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    Assignment 1 Boeing 737 by Group 12

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    Ajay
    The document discusses outsourcing the manufacturing of Boeing 737s from the Wichita factory. It lists the major motivations for outsourcing as business transformation, increasing capacity utilization, reducing costs, and decreasing delivery lead times. Potential reservations about outsourcing include losing control and confidentiality, increased logistics costs, unexpected cost increases, and high dependency on suppliers. When evaluating an outsourcing decision, the document recommends analyzing total system costs, tangible and intangible losses from supply issues, strong supply chain management, and identifying long-term partners.

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    Assignment 1 Boeing 737 by Group 12

    Uploaded by

    Ajay
    101 views8 pages
    The document discusses outsourcing the manufacturing of Boeing 737s from the Wichita factory. It lists the major motivations for outsourcing as business transformation, increasing capacity utilization, reducing costs, and decreasing delivery lead times. Potential reservations about outsourcing include losing control and confidentiality, increased logistics costs, unexpected cost increases, and high dependency on suppliers. When evaluating an outsourcing decision, the document recommends analyzing total system costs, tangible and intangible losses from supply issues, strong supply chain management, and identifying long-term partners.

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    The document discusses outsourcing the manufacturing of Boeing 737s from the Wichita factory. It lists the major motivations for outsourcing as business transformation, increasing capacity utilization, reducing costs, and decreasing delivery lead times. Potential reservations about outsourcing include losing control and confidentiality, increased logistics costs, unexpected cost increases, and high dependency on suppliers. When evaluating an outsourcing decision, the document recommends analyzing total system costs, tangible and intangible losses from supply issues, strong supply chain management, and identifying long-term partners.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    101 views8 pages

    Assignment 1 Boeing 737 by Group 12

    Uploaded by

    Ajay
    The document discusses outsourcing the manufacturing of Boeing 737s from the Wichita factory. It lists the major motivations for outsourcing as business transformation, increasing capacity utilization, reducing costs, and decreasing delivery lead times. Potential reservations about outsourcing include losing control and confidentiality, increased logistics costs, unexpected cost increases, and high dependency on suppliers. When evaluating an outsourcing decision, the document recommends analyzing total system costs, tangible and intangible losses from supply issues, strong supply chain management, and identifying long-term partners.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
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    The key takeaways are the motivations for outsourcing Boeing's Wichita factory including business transformation, capacity utilization, cost reduction, and reduced delivery lead time.

    The major motivations that support outsourcing are business transformation, capacity utilization, cost reduction, and reduced delivery lead time.

    The major reservations and cons of outsourcing the Wichita factory include loss of confidentiality and security, increased logistics costs, unexpected cost increases, change in design, high rework requirements, high supplier dependency, and loss of control once outsourced.

    Assignment 1 :

    Boeing 737
    Manufacturing
    Footprint : The
    Wichita
    Decision
    •Group 12
    What are the major motivations that
    support outsourcing?
    • Business Transformation : Transform the processes to handle final assembly and
    high value added works instead of focusing more of small parts handling and in-
    house assembly
    • Capacity Utilization : Currently the Wichita Factory which handles the
    manufacturing of commercial airlines is operating at 50% capacity but operating
    with high over head cost. This is impacting the overall revenue of the organization.
    • Cost Reduction : Boeing is currently operating with 10 – 20% more operating cost
    compared to its competitors.
    • Less Delivery Lead-time : Shifting from in-house manufacturing to procurement of
    sub-assemblies and doing in-house assembly will reduce the overall manufacturing
    time of the airlines. This will also improve the working capital turnaround time.
    What Are The Major Reservations & Cons of
    Outsourcing The Wichita Factory ?
    • Outsourcing partner was expected to more effectively squeeze out labour
    and other costs.
    • Outsourcing partner could bring the work from other manufacturers also.
    • Outsourcing requires more complete specifications because disputes arising
    from omissions or changes would be subject to legal remedies.
    • High Overheads on support functions :- Outsourcing expected to create new
    internal tasks that had not previously existed. Normal accounting practices
    do no allow these unavoidable additional cost to be billed against that
    particular item of work and hence it eventually gets misrepresented. Extra
    cost for overseeing supplier’s work cannot be accounted properly.
    What Are The Major Reservations & Cons of
    Outsourcing The Wichita Factory ?
    • Loss of confidentiality and security - Boeing had to abandon some degree of
    privacy over its core business secrets, when outsourcing. Additionally, it had to
    pass on information such as critical details about business processes and safety
    measures, even if partners were thoroughly tested for their internal security
    processes, there is always a risk of data getting stolen or fraud being committed.
    • Increase in Logistics cost - Since different parts are manufactured in different
    locations, the supply chain is stretched too long. Co-ordination and
    communication issues, time difference, language barriers, other communication
    difficulties may disturb the schedule.
    • Unexpected cost increase - These were mainly due to increased co-ordination
    and labour cost, penalties due to delayed deliveries, additional redesigning cost.
    What Are The Major Reservations & Cons of
    Outsourcing The Wichita Factory ?
    • Change in design to suit the assembly process.
    • High rework required – Safety & Quality issues brought huge negative
    impacts to Boeing.
    • High dependency on the suppliers to achieve timely delivery of aircrafts.
    • Once a business part is outsourced, the company is no longer in full
    control of that aspect.
    • Blind imitation of Toyota’s three tier supply chain- Toyota worked closely
    with its suppliers and responded to their concerns with integrity, with
    high attention to product quality. In contrast Boeing adopted Toyota’s
    system in superficial way, imitating it blindly.
    How do you evaluate an outsourcing decision such as
    this? Please organize your thoughts to build your own
    framework for taking such decisions?
    The Key Points Need to be considered while evaluating the outsourcing decision
    • Reasons for the delay in the on time delivery of airlines
    • Analysing the complete system cost such as cost of procurement of assemblies,
    additional logistics cost, cost of repairs, cost of change in designs to suit for
    procurement of assembled parts, administration cost to manage the complete supply
    chain from order to delivery
    • Analyse the both tangible and intangible losses occurred in the failure of supply of
    best quality product. The reputational loss incurred in the failure of airlines due to
    supplier issue is key for the success of the company.
    • Strong supply chain management policy and team.
    • As Boeing is looking to follow lean manufacturing principles, Identification of the long
    term partners to have uninterrupted supplies is key factor.
    Name Roll no.

    Subhakanta Mohanty EPGP-12A-110


    Suva Deep Mohanty EPGP-12A-118
    Vaibhav Afzalpurkar EPGP-12A-121
    Vallabh Shrikant Chavan EPGP-12A-122

    Thank you Vinod Kumar Gandham EPGP-12A-126

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