamlined and wastage of the product can be removed.

v.

Planning and Forecasting: A strong team works in the company focused towards the planning and forecasting. This allows the company to overcome the competition as well as the difficult situations in the company.

The role of IT in the case of both Boeing and Airbus IT plays an essential role in the operation management. In both Boeing and Airbus, Information Technology is utilized to keep the track of the project management. Following are major sections where the IT is used in the process of operation management: i)

Supplier management: Both Airbus and Boeing have maintained special software which allows them to manage the suppliers and be in close with them. The information sharing and monitoring happen through this software. Thus this software is quite essential for the company. S and SCE software form the backbone of the

ii)

whole process of the supplier management. Customer management: The information technology is also used in the companies to be in close with the customers and provide them with the technical solutions

iii)

for the same. Documentation Management system: Information technology also plays an important role in the management of documentation. The storage of documentation as well as

iv)

the dissemination of the information is done through the programs only. Monitoring and planning programs: Most of the project monitoring and planning in both the companies is done through the information technology only. The dedicated software is used for the purpose so as to ease the process of the company.

Conclusion and Recommendation The paper discussed the operation management strategy followed in Airbus and Boeing. It was observed that the biggest reason for the problems in Boeing is the integration of the technology that was outsourced from different vendors. If the integration of these components could be tested beforehand, such problems would not have emerged. Hence the biggest suggestion to the company is made regarding the supplier management and the management of the quality of the sub vendors. The quality of the components together decides the quality of the final product, and hence the control of suppliers is of prime importance. Also it is observed that it would be better for the company if the core products of the company are manufactured in-house or in nearby locations so as to help the company. Lastly, it is suggested that the company utilize the project management techniques like PERT and M to develop the defect repair plan to achieve their previous status. Recommendation i) ii) iii) iv) v) vi) vii) viii) ix)

Maintaining the closer to home suppliers In house Development of core competencies Assessment of the Technical Expertise of the Suppliers Reducing the Supplier Complexity Close Tie-Ups with the Suppliers Better communication Better Team Involvement Better quality and safety framework Integrated testing of the products

Bibliography Airbus. (n.d.). EARLY DAYS (1967-1969). Retrieved 31 08, 2016, from Airbus: http://www.airbus.com/company/history/the-narrative/early-days-1967-1969/ Airbus. (n.d.). Proven Concepts in Manufacturing. Retrieved 09 01, 2016, from Airbus: http://www.airbus.com/innovation/proven-concepts/in-manufacturing/ Allworth, J. (2013, 01 30). The 787’s Problems Run Deeper Than Outsourcing . Retrieved 09 01, 2016, from Havard Business Review: https://hbr.org/2013/01/the-787s-problems-run-deeper-t Badirul, A., Badiru, A., & Badiru, A. (2011). Industrial Project Management: Concepts, Tools, and Techniques. New York: CRC Press. Cohan, P. (2013, 01 21). Why 787 Dreamliner Battery Woes Are the Tip of Boeing's Iceberg. Retrieved 09 01, 2016, from Fortune: http://www.forbes.com/sites/petercohan/2013/01/21/why787-dreamliner-battery-woes-are-the-tip-of-boeings-iceberg/#51a8a7cb2547 Denning, S. (2013, 01 21). What went Wrong at Boeing. Retrieved 09 01, 2016, from Fortune: http://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-atboeing/#7c28d43d5aad Eppinger, S. (2013, 03 04). A systems engineering view of the Boeing 787 Dreamliner. Retrieved 09 01, 2016, from MIT Sloan: http://mitsloanexperts.mit.edu/a-systems-engineering-view-ofboeings-787-dreamliner-steve-eppinger/ Gardiner, P. D. (2005). Project Management: A Strategic Planning Approach. New York: Paulgrave Macmilan.

Irving, C. (2014, 08 25). NTSB Doesn’t Think the Boeing 787 Dreamliner Is Safe Enough to Fly. Retrieved 09 01, 2016, from Daily Beast: http://www.thedailybeast.com/articles/2014/05/28/ntsb-doesn-t-think-the-boeing-787dreamliner-is-safe-enough-to-fly.html Jones, P., & Robinson, P. (2012). Operation Management . Oxford: Oxfoord University Press. Mahadevan, B. (2010). Operations Management: Theory and Practice. India: Pearson Education. Mitchell, C. (2016). I was taking Notes. Online Edition. Mocenco, D. (2015). SUPPLY CHAIN FEATURES OF THE AEROSPACE INDUSTRY. Scientifica Bulletien: Economic Sciences , 17-25. Ray, S., & Stone, B. (2013, 01 25). Boeing's 787 Dreamliner and the Decline of Innovation. Retrieved 08 31, 2016, from Bloomberg: http://www.bloomberg.com/news/articles/2013-0124/boeings-787-dreamliner-and-the-decline-of-innovation Suroweiki, J. (2013, 02 04). Requiem for a Dreamliner? Retrieved 09 01, 2016, from New Yorker: http://www.newyorker.com/magazine/2013/02/04/requiem-for-a-dreamliner Tang, C. S., Zimmerman, J. D., & & Nelson, J. I. (2009). Managing new product development and supply chain risks: The Boeing 787 case. In Supply Chain Forum: An International Journal , 74-86.

