Boeing’s Organizational Strategic Planning
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Outsourcing refers to a firm run-through of commending to an external entity the performance of an activity that was former performed in-house. The outsourced activity could either be the manufacturing of a good or the performance of a service. Subcontracting to third party firms based in other nations is generally referred to as offshore outsourcing, and sourcing from a firm’s subsidiaries located in other countries as off-shoring. Anyway, both offshore outsourcing and off-shoring fundamentally organize international trade in goods and services. Nevertheless the current high level of interest in offshore outsourcing and off-shoring, it should be noted that they are only a part of a much larger pie that also includes outsourcing that does not exceed national limitations, and outsourcing to objects other than to a firm’s suppliers. The assessment by firms to outsource is often determined by as well as drives the appearance of high-quality organizations in various fields and the supplementary balance driven cost efficiencies. While much of the discussion relating to outsourcing is focused on the cost of performing an activity within the boundaries of the firm versus entrusting to a third party, situations in which cost may not be the major consideration in a firm’s outsourcing decisions also merit careful consideration.
Outsourcing the assembly of parts of the airplane was a main step Boeing has taken to diminish cost and control capacity at its main plant. They have outsourced to countries such as China and India, where labor is much cheaper. In return, they have obtained aircraft sales from these countries, which is also two of the major and fastest growing airplane markets in the world. Boeing has called this an “offset agreement”. Japan also helped with building the newest Boeing 787 Dreamliner. One of the key reasons for establishing strategic corporations is the ability to distribute some of the risk connected with large investments required in building an aircraft. Outsourcing has given Boeing more suppleness, control, and a better cash flow.
Outsourcing may be better for the company, but in reappearance angers some of their engineers at home, which feel that their jobs are at stake.
Boeing’s Organizational Strategic planning
Boeing’s globalization strategy is planned to optimize short-term fiscal and monetary performance. This favors the interests of financial shareholders, but it makes less sense to Boeing’s technical community. We identify several areas of practical concern, and explain how each factor impends our ability to compete efficiently in the long-term. The Boeing Cooperation has many ethic, legal, and social duties and tasks that impact their organization. We will discuss a few of their responsibilities and in what manner they impact the Boeing Corporation management planning. There are also many factors that impact the Boeing companies planned, operational, strategic, and contingency planning. With “Boeing being the world largest aerospace company and the largest manufacture of commercial jetliners and military aircraft” (WEC, 2005, CSR wire, ), they have many separations all through the world. Because of this world domination there are many issues that will affect the planning of Boeings’ management team and how the organization is run.
The Boeing Company has been a high tech company pioneer. The company is somewhat unique in that it is a high tech company that has created and mass-produced a high tech artifact with unmatched reliability. The failure rate of a Boeing commercial airplane on any single commercial flight is about one in a billion. As can be occasionally heard among Boeing engineers: ‘‘Think of it, millions of parts flying in close formation more than 5 miles high, at close to the speed of sound!’’
The Leadership Team sets strategic direction through Boeing Combined Planning Process .This grouping of processes focuses on developing and implementing strategies that use Being’s Vision and Values to enhance customer satisfaction, improve processes, and increase Boeing market position. Boeing human resources planning has evolved from being a stand- alone effort to being fully integrated with Boeing Integrated Planning Process. During Assess and Understand of the Integrated Planning Process, a Workforce Environment Assessment defines key external and internal factors that influence the workplace and workforce. The figure below shows a brief story of Boeing strategic planning.
• Strategic BusinessCouncil
• Strategic Plan
• Process Council/People Council
• Strategy Implementation Plan
• Resource Council
• Operating Plan
• People and Teams
• Action Plans
• People and Teams
Vision and Mission
Every company has its own mission and objectives. It is indeed very important for the company to follow through their vision for constant improvement to achieve its ultimate goal. Even though Boeing has improved CEO many times throughout its life, however, there is only one purpose for the existence of Boeing. It is “working together as one global enterprise for Aerospace leadership.” Boeing values team work and collaboration. It recognizes that its strength and competitive advantage will always come from its human resources. It encourages cooperation at every level and in all activities because it is believed that sharing ideas and knowledge will help everyone learn.
Boeing collaborated with many partners to design and develop the 787 in hopes to develop faster and reduce costs. Also, spreading the costs would build global relationships that may help the company sell its planes overseas in return. As Scott Griffin, the vice president and CIO of Boeing said, “The company is no longer just a manufacturer, but also a high-end systems integrator. We are a technology company.” This move is very critical to Boeing since it would bring a competitive advantage to the company and also helps it lock in a global fight for market leadership with its biggest competitor Airbus.
