SWOT Analysis of Boeing

Strengths

1. Supply Chain Innovation: By outsourcing 70 per cent of the components of 787 Dreamliner rather than building the entire aircraft on its own, Boeing would only assemble the parts of the completed sub-assemblies and test the plane before finally delivering to their customers like Virgin Atlantic Airways, KLM, Lufthansa, etc. This would in effect reduce the inventory and final assembly time from 30 to 3 days.

2. Eliminating Layovers: The lightweight material enables the Dreamliner to take long non-stop flights, thereby eliminating layovers, which is preferred by most international travellers. (Hucko, 2007).

3. Lesser Noise Pollution during Take-offs and Landings: The 787 Dreamliner uses acoustically treated engine inlets and chevrons and high bypass ratio along with other exceptional treatments for the engines – to ensure that all sound of 85 decibels stays within the airport boundaries. The noise footprint of 787 is 60 per cent smaller than those of the similar sized airplanes. (www.boeing.com)

4. Efficient Utilisation of Fuel: The 787 Dreamliner ensures a reduction of 20 per cent in fuel usage, leading to an expected reduction of 10 per cent in the cost-per-seat mile than any other aircraft (Murray, 2007). The overall performance of the Dreamliner is essentially depends upon the new technology engines, greater use of the light weight composite material and the modern aerodynamics.

5. Reduction in Emission: As a result of reduced fuel usage, there is an equivalent reduction in CO2 emissions.

6. Decreased Manufacturing Waste: In a striking contrast to the modern airplanes which are primarily made up of aluminium, the 787 uses over 50 per cent of carbon-fibre composite material which is trimmed like a cloth, 15 per cent aluminium and 12 per cent titanium (Hawk, 2005; Wallace, 2006). The end result is that of less manufacturing and maintenance processes producing less waste. Also, because of the composite material being used for the 787’s fuselages, there is also a reduction in the airlines’ maintenance and replacement costs (Murray, 2007).

Weaknesses

1. Lack of Control: With the traditional model of manufacturing the parts with the US vendors, Boeing had a great control over its supply chain. On the other hand, in the new unconventional model of outsourcing, the control has shifted in the hands of the suppliers, leading to a higher level of risk and possible ambiguity between Boeing and its suppliers. For example, Vought, one of the fifty tier-1 suppliers of Boeing, hired Advanced Integration Technology (AIT) as a tier-2 supplier to serve as a system integrator without informing Boeing (Tang, 2007).

2. Operational Risk: In its traditional role of a key manufacturer Boeing would assemble different parts and subsystems produced by thousands of its suppliers, and was not dependent on them for a completed subassembly. However, in the new unconventional method adopted by the company, it was forced to be completely dependent on the finished subassemblies, also because of the risk sharing contract that Boeing has entered with its strategic partners, none of the suppliers would be paid until the first fully assembled plane is certified for flight, nor would they be compensated for any delays caused by another supplier. If the suppliers realize the possibility of being penalized unduly, they might be enticed to work slower and cause overall delays in the delivery (Kwon et al., 2009).

3. Over-dependence on Technology for Communication: Boeing uses Exostar to communicate with and coordinate the supplier development activities. However, when using such a web-based planning system there can be no coordination without accurate and timely information being provided by the suppliers, and due to cultural and geographical differences between the information might not be entered timely, and this can further lead to delays in the various stages of operations, ultimately resulting in a delayed delivery. Without accurate and timely information about the development progress at each suppliers’ site, the value of Exostar holds no significance. Overly depending upon IT for communication in a new project, in this case is highly risky.

4. Labour Problems: With problems in the production department leading to delayed deliveries of the Dreamliner, Boeing had to increase its manpower to complete the planes. However, because of lack of experience, the work force led to additional problems, subsequently increasing the cost per plane. In addition, the inexperienced workforce found the aircraft design too complex to execute. They were also asked to do extra time, and 50-60 hour work weeks became a common norm. Also, because of the increase in the outsourcing done by Boeing, the employees became insecure about their jobs. This further resulted in a strike by more than 25,000 Boeing employees in September 2008. The strike also had an effect on the Boeing’s suppliers as Spirit Aerosystems, a key supplier of Boeing who anticipated the strike and a possibility of order cancelations, reduced its work week for employees in charge of developing and manufacturing various Boeing aircrafts. Such an action could possibly delay the delivery schedule of 787 (Rigby and Hepher, 2008).

Opportunities

1. Pioneer Manufacturing Beyond the Borders: Boeing could be become a leading example for other manufacturers for assembling the final product and outsourcing the manufacturing globally. The unconventional techniques used by Boeing surely meets the needs of globalization, but is a risky endeavour for companies worldwide. This is a revolutionary approach about choosing between cost savings and giving up control. In the event that Boeing lives up to expectations, it could be a leading example of a new manufacturing model for globalized manufacturing.

2. Innovative Advantage: Boeing has an advantage of being the first ever company in the history of airlines to use the composite material (Wallace, 2006). Also, because of its ability of efficient usage of fuel and reduced emission production it has become the first mover in sustainable and environment friendly efforts, making it one of the leading examples for the others in the same industry to strive for sustainable economic development.

3. Increased Demand for Point-to-Point Routes: As explained earlier, the 787 has the ability to make long haul flights, with no lay overs. This is particularly of interest to most of the international travellers as well as the low cost airlines which use point to point routes in order to reduce the costs. Because of its ability to make long non-stop flights, Boeing’s customers (airline companies like KLM, Lufthansa, Virgin Atlantic, etc.) can now identify many a new long point-to-point routes across the oceans.

4. Form Strong Partnerships: The 787 Dreamliner project provides Boeing with an opportunity to collaborate with its suppliers in such a way that it can cement its relationship with its key partners for its future endeavors. By forming such relationships, Boeing can easily then rely on these partners without the fear of them dropping out or maintain ambiguities like Vought.

Threats

1. Deceleration in the Commercial Jet Market: After the 9/11 attack, the airline industry was probably hit the hardest and both Boeing as well as Airbus incurred losses in revenue post the 2001 attack (www.memphisdailynews.com). However, the demand for international tourism and the delivery of new aircrafts has been increasing, resulting in an increase in the number of orders being given to both the companies.

2. Uncertain Airline Industry: The airline industry is so dynamic and uncertain that it is not easy to guess long term or short term opportunities. There is an intense competition in the airline industry with regards to price, operating cost and production schedules. Increasingly, major manufacturers are teaming with global suppliers to reduce the risks, cut costs and boost profitability. Also, this industry is hugely affected by the prevailing economic conditions of the country and globally as well.

3. Boeing Corporate Culture: The organizational culture of Boeing is mostly low sociability/low solidarity because of the following reasons:

i. Inexperienced employees

ii. A hierarchal, rigid and autocratic management style (Friesen, 1998).

iii. Labour problems- strike for a period of 2 months (Rigby and Hepher, 2008).

iv. Lack of professional management skills.

4. High Risk New Product Development: To outsource a brand new airplane model based on brand new composite technologies which have not been tried before is a risk in terms of actually delivering the product as well as delivering it within the promised timeline.

5. Safety Issues: The fact that composite material has never been used on as large a scale as a Dreamliner, there is a fear of lightning strikes for wings made of this material as the lightning bolt would travel through the wing-skin fasteners (Wallace, 2006).

6. Cyber Security Issue: The current configuration of the electronics of the Dreamliner is such that it puts the passenger electronic entertainment on the same computer network as that flight control system making it highly vulnerable to hacking. This has led to concerns over possible terrorist attack via the cyber route (Zetter, 2008).

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