SECTION 2

Introduction Supply chain management is essential for the success of the company in the current times. The supply chain ensures the success of the company not in of the timely deliveries, but also in of the quality of the product and service delivered. This paper tries to understand the supply chain of an automobile industry. For this purpose, the company considered is Chrysler whose supply chain strategy is discussed in this paper. Supply chain refers to system of organization, people, information, technology, activity and resources which helps in movement of the product or the service from supplier to the customer. Such a system ensures that the products are developed from the raw materials and are received by the customers (Ding, 2013). Automobile industry is quite an interesting case study as it involves a huge number of components. On one hand, different suppliers have to provide the raw material, and on the other hand it uses rubber, glass and steel (Ding, 2013). Chrysler as a company was started in 1924 when the company Maxwell-Chalmers was overtaken by Walter Chrysler. In 1924 the first affordable luxury car was launched by the company. The company maintained its status as the luxury car manufacturer in the initial times. Till 1960s, the company was doing well , but the pressure on the company was mounting. The demand for luxury car reduced and there was a huge competition from the international players in the automation industry. The situation worsened in 1970s, and the company had to request for the government help in the same 1970s to stay afloat. The loan of the company was paid in 1983 after which the manufacturing of the new vehicles restarted. The company went through the turbulent times including being almost bankrupt in 2009 (Wikipedia, n.d.). The company is

currently owned by Fiat. Currently the Fiat Chrysler is a fully American company. Few of vehicles produced by the company are: i) ii) iii) iv) v) vi)

Fiat Jeep Maserati Chrysler Ram Dodge. (Wikipedia, n.d.)

Operation Strategy followed currently by the organization This section tries to understand the strategy currently followed in Fiat Chrysler. The figure below explains the supplier chain system followed by the company.

Figure 5: Supplier Chain for Wrangler (Ding, 2013)

As clearly seen above, the suppliers are divided into four kinds of tiers:

i)

Strategic Partners: These are the strategic partners of the company which work closely. They are involved in all stages of the development of the product and their input is preferred everywhere. These products are mostly high-cost products which

ii)

are supplied just in time. Low inventory is maintained for these components. Operation partners: These also work in close co-operation with the company, but these are not involved in the decision regarding the market change or the product development. Such partners are mostly the suppliers of the large parts like the car

iii)

seats. Arms-length suppliers: These are the suppliers of the standard products which are not differentiated, but reliability is essential for these products. In order to ensure the reliability, the product is selected from the supplier so that it is physically compatible and reliable. The interaction between the company and the supplier is minimum.

iv)

Example can be the steering wheels. Open market suppliers: These are the suppliers of the products like oil and lubricants that can be procured over the eCatalogue or in open market.

The company has three main suppliers in its supply park itself: KUKA Toledo Production Operations LLC (KTPO), Magna, and Ohio Module Manufacturing Co., LLC (OMMC). These suppliers are located inside the manufacturing complex of the company and supply the product directly to the company’s assembly line. These three companies have further sub-suppliers which are divided into Tier 2,3 and 4 and are managed by either a third party or the company itself. The company named Exel is used to managing the contract logistics. The finished products are then distributed using the trucks(Vonderembse, 2010).

Effectiveness of Current Strategy This section of the paper tries to evaluate the pros and cons of the current strategy.

i)

The biggest advantage the company enjoys is that the absence of lead time. Since the suppliers are located within the same manufacturing park, this helps the company reduce the time of the supply of the major parts. Company also enjoys the control over the quality and the production of these supplier. Furthermore, the company can

ii)

take into the control of the subvendors of these companies as well. The biggest disadvantage of such a system is that the company does not enjoy any flexibility in of suppliers. In case of emergency in the factory, the whole production will have to be stilted. Moreover, total dependence on only three companies is not good for the healthy economy which can work only when the

iii)

growth of the company is regular. (Ding, 2013) The inventory cost of the supply can be saved in such a scenario as the company

iv)

works on minimum inventory. Relationship with the strategic supplier is already developed, and the company can

v)

hence enjoy the smooth supplier relationships in the process. The disadvantage of such a system is that the company does not keep track of Tier 3 and 4 subvendors directly. Also, the company has no control over the dealers of the products. This prevents the company from having the complete control of the system.

vi)

(Vonderembse, 2010) The strategy is dependent upon smooth information transfer across different channels of the company. Thus it becomes essential for the company to take into the information transfer across different channel.

In an automobile industry it is not possible for a company to manufacture all the varied parts required for the manufacturing process, but Chrysler does maximum effort to control the supply of major parts. However, there is no development of sub-suppliers seen in the plan. This means that the company does not take keen interest in the sub-suppliers issue. This can be detrimental

for the total supply of the company as such issue might completely stop the production at one or the other stage.