However, the success of the 787 in the future years was not clear but a new level of global collaboration is definitely established. Innovation and competitiveness are also the biggest priorities of Boeing. It continues to expand its product line and services to compete with its competitors and exceed quality, customer satisfaction and needs. Boeing also has the ability to think differently, allowing the company for change.
The significant 787 model was part of the next compeers of airplanes engine at the start of the plan. With the 787-model technology, Boeing decided working hard with the world’s leading organization to influence their research and growth and enlist their capability to provide the best cutting edge technology clarification available. Boeing is viewed has a global business company, but at the same time they work to the benefit of the local communities. The new Boeing 787 Dreamliner that they are developing is a mid-sized, wide-body, twin-engine jet airliner. Its capacity is between 210 and 330 passengers and will have more standing room, larger windows and bathrooms. Most of all, it will be more fuel-efficient than any of the Boeing airliners developed and also the first major airliner that uses composite materials for most of its construction. Boeing is trying something that is almost completely different from its previous work. From the materials and electronics that are used to build the plane to the technology uses during the design and many other processes, Boeing is said to be undergoing a big transformation as it comes to building its “next-generation jet” as a new way of doing business. Indeed, Boeing did a very remarkable job in achieving its goals.
Internal Analysis of Boeing
Boeing has many strong competitive advantages, and internal resources that help define its core value. The main source of Boeing’s competitive advantages is its core competencies, which help develop Boeing’s resources into strong competitive advantages in the airline 6 manufacturing industry. Boeing also has operational strength internally, which allow them to better manage and sustain their competitive advantage in the market. Boeing has a strong set of competitive advantages at which it uses to market share and the airline industry, as we will analyze Boeing’s unique competitive advantages in the airline industry.
External Analysis of Boeing
Boeing is in a duopoly when it comes to being in the large commercial aircraft industry, which means that there is one other major company that is competing with them directly in the same market and that would be Airbus Industries. The main compatible production for Boeing 787 is airbus 350. Nevertheless, Boeing was the first to be in the large commercial aircrafts industry until Airbus came along. McDonnell Douglas used to be another competitor to Boeing until the two companies combined. Airbus entered the market with the help of “launch aid”, a form of government subsidies that helps a company compete and continue in industries that already have giants with recognized distribution networks and economies of scale.
Airbus take advantage of the marketplace by making planes that addressed the needs of their buyers, which were midsize cost efficient planes. This plane was the A-320, which competed with the Boeing 737; both are the best selling planes for each company in the same category. Both companies have competed neck to neck on building the most effective planes to meet their customer’s source and demand. In order to advance their position, Boeing needs to rethink their strategy and work with their suppliers. Boeing’s strategy in 2004 was to move up the value chain, import that they are going to focus less on details and more on their core competence, integration, and assembly. By doing so, Boeing has consolidated their list of suppliers to a select few and to those that deliver quality products with the best value. Instead of assembling the aircraft in-house, Boeing began to outsource some of their operations in assembly.
Because many of the world’s airlines are exclusively or partially government owned, aircraft obtaining decisions are often taken according to political and commercial criteria. Boeing and Airbus seek to exploit this by subcontracting production of aircraft components or assemblies to builders in countries of strategic importance in order to gain a competitive advantage. For example, Boeing has offered longstanding relationships with Japanese suppliers including Mitsubishi Heavy Industries and Kawasaki Heavy Industries , a process which helped Boeing achieve almost total dominance of the Japanese market for commercial jets. Partly because of its origins as a consortium of European companies, Airbus has had fewer opportunities to outsource significant parts of its production further than its own European plants Boeings strong name and brand allows for a strong hold on the airline manufacturing industry, which has now become a duopoly between Boeing and Airbus. As one can s ee, t he f inale o f b oth B oeings c ore c ompetencies a nd o perational s trengths allow it to build upon different competitive advantages in the airline industry.
One of Boeings greatest competitive advantages is its unique strategy to work more w ith b oth i ts c ustomers a nd s uppliers, t o d esign a nd b uild t he b est a ircrafts o n t he market. It’s unique R&D which are able to design a nd i mplement b etter a ircrafts w ithout i ncurring l arge a mounts o f c ost is the other part of it’s advantages.
