QUESTION ONE $[25]$

Boeing Is Haunted By Two Decades Of Outsourcing

For $20$ years, Boeing has engaged in collaborative product development with a number of suppliers.

The outsourced R&D$,$ in turn, supported outsourced manufacturing with over $50$ key suppliers.

These suppliers, in turn, outsourced various parts of the modules they produced to their suppliers.

Historically, Boeing was vertically integrated $-$ the great majority of product development and

manufacturing was done in$-$house. Boeing is now a case study in how not to outsource a supply

chain.

Quality issues have recently bedeviled Boeing. On January $5$th the mid exit door on the left side of

the $737$ Max $9$ blew off at $16,000$ feet during an Alaskan Airlines flight. Rapid decompression then

resulted. It was a minor miracle that no one was sucked out of the plane. The flight did not have

passengers sitting next to the door that blew off. This was very unusual. On February $6$th$,$ the

National Transportation Safety Board released a report saying that missing bolts were the likely

cause. Boeing$$s stock price fell $16\%$ from January $5$th to February $12$th$.$ Meanwhile, Airbus, Boeing$$s

principal competitor, has seen its stock rise nearly $6\%$ in the same time$-$period.

There have been other incidents. In $2018$ and $2019$ there were two fatal crashes of the $737$ Max $8.$

These claimed a total of $346$ lives and led to a $20-$month grounding of the aircraft. $$Unless significant

sanctions are imposed due to Boeing$$s design and production$-$quality issues, it is likely that business

will continue as usual,$$ according to Christopher Tang. Dr$.$ Tang is a distinguished professor at the

UCLA Anderson School of Management. Problems are likely to continue, Dr$.$ Tang argues, because

the current crisis is hardly unprecedented; it is based on the changes that Boeing made to its R&D

and manufacturing processes during the development of the $787$ Dreamliner. The Dreamliner

program was launched in April of $2004.$

$$The company aimed to develop the aircraft quickly and inexpensively to compete with the Airbus

A$380.$ Instead of developing the aircraft in$-$house and sourcing parts from suppliers,$$ Dr$.$ Tang

explained, $$Boeing decided to outsource $70\%$ of the design, engineering and manufacturing of entire

modules to over $50$ strategic partners.$$

At the time, this program was considered groundbreaking. PLM designer Dassault Syst$$mes

announced at the onset of the program that their software would $$comprise Boeing$$s Global

Collaboration Environment.$$ It would create a $$virtual product development platform$$ involving

Boeing$$s key suppliers. This $$harmonization$$ in turn would $$improve collaboration, innovation,

product quality, time$-$to$-$market and return$-$on$-$investment.$$ The Boing contract accelerated the

development of collaborative PLM solutions by over a decade.

In $2017,$ a billion dollar extension contract worth $$1$ billion and covering $30$ years was signed

between Boeing and Dassault. Boeing$$s chief information officer at that time said that $$the decision

to adopt Dassault$$s platform $$is a key milestone in our digital transformation.$$ However, an ex$-$chief

$1$

executive officer at Boeing said last year that the company needs to undertake $$real honest$-$to$-$God$$

product development, or it will lose the skills required to do so$.$ Advanced software is not a magic

wand. $$Boeing failed to establish the close supplier relationships that took Toyota decades of effort

and commitment to develop. Without close communication and coordination among the partners,

Boeing was unable to manage its external development process effectively,$$ according to Dr$.$ Tang.

Recent investigations have revealed serious production control problems within Boeing$$s supply

chain operations. On January $30,$ Boeing indicated that the bolts required to fasten the fuselage

panel of an Alaskan Airlines aircraft were missing when the plane left Boeing$$s facility. This incident

might be because of oversights in documentation and procedures at Boeing$$s Renton factory in

Washington. But if Boeing can$$t even manage processes in their factories, how good can they be at

managing their partner$$s manufacturing processes? A failure by Boeing supplier Spirit AeroSystems

seems to confirm this suspicion. Spirit AeroSystems manufactures the fuselages of the $737$ Max jets.

They notified Boeing that two holes may not have been drilled exactly to Boeing$$s specifications.

Airbus also uses advanced PLM software to codesign their planes and has also largely outsourced

production of key aircraft modules. But in recent years Airbus$$s safety history is much better than

Boeing$$s$.$ CIO$$s commonly say that implementing technology is not enough. Companies need to pay

attention to people, process, and technology. There is growing certainty that Boeing is not paying

enough attention to their own and their partner$$s quality culture and processes.

Question:

Identify the supply chain challenges Boeing is facing and propose a solution to improve the supply

chain for the company.

QUESTION TWO $[25]$

From the case study above, comprehensively discuss how Boeing should manage its risks.