Suggestions for the improvement of Supplier Management Keeping in view the pros and cons of the supplier management system of Chrysler, following is suggested to improve the SCM of the company: i)

Better coordination with the sub vendors: The company need to keep better track of the sub vendors. This could be done either with the monthly report from the third party or by tracking the social media and other market scanners. The problems with sub vendors should be identified beforehand so that the alternate solutions can be

ii)

made. Emergency plan: The Company is solely dependent upon its current main suppliers. It is necessary that the emergency plan be made in case the problem increases beyond

iii)

the expected solution. Better Supplier Information Management System: The success of such a lean business is dependent upon the conveying of the right information at the right time. The better supplier information system ensures that the information is gathered and maintained for all the suppliers from the operational, financial, and stability point of view. Such system gives insights to the various problems with the vendors. Also, the system provides the option of setting up of newer vendors and establishing the check for the same. One of the biggest problem cited by the groups dealing with the vendors is the incomplete information about the vendor and supplier relationships. It is

iv)

possible to incorporate the CSR, QA, security and other checks in the SIM system. Supplier Risk management: This is another technique company can utilize to manage the vendors. The process involves proactive identification and assessment of vendor

related risk so that the right action can be taken for the same. Past has shown that it is possible for the supplier to move from solvency to bankruptcy and such a change can cause serious setbacks to the production. Supplier risk management shall be carried out regularly to ensure that the suppliers are risk-free and any problems are taken into v)

(Kearney, 2013). Use of the technologically advanced logistic system: The technological scenario has changed drastically. For the product to reach the end supplier, the final product and the raw materials mostly travel a long distance. The technology today allows the company to use the advanced techniques which will not only help in keeping the realtime track of the material and product, but will also help in identifying the problems that can arise.

Tools for improvement of supply chain management The times have been changing and each of the manufacturers has different tools that they can adopt to improve the supply chain management. Some of the tools that can be utilized by the company are listed below: i)

Real-time information system: As discussed above, information is the key to success for the company like Chrysler which has just in time approach. The approach will only be successful if the right information is provided to the companies at the right time. To ensure that, a real—time information system is needed which can tell the

ii)

company about the need for the new part. Real Time Dashboard for taking pulse of the supply chain: Controlling the main supplier alone is not sufficient. It is essential for the company to assure that the subsuppliers of these main suppliers are also financially, technically, and operationally

healthy. To ensure that, a real time dashboard of the whole supply chain needs to be developed where all the important supplies will be marked. The data for the shipment, tracking record, existing inventory etc. can be marked in this dashboard iii)

itself(Williams, n.d.). ERP Application: Right ERP application can help the company keep all the information associated with the vendors at one place. This allows the ease of operation throughout the organization. There are many ERP platforms available to the company, SAP being the most prominent one. It is essential for the company to select

iv)

an ERP system which suits its size. Use of RFID in logistics system: RFID or radio frequency infrared detection is a method which is used to track a particular part of the inventory. The use of RFID provides the real time status during the logistics process. It makes the inventory management more accurate, more efficient and faster. This further helps in reducing the cost of inventory and the cost of storage of inventory. This also helps in preparing the company for the problems against which the company can proactively

v)

take the action. Material Requirement Planning: The material requirement planning or MRP is the process through which the final material is planned. It is a planning, scheduling and the inventory control system which allows the companies to keep track of the material required. The system ensures that the right materials are available to the companies at the right time for the manufacturing process.

Scope for future sustainability of the strategy The current strategy followed by the company is quite beneficial. In fact Chryslar has brought the Japanese SCM techniques in United States in its own way. But with respect to the future, this might not be a feasible idea. The company currently only has one manufacturer for each of its major parts. Although the company is influencing quite a lot of control over these primary strategic suppliers, it is not a good idea for the future of the company. This can prove problematic for the company as there will be too much of pressure in case of emergencies or sudden problem with any of the strategic supplier. Similarly, leaving the sub-suppliers of these companies to the third party might not be right idea as it can backfire in case of problem with the strategic subsuppliers of these suppliers. It is essential that the whole supply chain be monitored by the company. Thus in short it can be said that the company indeed follows a strong SCM, but the same can be improved drastically over the period of time.

Bibliography Ding, H. (2013, 01 25). Information Failure in Value Chain. Retrieved 09 01, 2016, from http://referaat.cs.utwente.nl/conference/18/paper/7367/information-failures-in-valuechains.pdf Kearney, D. (2013, 01). Supplier management- market insights. Retrieved 09 01, 2016, from 360supplierview: https://www.cips.org/Documents/Knowledge/360_Supplier_View.pdf Vonderembse, M. (2010). Understanding the Automotive Supply Chain:The Case for Chrysler’s Toledo Supplier Park and its Integrated Partners. Retrieved 09 01, 2016, from Wistrans: http://www.wistrans.org/cfire/documents/AutoSupplyChainCase10_30_09%20FINAL.pd f Wikipedia. (n.d.). Chrysler. Retrieved 09 01, 2016, from Wikipedia: https://en.wikipedia.org/wiki/Chrysler Williams, P. (n.d.). 5 Techniques to Improve Supply Chain Management. Retrieved 09 01, 2016, from Business Bee: http://www.businessbee.com/resources/operations/suppliermanagement/5-techniques-to-improve-supply-chain-management/