Both companies compete against each other at every product level
• Boeing 737
• Boeing 767 & 777
• Boeing 787Dreamliner
• Boeing 747
• Airbus A320
• Airbus A330
• Airbus A350
• Airbus A380
Core competencies are unique, in that they retain value, are rare, expensive to imitate, and cannot be replaced. One core capability Boeing contains is its repeated effort to meet the customer demands and needs (Core competencies-Boeing.com). Boeing obligates to understanding and responding to what its customers would like in an aircraft; and designing and implementing specific needs or demands. One of Boeing’s unique business structures is to design the product according to customer wants, and have it waiting for them to buy.
This builds a strong competitive advantage, as it informs the customers that Boeing will design aircrafts according to their needs, and allows them to build stronger relationships with their customers. Another core competency Boeing has is their ability to device large-scale implementation systems (Core competencies-Boeing.com). Boeings general research and development is a solid core competency, with its unique knowledge of wing technology and new lightweight composites being one of its stronger manufacturing core competencies. Boeing has begun to build stronger bonds with its suppliers, as they are commencement to research with their suppliers to participate and design better aircrafts.
With some of their research and development being done outside the company, they are able to design and build better aircrafts. The last core competency Boeing has, is its unique contracts and agreements with both NASA, and The United States Air Force. The strategic partnership with both of these two organizations allowed Boeing to become the world’s largest space and infrastructures company, as well as helped it become a large leader in the aircraft manufacturing market. These two partnerships allow for Boeing to grow into the aerospace industry, and allow Boeing to have a wider range of products for a wider range of customers.
Boeing SWOT Analysis
Boeing gained Innovation and Technical Expertise with Strong reputation of quality and industry leadership in new product. The other power point of its innovation was based on Long-standing customer relationships through International customer base. Regarding to it’s SupplierComponent Manufacturer Networks the company was in right direction. Commercial Aircraft is one of six business divisions . Boeing accomplished Innovation and Technical Expertise with Strong reputation of quality and industry leadership Supplier-Component Manufacturer Networks. But unfortunately the Costs for new products: $8-10 Billion was developed. Reliance on Suppliers-Component Manufacturers includes both strength and weakness. Boeing come out with new technologies to build lighter, longer range aircraft. New airline customers in Asia and Pacific market can make entrepreneurship opportunities beside financial profitability. Airline travel pattern changes supporting Boeing product line. there are some threats in Boeing’s way. Aggressive Airbus Price Discount Practices and WTO dispute regarding EU subsidies are some of this components. Through world economic changes Boeing is not separate of Changing economics danger. Some Domestic airline bankruptcies threats Boeing’s market demand, Changing governments, politics and business partners based in those countries.
Porter’s model is based on the insight that a corporate strategy should meet the openings and threats in the organizations external environment. Based on the information derived from the Five Forces Analysis, we can choose how Boeing influence or to exploit particular characteristics of their industry. The five forces model of competition includes the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intense rivalry among competitors.
Boeing outsourcing Issues
Boeing’s next new plane, the 787 Dreamliner, is three years late. It’s also become extraordinarily costly for the company, coming in billions of dollars over budget. The next-generation airliner is billions of dollars over budget and about three years late; the first paying passengers won’t be boarding until this fall, if then. Some of the delay stems from the plane’s advances in design, engineering and material, which made it harder to build. A twomonth machinists strike in 2008 didn’t help. But much of the blame belongs to the company’s quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing’s dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house. The 787 has more foreign-made content 30% than any other Boeing plane, according to the Society of Professional Engineering Employees in Aerospace, the union representing Boeing engineers. That compares with just over 5% in the company’s workhorse 747 airliner.
Boeing’s goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits. The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn’t fit together. Some subcontractors couldn’t meet their output quotas, creating huge production logjams when critical parts weren’t available in the necessary sequence .Some then farmed out their engineering to their own subcontractors, Mike Bair, the former head of the 787 program, said at a meeting of business leaders in Washington state in 2007. That further reduced Boeing’s ability to supervise design and manufacture. At least one major supplier didn’t even have an engineering department when it won its contract, according to an analysis of the 787 by the European consortium Airbus, Boeing’s top global competitor. Boeing executives now admit that the company’s aggressive outsourcing put it in partnership with suppliers that weren’t up to the job. They say Boeing didn’t recognize that sending so much work abroad would demand more intensive management from the home plant, not less. Boeing excessive reliance on outsourcing was other problem.
Some pieces made by foreign suppliers didn’t fit together and vendors couldn’t provide enough parts on time, contributing to delays. Boeing began asking subcontractors to do some of the engineering, and one supplier didn’t even have an engineering staff. The parked planes are 787-8 Dream liners, the world’s first commercial aircraft with a body and wings made largely of lightweight carbon-composite materials instead of aluminum. Someday these sleek, fuel-efficient machines already painted in the liveries of their airline customers may change the face of air travel and plane-making.
