Case Study: Boeing

1. Boeing was the leader in the aviation industry through the 90’s, touting the success of their twin-engine 777 plane. However, their market share in the aviation industry took a tumble in the early 2000’s resulting in Airbus surpassing them as the industry leader in 2003. 9/11 caused a major downward demand shift in the aviation business as a whole. Between 2001 and 2002, Boeing’s profits dropped 80%. These poor economic consequences were exacerbated by the ethical conflicts which arose in 2003 and 2005 with two top Boeing executives, Phillip Condit and Harry Stonecipher, leading to nearly $1 billion in fines. Their CFO Michael Sears was also convicted and issued a jail sentence after a scandal with the pentagon.
2. The aviation industry during the 2000’s was pushing for airline producers to create a better passenger flying experience while reducing costs. Boeing was seeking to accomplish this task with the 787 by allowing for more nonstop, long distance flights. They would be able to reduce costs through the use of more carbon fiber materials, minimizing the weight of the 787. Previous plane’s fuselage sections were composed of 1200 sheets of aluminum, in comparison to the 787’s 1 carbon fiber sheet. This differed from the previous flight models that were designed for more frequent stops and an overall less convenient passenger experience. Airbus agreed with Boeing that the aviation industry will double in the next 20 years; however, they believe plane size is more important than the ability to perform nonstop flights.
3. Boeing implemented an ‘extreme outsourcing’ procedure to expedite production of their complex, light-weight materials that would construct the 787. This outsourcing plan involved the utilization of 43 ‘top tier’ suppliers in 3 continents. 80% of the 787’s production and supply was outsourced; compared to only 51% outsourced materials for the rest of their planes.
4. Boeing’s outsourcing initiative was supposed to save them money by seeking out low cost suppliers all over the world. Outsourcing was also utilized to rely on suppliers to engage in the production of certain complex technological parts going into the 787. Boeing had hoped this would result in a quicker overall production schedule.
5. Although this strategy seemed logical on paper, it was not actually effective for Boeing. Many suppliers world-wide are having difficulties producing the complex parts that Boeing requires on schedule. Problems also rise as each separate supplier must effectively communicate across all levels of production. The Japanese company designated with the fuselage could not keep up with production expectations and is causing delays for Boeing. Their avionics (electronics) suppliers are all finding it difficult to communicate with each other in order to cohesively assemble the 787’s electronics. Many other problems have arisen such as bubbles rising in the fuselage plating, incorrectly installed fasteners, and problems where the wings attach to the body.
6. The obvious market risks associated with this strategy relate to the inability for Boeing to meet their production schedule. Many suppliers all over the world are having problems keeping up to their own production schedules, which results in further delays for Boeing’s assembly and testing. These delays are costing Boeing millions in penalties and restitutions related to promised test and release dates which are not being met.

7. Boeing has taken the initiative to overtake certain facets of production that were being delayed due to suppliers not meeting schedule. Boeing has implemented lean manufacturing initiatives and taken control of key parts of the supply chain. They have acquired key suppliers in South Carolina which were responsible for the production of the mid- and rear sections of the plane. These were key measured required to increase production.
8. Boeing had to major flaws in their strategy for the 787; first, was their inability to stick to

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Case Study: Boeing

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