Term Paper on "International Operations Management Strategy of Boeing Company"

Term Paper 8 pages (2393 words) Sources: 15

[EXCERPT] . . . .

International Operations Management Strategy of Boeing Company

As the largest manufacturer of aircraft in the world, Boeing provides some valuable examples of best industry practices with respect to their supply chain management and lean manufacturing principles. By forging strategic partnerships with suppliers around the world, Boeing has developed a sophisticated but complex supply chain that requires fine-tuned management techniques to ensure that inventory levels are maintained at their lowest possible levels while ensuring that parts are available when and where they are needed. Certainly, the company has experienced its fair share of missteps over the years, but the research will show that they have learned from these mistakes and become even more efficient as a result. To determine how Boeing has achieved its remarkable track record of success, this paper reviews the relevant literature to identify Boeing's current international operations management strategy and to what extent the company's international operations management strategy will likely remain appropriate in the future. A summary of the research and important findings are provided in the conclusion.

Review and Discussion

What is the current international operations management strategy of the organization?

Boeing (hereinafter alternatively "the company") is currently the largest aerospace company in the world and the top manufacturer of commercial aircraft as well as defense, space and security systems (Boeing profile 2001; Bull 2004). In this capacity, the company's current international operations management strategy involves exports to more than 90 countries, with products and services spanning the entire range of the aerospace industry needs, including commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training (Boeing profile 2011). In addition, Boeing's international operations management strategy is focused on eliminating waste throughout the organization and developing a lean manufacturing approach with its vendors and suppliers (Michaeu 2005; Day & McNeill 1998). According to the company's profile, Boeing employs almost 160,000 people in the United States and 70 other countries, and more than 123,000 of these employees have colleges degrees (including almost 32,000 advances degrees), providing an impressive pool of talent for the company's operations management (Boeing profile 2011).

A case study sponsored by the U.S. Environmental Protection Agency provides some useful examples of how Boeing's international operations management has embraced lean manufacturing and strategic relationships with its supply chain partners to model the way for others. In this regard, the case study notes that, "Like many companies today, Boeing has placed Lean Manufacturing in the forefront of its efforts to eliminate continually all non-value added aspects of the enterprise and ensure optimal competitiveness. Lean strategies utilized at Boeing have reduced the amount of energy, raw materials, and non-product output associated with its manufacturing processes, and many of these reductions can be translated into important environmental improvements" (Pursuing Perfection 2000, p. 3).

Although the company's focus on eliminating waste at every opportunity is based on mainly pragmatic reasons, the concomitant effect has been to improve its environmental impact as well (Pursuing Perfection 2000). An appendix to the case study includes an analysis of Boeing's operations at its Auburn facility and how it has applied lean manufacturing principles. The case study reports that since the company implemented its lean manufacturing approach, Boeing's manufacturing business unit (MBU) at its Auburn facility has experienced significant gains and improvements in the following areas:

1. The MBU has reduced total cost by 30%;

2. Productivity has improved by 39%;

3. The factory has reduced approximately 70% of flows by 70%;

4. Production flexibility has increased approximately 40-50%;

5. Defects have been reduced from 1,200/10,000 in 1996 to fewer than 300/10,000 presently; and,

6. The MBU has reduced by over 51% its quality cost performance measure (measured as total cost of dollars lost due to defects) (Boeing Auburn Machine Fabrication, 2000, p. 4).

One aircraft in particular, the Boeing 777, stands out as being a classic example of lean manufacturing in action. Boeing uses a platform strategy to manufacture the 777 that provides a wide range of alternatives for its customers, including the standard version, an extended range model, as well as long haul, larger capacity, and freighter models by using the same size wings as well as numerous other components. According to Bowonder, Dambai, Kumar and Shirodkaer, "Platform planning requires a strong leadership team. Boeing executives and the directors demonstrated visionary industry leadership by focusing on innovation and product development, at the risk of financial and technical failure. In doing so, Boeing transformed its industry through innovation" (2010, p. 20).

