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 account 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 terms 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 account

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 passengers 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 passengers, 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 passengers. Further

versions were discovered to meet with the increased air traffic and passengers 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

passengers, and more area for the better comfort of the passengers. 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 passengers. 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, Germany and France 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 terms 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

development of the product

ii) 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

a part of the operation management..

iii) Staffing involves ensuring that there are sufficient and skilled workers for the lined up

process.
iv) 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, Germany,

France and Spain, and then these parts are assembled in France or Germany. 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 terms 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

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

compromised which further resulted in the delay in the commercial operations.

iii) Control over the quality and manpower became the issue in such cases.
iv) Insufficient testing of integrated product after outsourcing.
v) 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 passengers

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

especially if it is focusing towards the new product development (Denning, 2013).

ii) 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

company should focus on (Denning, 2013).

iii) 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

aircraft is launched further (Allworth, 2013).

iv) 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

management will prevent such further problems in future.

v) Better material management and production planning: The company can do better

with the process of production planning and material management in order to make

up with the delays in the process of procuring the material and delays in production.
vi) 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 passed 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

flight. This will ensure the safety of the flight.

ii) 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

Wrong machine selected

Mistake in BOQ Generation

Machine did not integrate well with other parts
Human error in testing at different phases Technical Failure of Boeing Dreamliner.

Wrong method of SCM selected

Wrong material selected

Improper vendor selection and approval process

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
Finalization of the SCM
design requirement for
strategy
Dreamliner

Scanning of the
Development of the
market for potential
specification.
suppliers
Finalization of the
Development of Bill
vendors for different
of Quantities
tiers
Floating of the Technical and
enquiry to the Financial Analysis of
potential bidders. the vendors.

Competitive bidding Finalization of potential subvendors.

Communication with the venodors

Finalization of the suppliers
regarding the project.

Ordering of different parts. Finalization of vendor.

Follow-up and monitoring of selected

Detail design of the project
vendors

Alteration in BOQ as per the

Quality check at suppliers' work.
drawing/document review.

Technical help in development of the

Manufacturing clearance .
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

help in judging the whether the aircraft and its various functions are in control or not.
v) Pareto Technique: Pareto technique is used to identify how important each item is to

verify 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

production for the company.

ii 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

worked in house to develop the core competencies as in other project of theirs.

iii 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

reduce the lead time for these parts as well. (Forbes, 2013).
iv 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

not be compromised (Forbes, 2013).

vi 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

taken to avoid such problems (Forbes, 2013).

vii 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

over the world to help the suppliers in providing the required material.
ii) 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

process.
iii) 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 verifying 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: France, Germany, 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 / CPM 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

various factors that affect the demand of the product.

ii) 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, CPM/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

different parties.
iii) 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).
CPM/PERT diagram for the activities

List of activities thus can be listed out as the following list:

i) Development of the process flowchart: 1 month.

ii) Finding of fault using the techniques described like checklist, FEMA, Cause and

Effect analysis, flowchart, control diagram etc. : 6 months

iii) Analysis of the vendors and the facility from where the parts were taken: 1 month.
iv) Preparation of final fault report: 1 month.
v) Reengineering of the faulty part: 2 months
vi) Reassessment of the vendors and their sub-vendors: 1 month.
vii) Ordering and supply of the part of the faulty part(s): 3 months
viii) Testing of the parts in the facility: 1 month
ix) Reintegration of these parts: 1 month.
x) Final Testing: 1 month
xi) Final launch in the market: End of the project.
 Process numbers Expect
and precedence ed
Most
Earliest Activit
1 Start Likely
Finish Time
time y
Delaye Time(T Varianc
d time ) e(V)
1-2 Flow chart
2 0.5 1 1.5
Development 1.00 0.03
3 2-3 Finding of fault 2 6 8 5.67 1.00
1-4 Vendor and facility
4 0.5 1 2
analysis 1.08 0.06
5 3-5 Final Report 0.5 1 1.5 1.00 0.03
6 5-6 Reengg 1 2 5 2.33 0.44
7 4-7 Reassement 0.5 1 1.5 1.00 0.03
8 6-8 Ordering and supply 0.5 1 1.5 1.00 0.03
9 7-8 Ordering and supply 2 3 4 3.00 0.11
10 8-9 Testing of the parts 0.5 1 1.5 1.00 0.03
11 9-10 Reintegration 0.5 1 1.5 1.00 0.03
12 10-11 Final Testing 0.5 1 1.5 1.00 0.03
Finish
 11