The program that produced these unfinished 787s is nearly three years behind schedule and, by some estimates, at least several billion dollars over budget. The 787 is not merely a historic feat of engineering. The program also marks Boeing’s departure from its own time-honored manufacturing practices.
Instead of drawing primarily from its traditional pool of aircraft engineers, mechanics and laborers that runs generations deep in the Puget Sound region around Seattle, Boeing leads an international team of suppliers and engineers from the United States, Japan, Italy, Australia, France and elsewhere, who make components that Boeing workers in the United States put together.
Boeing itself has acknowledged that the system needs change, and the company promises to bring more of the design work back in-house for the upcoming 787-9 model. But Boeing defends its reliance on outside partners, saying their work and investments made the Dreamliner possible. “It is true that supplier involvement in the development and design of the 787 is significant,” the company said in an emailed response to questions. “Suppliers helped us develop and understand technologies and options for the airplane as we went through the early phases of concept development. Suppliers have also provided more of their own development, design and manufacturing funding.”
Boeing Fastener Issues
Boeing 787 fastener problems caused by Boeing engineers. The Boeing 787 Dreamliner’s latest problem can’t be blamed on the Machinists strike. Nor is it the fault of inexperienced mechanics at Boeing’s far-flung suppliers.
Assembly issues continue to slow delivery of the Boeing 787 Dreamliner, which is now almost three years behind schedule. Workers at Italian subcontractor Alenia apparently incorrectly installed fasteners where the horizontal stabilizer attaches to the fuselage on some aircraft. Boeing employees in Seattle are now correcting the problem.
“This is not a design issue or a flight-test finding,” says Scott Fancher, VP &GM of the 787 program. “This is a straightforward workmanship issue with the installation of a couple of shims and some associated fasteners.”
The big glitch that now has mechanics finding and replacing thousands of fasteners on every Dreamliner was caused by a Boeing engineering error made in Everett. The bolts in question were used inside the fuselage to fasten titanium structure to carbon-fiberreinforced plastic composite, and the problem emerged after a pressurization test in October. The fix could require replacing up to 8,000 of the fasteners on each of the first dozen planes that are in various stages of completion.
A whole series of Boeing specifications governs installation of fasteners, depending on the materials being joined together. In this case, the instructions for fastening titanium to composite bewildered mechanics.
An operations manager at a Dreamliner supplier plant said he examined the specifications closely with an experienced design engineer after the problem was discovered and realized the mechanics were not at fault.
No one was hurt, but some flights were diverted after the metal debris sparked a grass fire at the airport. Because the engine is already used on other commercial aircraft, the National Transportation Safety Board wants to know what went wrong.
“Clearly, if there are issues of design or materials, they’ll understand that a lot better when they begin to tear that engine down piece by piece,” Rosenker notes. In fact, a myriad of production problems delayed delivery of the first Dreamliner by three years.
Boeing discovered the fastener problem last month, in the midst of the strike. A pressurization test on one of the completed Dreamliner’s revealed a small gap under the heads of thousands of fasteners inside the fuselage. The problem arose only on structures installed inside the fuselage shell such as the floor grid where titanium was fastened to the composite. It isn’t a safety threat, says Boeing, but it potentially could reduce the airframe’s durability. Boeing and its partners must fix it on all the planes now in Everett and on all the partially completed sections at supplier plants worldwide.
In this case, the specification that mechanics consult for precise instructions made the job impossible.
The fastener in question won’t sit properly in the hole unless the top of the hole is widened to accommodate a bevel, a curved join between the head and the shank of the fastener. The mechanic has to prepare the hole by cutting it wider at the top, first consulting a specification to find out exactly how much to cut.
The regular spec document for installing fasteners sent the mechanic to another spec if composite plastic was being drilled. This spec then correctly sent the mechanic back to the first if the fastener head was on the titanium side, as in this case.
The location of all the fasteners is not certain, so “they have to reinsert the airplane from nose to tail. The fastener woes revealed a serious lack of quality-control inspection, especially early in the program.
Recommendation for Outsourcing and Fastener Issues
“Everyone knows that vending has killed this program. Boeing have contractor agreements that have slowed the whole process down.
Now, if Boeing outsourced well and saved money in the process, that would be one thing. But it didn’t, and the list of mistakes it made in enlisting offshore help serves as a warning to other companies hoping to cut costs. Too many of Boeing’s outsourcing partners needed handholding, which drained time and money. The company pretty much admits this now. The airliner is billions of dollars over budget and about three years late.