The Need for Organisational Resilience Chapter-6

In April 2004, Boeing announced that All Nippon Airways (ANA) would be the launch customer of the new revolutionary 787 Dreamliner. On July 8 th 2007, the first was unveiled at

Boeing’s Everett assembly factory. At that time, 677 orders had already been received.

The delivery of this aircraft was thereafter plagued by delays in production, on-board fires

and emergency landings. In July 2013, Qatar airways grounded their whole fleet due to issues

with an electrical panel. Air India followed suit with the problem of an overheated oven, and

launched an investigation. In 2016, ANA decided to ground all aircrafts due to complications with

their Rolls-Royce engines. All these posed disruptions to the supply chain and Boeing has failed

to set up adequate logistics that enabled a fast and reliable delivery of their new aircraft.

It emerged that Boeing is rather unconventional (by airline industry standards) in its

management of the supply chain. First, it outsourced 70 per cent of the production and

development, thereby increasing the need for co-ordination and collaboration between suppliers

while levering the expertise of these suppliers. Second, to expand delegation down the supply

chain, Boeing reduced the number of strategic suppliers it dealt with directly. These strategic key

suppliers would deliver entire sections to Boeing, meaning that they, not Boeing, would in turn

have to deal with the procurement of raw material and components. This increased dependence

on a few suppliers, over which Boeing had no immediate control. Finally, a risk-sharing

agreement was implemented. Strategic suppliers would only get paid when the first Boeing 787

was delivered, to ANA.

Limitations in Forecasting

Modern products and services become ever more complex, as they are required to fulfil an

increasing range of customer needs and wants. Hence, delivering a product such as an airplane

has become a daunting challenge. Without a doubt, experience in engineering has led to greater

reliability, but pushing the envelope of innovative, complex products and services limits the ability

to forecast demand, restricting an organisation’s capability to predict when and where to have

what, and how much inventory available.

One of many delays was triggered by an aircraft component that one may not tend to

associate with a shortage: aerospace fasteners, bolts, rivets and washers; all components that hold an aircraft together. The backlash of the terrorist attack on September 11 th 2001 led to a

consolidation of fastener makers, going hand in hand with a reduction in production capacity.

Boeing was aware of potential shortages and in response launched a new system, called

Fastener Procurement Model (FPM). It offered a centralised demand and procurement system.

Boeing and its partners would update their inventory on fasteners daily. Partners also had to

provide preliminary pricing information and other information such as about lead times. Soon

problems emerged. Partners were confused about what kind of information to feed into this

system. In addition, they could not provide information in real-time or provided false information

to cover their tracks.

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