Operations Management Strategies of The Boeing Company

This paper discusses the operation management strategies of The Boeing Company, which is listed on the NYSE. It covers topics such as operational strategy, process design, capacity planning, inventory management, quality management, supply chain management, and technology management.

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Running Head: OPERATIONS MANAGEMENT
Operations Management
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Institution
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Introduction
The Boeing Company is an American multinational corporation which deals in
designing, manufacturing and selling rockets, airplanes, satellites, missiles, and rotorcraft.
Besides, The Boeing Company offers leasing services as well as support services for products. It
is considered one of the biggest international manufacturers of aircraft. The company stock is
listed on the New York Stock Exchange (NYSE). Boeing Company was established in1916 by
William Boeing with its head offices located in Chicago, Illinois. It has five main divisions
which include Boing Commercial Airplanes (BCA), Boeing Capital, Boeing Defense, Boeing
Shared Services Group, and Engineering, Operations & Technology.
The purpose of this paper is to discuss the operation management strategies of The
Boeing Company, which is listed on the NYSE. Operations management refers to the process of
administering business practices that offer the highest efficiency level in an organization. It
involves the efficient conversion of labor and materials into services and goods in order to
achieve organizational profit maximization (Das, 2015). It also involves managing and
balancing operational costs with revenues to achieving the highest operational income. The
paper discusses Boeing’s operational strategy, process design, capacity planning, inventory
management, quality management, supply chain management, and technology management.
1. Operational Strategy
Boeing is the biggest aerospace company in the world, mainly dealing in manufacturing
commercial jetliners, space, defense and security systems, as well as providing aftermarket
support services. It is the largest manufacturing exporter of airlines in America, supporting its
wide range of customers in more than one hundred and fifty nations. Its primary products and
customized services are military and commercial satellites, aircraft, launch systems, weapons,

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advanced systems of information and communication as well as electronic and defense systems
(Das, 2015).
Boeing faces competition from various companies. The airline industry and the
commercial airplane market remains highly competitive. Boeing experiences stiff competition
from global competitors who continuously intent to increase their share of the airline market.
They include the Airbus, United Aircraft corporation from Russia, Mitsubishi Aircraft from
Japan and Embraer & Bombardier. Boeing focusses on improving its processes and reducing its
costs. It intends to carry on its competition with other manufacturers of airplanes through the
provision of higher value services, products, and support to its worldwide customers. The
company offers a high customer satisfaction level through its extensive services of customer
support (Magretta, 2012).
Additionally, Boeing Defense, Space, and Security (BDS) experiences stiff competition
in various segments of the market, mainly from Northrop Grumman, SpaceX, General
Dynamics, and Lockhead Martin. Besides, non-American aircraft companies such as Airbus
Group and BAE systems continue establishing a strategic business presence in the airline market
of the US, through forming partnerships with American defense companies and improving their
North American operations as well (Panneerselvam, 2012).
The nature of the defense industry compels Boeing to establish business partnerships
with other competing organizations in other geographical locations to providing customers with
the best capability mix that helps address specific requirements. For instance, Boeing and
Lockhead Martin have owned and operated together with the Hellfire Systems LLC that makes
the AGM-114 Hellfire Missile. Besides, the companies jointly own the United Launch Alliance
LLC, which they operate jointly and makes the Delta IV, as well as Atlas V, Launch vehicles

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for use by the Air Force of the United States. Furthermore, Boeing and Lockhead Martin are co-
contractors on the defense program of F-22 Raptor. In addition to this, Bell helicopter and
Boeing established the Bell-Boeing joint project office that makes the V-22 Osprey tilt-rotor
aircraft (Young, 2009).
2. Process Design
Boeing processes have a process design option of product focus rather than a functional
focus. Boeing focusses on safety while designing its airframes and establishing the subsequent
configuration of security. In doing this, the company addresses the safety of its products
regarding the potential of loss through identification of primary hazard sources. It then
implements effective actions to preclude the development of potential hazards (Magretta, 2012).
Boeing accomplishes this through the implementation of a cooperatively interactive and
practical framework of an integrated product team that helps in the identification of potential
hazards (Das, 2015). It also offers timely resolutions to challenges in the product designing and
engineering. Boeing aims to avoid injuries and accidents as well as to meet or exceed the safety
of employees, the standards of the company, and the health regulatory requirements. It,
therefore, focuses its process design primarily on its aircraft product (Magretta, 2012).
3. Capacity Planning
Boeing defines its capacity regarding the number of aircraft and jetliners produced
annually (Young, 2009). The Boeing Commercial Airplanes business unit of the Boeing
manufactures airplanes with high efficiency and superior design. Boeing has more than ten
thousand commercial jetliners and airlines and its leases more than five thousand and seven
hundred of its jets (Chiarini, 2015).