2 3 5 6

10
1

4 7 8 9

Acitivit Expected
y No. Name of the work time=T ES EF LS LF Slack
1-2 Flow chart Development 1 0 1 0 1 0
2-3 Finding of fault 5.67 1 6.67 1 6.67 0
1-4 Vendor and facility analysis 1.08 0 1 0 1 0
3-5 Final Report 1 6.67 7.67 6.67 7.67 0
5-6 Reengg 2.33 7.67 10 7.67 10 0
4-7 Reassement 1 1 2 1 2 0
6-8 Ordering and supply 3 10 13 10 13 0
7-8 Ordering and supply 3 2 5 2 5 0
8-9 Testing of the parts 1 5 6 13 14 6
9-10 Reintegration 1 14 15 14 15 0
10-11 Final Testing 1 15 16 15 16 0

Thus CPM 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.
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

in past as well in case of Boeing 787 (Gardiner, 2005).

ii) 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

Dreamliner, the project schedule is evident in all the communications of the company.
iv) 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

adopted the lean management techniques to manage their operation (Mocenco, 2015).
ii. 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

(Mocenco, 2015).
iii. 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 account full cross-functional alignment and even more teamwork

so as to improve the existing production process (Airbus, n.d.).

iv. 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 contact with them. The

information sharing and monitoring happen through this software. Thus this software

is quite essential for the company. SCP and SCE software form the backbone of the

whole process of the supplier management.

ii) Customer management: The information technology is also used in the companies to

be in close contact with the customers and provide them with the technical solutions

for the same.

iii) Documentation Management system: Information technology also plays an important

role in the management of documentation. The storage of documentation as well as

the dissemination of the information is done through the programs only.

iv) 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 CPM to develop the defect repair plan to achieve their

previous status.

Recommendation

i) Maintaining the closer to home suppliers

ii) In house Development of core competencies
iii) Assessment of the Technical Expertise of the Suppliers
iv) Reducing the Supplier Complexity
v) Close Tie-Ups with the Suppliers
vi) Better communication
vii) Better Team Involvement
viii) Better quality and safety framework
ix) Integrated testing of the products
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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 terms of the timely deliveries, but also in

terms 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) Fiat
ii) Jeep
iii) Maserati
iv) Chrysler
v) Ram
vi) 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

are supplied just in time. Low inventory is maintained for these components.
ii) 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

seats.
iii) 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.

Example can be the steering wheels.

iv) 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

take into account the control of the subvendors of these companies as well.
ii) The biggest disadvantage of such a system is that the company does not enjoy any

flexibility in terms 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

growth of the company is regular. (Ding, 2013)

iii) The inventory cost of the supply can be saved in such a scenario as the company

works on minimum inventory.

iv) Relationship with the strategic supplier is already developed, and the company can

hence enjoy the smooth supplier relationships in the process.

v) 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.

(Vonderembse, 2010)
vi) The strategy is dependent upon smooth information transfer across different channels

of the company. Thus it becomes essential for the company to take into account 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

made.
ii) 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

the expected solution.

iii) 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 upcoming 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

possible to incorporate the CSR, QA, security and other checks in the SIM system.
iv) 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

account (Kearney, 2013).

v) 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 real-

time 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

company about the need for the new part.

ii) 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 sub-

suppliers 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

itself(Williams, n.d.).
iii) 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

an ERP system which suits its size.

iv) 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 upcoming problems against which the company can proactively

take the action.

v) 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 sub-

suppliers 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.

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