This fundamental transformation did not occur overnight (Bugas 1999), though, but has rather been the result of the company learning from its successes as well as its failures over the years and implementing a series of sustained incremental changes that have consistently added value to the company's operations (Tidd, Bessant & Pavitt 2001; Luz 1999). For example, among the company's notable success is Boeing's innovative approach to machining parts for its various aircraft. Although the company has outsourced a significant percentage of its component manufacturing needs abroad, many parts are still made by the company at its facilities in the United States. The company currently manufactures between 300 and 500 aircraft each year, ranging from 185-passenger 737s to enormous 400-plus passenger 747s (Gaither & Frazier, 2009), as well as 757s, 767s, and 777s (Heizer & Render, 2011).

To facilitate the component manufacturing process, Boeing uses an innovative approach to make its shot peening process (a method of shaping metal parts) more efficient. Using computer simulations of the input-output process, Boeing developed a streamlined approach to this aspect of their manufacturing that has historically been a problem area. According to Gaither and Frazier, "Such actions that reduce production costs and improve the production process help to make Boeing more competitive in the commercial aircraft industry" (2009, p. 628). In addition, the company's floor panel and air duct production process in Spokane, Washington, has been made more efficient through the introduction of a leaning manufacturing approach. This initiative reduced lead times and operating costs, as well as halving the amount of space required (Gaither & Frazier 2009, p. 193).

These highly efficient lean production processes are desperately needed in the commercial aircraft manufacturing industry where cyclical and sometimes-unpredictable demand can create surges that Boeing must accommodate. The company learned its lessons the hard way in 1997 when it laid off 12,000 workers due to slowed sales, but was forced to hire 32,000 more workers when demand increased (Gaither & Frazier, 2009, p. 169). According to Miller, "Not much more than a decade ago, Boeing went through a hiring binge to ramp up production, fell flat on deliveries and shed many jobs as a result" (2008, p. 1). It required a significant amount of time and money to bring the company back up to speed and Boeing's stock price suffered as a result (Gaither & Frazier, 2009, p. 169).

Other lessons learned by the company include enhancing their existing aircraft models to extend their marketability and increase profits. For example, in a last-ditch effort to revive sales of its hallmark 737 aircraft during the late 1960s which had traditionally been sold 20 aircraft at a time to carriers such as Southwest, Boeing began selling one or two 737s at a time to fledgling airlines in Africa, South America and other emerging regions (Heizer & Render, 2011). The company also modified the 737 to better accommodate the less experienced pilots employed by these up-and-coming carriers by redesigning its landing system for the more rugged landing conditions characterizing airports in these developing nations (Heizer & Render, 2011).

Not only did the company manage to keep the 737 alive through these more modest sales, many of the companies that purchased 737s initially began purchasing larger aircraft as their companies grew, and the 737 has become the largest-selling commercial aircraft in aviation history as a result (Heizer & Render 2011). Likewise, the company used the same approach for its Harriet jet defense contracts by developing innovative solutions to the problems identified with the aircraft by the military, thereby extending the life -- and profitability -- of their contract (Fallows 2002).

Finally, Boeing has added safety to the list of the so-called five S's of lean manufacturing ("seiri": sort things out and define what is needed; "seiton": set things in order; "seisou": clean things up; "seiketsou": standardize and define standards"; and "shitsuke" develop a means of measuring progress), and has realized a lower risk profile as a result (Tool for Productivity, Quality, Throughput, Safety 2006). It is reasonable to suggest that the company's focus on the elimination of waste, reduction of costs and increased efficiency have contributed to its success to date, but the question remains whether these efforts will continue to fuel the company's success in the future, and these issues are discussed further below.

To what extent is the organization' international operations management strategy likely to be appropriate over the next years?

The lessons learned by Boeing appear to have helped the company maintain its… READ MORE

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