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Boeing manages its supply and demand strategy through the use of a forward and
reverses chain of supply, use of controlling technologies and on-time delivery of parts of aircraft
from sub-contracted manufacturers. The company runs its supply and demand operations
effectively through the establishment of formidable and complex supply chain management as a
result of many global companies that supply aircraft parts its manufacturing department. Boeing
focusses on lean practices of supply chain management. It focusses much on reducing cost and
enhancing savings on the lead time, by improving its existing processes as well as adopting
modern technologies (Magretta, 2012).
Boeing outsources its production and development activities up to 70%, under its
integrated system of the supply chain. It leverages its strategic partners who simultaneously
develop various aircraft parts and deliver them to the assembly plant of The Boeing Company.
By doing this, Boeing aims to reduce lead time and costs of development significantly. Boeing
company achieves coordination in its supply chain through a collaboration hub which enhances
visibility, achieves control and integrates its key processes of the business. The company’s
collaboration hub facilitates supply continuity and ensures minimal disruptions of supply by
synchronizing on real-time the demand of the company with its supply (Jones &
Robinson, 2012). The hub addresses the highlighted hiccups immediately for proper running of
production activities. The collaboration hub also facilitates effective communication of supply
and demand, thus enabling a timely action that leaves the customers of the company satisfied
(Young, 2009). Furthermore, Boeing delegates more functions, thus giving it much time to
conduct research and development.
4. Inventory Management

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Boeing operates primarily in the manufacturing business. The company should use a
single-period inventory model in managing its inventory rather than the multi-period inventory
model. Boeing outsources most of its aircraft parts, and therefore a single-period model of
inventory management is the best approach to control and manage its inventory. Holding
inventory is costly since the company would incur costs such as warehousing. Boeing focusses
on minimizing the costs associated with its inventory (Chiarini, 2015). It accomplishes this
through its collaboration hub which communicates effectively with its numerous suppliers
worldwide to offer product parts for manufacturing activities. A single-order inventory
management model allows the company to make one-time ordering decisions, based on its
demand for supplies. It helps The Boeing Company minimize costs associated with storage and
many order placement. Through the single-period model, Boeing balances the effects of stock
depletion with the implications of holding idle stock (Grütter, 2010).
Boeing leverages its ERP system to manage inventory costs and obsolescence through
automation of Bill of Materials (BOM) as well as addressing multi-level challenges. An ERP
systems help inventory managers determine inventory order requirements on real time, thus
avoiding over-production and overstocking. It also helps automate inventory reconciliations and
update figures in real time (Mahadevan, 2010). Besides, implementation of lean strategies
through an ERP system helps target wastes, thus reducing inventory costs and obsolescence
significantly. A proper ERP system has real-time data on projected demand, which helps make
accurate predictions of expected demand and reduces obsolescence. Furthermore, ERP system
helps to gain better coordination between various inventory functions such as forecasting of
demand and planning of inventory, which assists in achieving better utilization of capacity,
production planning and minimization of inventory costs (Brown, Bessant & Lamming, 2013).

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5. Quality Management
Boeing uses lean strategies in the management of its inventory. The lean strategies of
manufacturing focus mainly on delivering what the customer requires most. Boeing removes
roadblocks which prevent it from meeting the goals of its customers. The company does this by
removing workflows and processes which lead to wastage of time and other available resources.
One can integrate the essential elements of the lean principles at The Boeing Company
to minimize waste and drive continuous improvement. The lean strategies of manufacturing help
in reduction of overproduction, delays in transportation, production quality assurance defects
and unavailability of workforce skills (Young, 2009). Development of a system that adopts
direct deliveries to the various lines and departments of the company would offer Boeing
tremendous opportunities. Additionally, a significant improvement on the process of aircraft
product part sequencing would reduce inventory and ease cash flow, thus requiring less storage
space and lowering costs. The plane making engineers of The Boeing Company must also
consider building quality while designing and assembling aircraft in order to achieve an
affordable and cost-effective production.
6. Supply Chain Management
The supply chain management of The Boeing Company is not subject to the bullwhip
effect. Boeing has an adequate supply chain management, and there is no considerable variance
in the orders issued to its various suppliers and the sales made to the final consumers (Oliveira
& Gimeno, 2014). As such, the company does not face any interruptions in the smooth running
of its process of supply chain since there are effective coordination and communication. Every
party in the supply chain of The Boeing Company does not underestimate or overestimate the
demand of the product, and thus exaggerated fluctuations do not often occur (Barnes, 2008).

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The Boeing Company has an established system of the supply chain which it manages
through controlling technologies. The company has a collaboration hub that plays a significant
role in coordinating the suppliers and product developers, ensuring effective communication and
on time delivery of ordered products (Ross, 2016). The collaboration hub also helps the
company establish a real-time demand projection, which it uses to place orders from its
suppliers and sub-contractors. Through the use of an ERP system, the company manages its
inventory effectively to avoid running out of stock, while minimizing the holding costs of
inventory (Shah, 2009). Boeing avoids order batching through implementing a system of
placing an order immediately with the suppliers and not accumulating the demand first. The
company uses a single-period model of inventory management where it orders product parts as
demand arises. Furthermore, Boeing’s supply chain management system aims to reduce lead
time, which avoids overstocking and prevents unnecessary changes in the demand for the
supplier over time. It helps prevent the bullwhip effect (Sindi & Roe, 2017).
7. Technology Management
Organizations use big data to gain a better understanding of their customers and make
improvements in their experiences as they continue to interact with the company’s brand. There
are various ways in which Boeing could effectively use big data to improve their customer
focus. For instance, big data offers the company an opportunity to collect a large amount of
data, both structured and unstructured, and analyze it to acquire useful insights about the
preferences and behavioral patterns of customers (Bamford & Forrester, 2010). It would enable
The Boeing Company to make smart decisions, develop its products and improve the
experiences of its customers significantly. Big data helps the company get a holistic view of its
existing and potential customers. It organizes the individual customer data neatly and offers a

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holistic view of the customer. Analysis of Big data would also help Boeing to make informed
decisions based on counter-intuitive information. It helps the management figure out what their
customers need, by analyzing their purchase patterns and preferences (Barnes, 2018).
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