Lean Manufacturing Initiatives at Boeing


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Case Details:

Case Code : OPER014
Case Length : 12 Pages
Period : 1993 - 2002
Organization : Boeing
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Airplane Manufacturing

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note Contd...

In the mid-1990s, Boeing's revenues plunged and it had to retrench around 9,300 employees due to the economic slow down. The company faced a 10-week strike in the fourth quarter of 1995. In late 1996, Boeing and McDonnell Douglas2 announced plans to merge. In 1997, Boeing had approximately 70% of the world market for passenger aircraft. By the end of 1997, Boeing was severely affected by the Asian economic crisis3 that put in doubt over one-third of the $1.1 trillion projected commercial aircraft sales for the next 20 years. The company's internal problems such as bureaucracy, redundant manufacturing processes and an outdated information technology setup further aggravated the situation. Boeing lost 17% of its market value as a result of the Asian crisis.

By 2001, Boeing had emerged as a $58 billion company operating in 145 countries with around 179,000 employees worldwide. The company was divided into six major units: Air Traffic Management, Boeing Capital Corporation, Commercial Airplanes, Space and Communications, Military Aircraft and Missile Systems, and Connexion by Boeing. The commercial aircraft division contributed around 60% of the total revenues. Boeing's manufacturing plants were located at Renton, Everett (Washington), Wichita (Kansas) and Long Beach (California).

Manufacturing Practices at Boeing

In a traditional commercial aircraft manufacturing plant, the floor layout was similar to a parking lot. The planes were docked in stalls – six on the left side of the factory, six on the right side. Each plane was surrounded by ramps and workers would go in and out to find parts, install them.

Boeing had followed the above approach from the beginning and its manufacturing practices did not change much over the years. According to analysts, by the early 1990s, the company's operations had become completely outdated...

Excerpts >>

2] McDonnell Douglas manufactured planes since 1920, and was one of the largest defense contractors in the United States producing combat aircrafts, helicopters, missiles and defense electronic systems.

3] The Asian financial crisis started in early July 1997, when international currency speculators as well as many Thai nationals were trying to sell Thailand's currency, the Baht to buy US dollars, causing a flight of capital out of the country. As a result, the capital became scarce and interest rates on borrowed money rose sharply, leading to the Baht losing about 20% of its value. Then the Thailand stock and real markets collapsed, pushing the country into its worst recession as production decreased, unemployment rose sharply and businesses went bankrupt. The crisis spread quickly to other countries in the Southeast Asian region like Indonesia, South Korea and Japan, significantly damaging the region's economy.

 

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