Question

The Boeing Company, headquartered in Chicago, Illinois, is one of the two major producers of aircraft in the global market. The other major producer is European Airbus. Boeing produces three models in Everett, Washington: 747s, 767s, and 777s. The planes are all produced in the same building. At any one time, there may be as many as six planes in various stages of production. Obviously the building has to be fairly large to accommodate such a huge undertaking. In fact, the building is so large that it covers over 98 acres and it is four stories high, making it the largest building by volume in the world. It is so large that all of Disneyland would fit inside, and still leave about 15 acres for indoor parking! The windowless building has six huge doors along one side, each about 100 yards wide and 40 yards high (the size of a football field)—large enough to allow a completed airplane to pass through. Boeing sells airplanes to airlines and countries around the globe. There isn’t a set price for the planes; the actual price depends on what features the customer wants. Once the details have been settled and an order submitted, the customer requirements are sent to the design department. Design Designers formerly had to construct a mock-up to determine the exact dimensions of the plane and to identify any assembly problems that might occur. That required time, materials, labor, and space. Now they use computers (CAD) to design airplanes, avoiding the cost of the mockups and shortening the development time. The Production Process Once designs have been completed and approved by the customer, production of the plane is scheduled, and parts and materials are ordered. Parts come to the plant by rail, airplane, and truck, and are delivered to the major assembly area of the plane they will be used for. The parts are scheduled so they arrive at the plant just prior to when they will be used in assembly, and immediately moved to storage areas close to where they will be used. Time-phasing shipments to arrive as parts are needed helps to keep inventory investment low and avoids having to devote space to store parts that won’t be used immediately. There is a tradeoff, though, because if any parts are missing or damaged and have to be reordered, that could cause production delays. When missing or defective parts are discovered, they are assigned priorities according to how critical the part is in terms of disruption of the flow of work. The parts with the highest priorities are assigned to expediters who determine the best way to replace the part. The expediters keep track of the progress of the parts and deliver them to the appropriate location as soon as they arrive. In the meantime, a portion of the work remains unfinished, awaiting the replacement parts, and workers complete other portions of the assembly. If the supplier is unable to replace the part in a time frame that will not seriously delay assembly, as a last resort, Boeing has a machine shop that can make the necessary part. The partially assembled portions of the plane, and in later stages, the plane itself, move from station to station as the work progresses staying about five days at each station. Giant overhead cranes are used to move large sections from one station to the next, although once the wheel assemblies have been installed, the plane is towed to the remaining stations. Finished planes are painted in one of two separate buildings. Painting usually adds 400 to 600 pounds to the weight of a plane. The painting process involves giving the airplane a negative charge and the paint a positive charge so that the paint will be attracted to the airplane. Testing and Quality Control Boeing has extensive quality control measures in place throughout the entire design and production process. Not only are there quality inspectors, individual employees inspect their own work and the work previously done by others on the plane. Buyers’ inspectors also check on the quality of the work. There are 60 test pilots who fly the planes. Formerly planes were tested to evaluate their flight worthiness in a wind tunnel, which required expensive testing and added considerably to product development time. Now new designs are tested using a computerized wind tunnel before production even begins, greatly reducing both time and cost. And in case you’re wondering, the wings are fairly flexible; a typical wing can flap by as much as 22 feet before it will fracture. Re-engineering Boeing is re-engineering its business systems. A top priority is to upgrade its computer systems. This will provide better links to suppliers, provide more up-to-date information for materials management, and enable company representatives who are at customer sites to create a customized aircraft design on their laptop computer. Another aspect of the reengineering involves a shift to lean production. Key goals are to reduce production time and reduce inventory. Boeing wants to reduce the time that a plane spends at each workstation from 5 days to 3 days, a reduction of 40 percent. Not only will that mean that customers can get their planes much sooner, it will also reduce labor costs and inventory costs, and improve cash flow. One part of this will be accomplished by moving toward late-stage customization, or delayed differentiation. That would mean standardizing the assembly of planes as long as possible before adding custom features. This, and other time-saving steps, will speed up production considerably, giving it a major competitive advantage. It also wants to reduce the tremendous amount of inventory it carries (a 747 jumbo jet has about 6 million parts, including 3 million rivets). One part of the plan is to have suppliers do more pre-delivery work by assembling the parts into kits that are delivered directly to the staging area where they will be installed on the aircraft instead of delivering separate parts to inventory. That would cut down on inventory carrying costs and save time. Boeing is also hoping to reduce the number of suppliers it has, and to establish better links and cooperation from suppliers. Currently Boeing has about 3,500 suppliers. Compare that with GM’s roughly 2,500 suppliers, and you get an idea of how large this number is.

1. What is the type of inventory management does Boeing embrace? How does Boeing manage its inventory? Why it is important to manage inventory?

need strong response please

Answer 1

The method embraced by Boeing is Lean principles for managing its inventory. Such as

• Just-in-time ordering – As the name suggests the company places order of the required goods just before the need arises.

• Point-of-use delivery – They try to get delivery of the good where it is actually required to required to go into manufacturing. This saves a lot of time, effort and money.

• Internal Kitting to streamline its manufacturing process .

The Boeing takes its inventory management very seriously. In an article a Boeing official wrote that if we visited their manufacturing facility some time back you would see a lot of raw material lying their but now they have completely changed this scenario. Now the Boeing relies on Just-in-time ordering technique. This consumption based ordering system has resulted in many benefits to the company. This is an online system in which a supply chain is created by the company which shares the data of remaining stock in the manufacturing facility of the company to its suppliers. It allows the supplies to keep a regular check on the inventory and place the order at their own discretion and deliver the required good the company’s warehouse when the remaining stock has fallen below a specified limit.

Importance of Inventory management- The managing of the stock and controlling the inflow and outflow of the goods in a proper manner is referred to as Inventory management. Usually, inventory is the largest current asset of an organization. It means invests, it means a lot of capital is invested in inventory so it becomes crucial to manage the inventory. Ignoring the inventory management can break a business and if proper balance is maintained it can take the business to greater heights. If inventory is not managed properly it can hurt a business in two ways. Firstly, if an organization order doesn’t keep a check and orders extra good than required, then those extra goods will keep lying around in the warehouse. They will eat-up more space in the warehouse and can get damaged with time and the capital will also remain invested in them till they are used. Secondly, if there is not enough inventory in the warehouse then the production will have to be stopped and the orders will get delayed and organization will loose its goodwill and may also loose the customers. So, it is very important to manage the inventory in smooth running of the business.