2) Value Chain in the Airline Industry3
2.1The Generic Value Chain in the Airline Industry3
2.2The Importance of different Operational Value Adding Activities6
3.1Determinants of the Operations Strategy7
3.2The Operations Strategic Objectives8
4.1.2Supply Network Design12
4.2Planning and Control13
4.3.2Failure Prevention and Recovery15
4.3.3Quality Planning and Control16
5) Outlook: Challenges for Operations Management in the Airline Industry18
The airline industry was directly affected by the Global Financial Crisis (GFC) and companies like Boeing had to be bailed out by the government. Smaller companies did not have the same advantage and ended up closing down.
In this report, we will compare the operations of two different aircraft producers, each successful in different aspects. On one hand to be analyzed is Boeing, ranked as the largest manufacturer of commercial jetliners and military aircraft combined, based in Seattle (USA) since 1916. On the other hand is the manufacturer of single-engine commercial aircrafts, Cirrus Design Corporation, based in Minnesota (USA).
Boeing was launched in 1916 and has always accepted challenges to build planes for different purposes, both commercial and military. For example, during the Second World War, they produced bombing planes. With new technology being developed, in 1955 Boeing created the first commercial plane with reactors manufactured in USA and in 1967 they produced the B737 (the best seller commercial plane in history until their release of the B787 in 2009 which became a new hit). On top of that, Boeing has 64,500 employees and sells to 90 different countries and is NASA’s major service provider and operates both the Space Shuttle and the International Space Station.
On the other hand is Cirrus Design Corporation, founded by two pilot brothers in 1984 with headquarters in Mennesota, USA. The company was founded from a dream to design and build affordable airplanes that deliver greater control, more comfort, and safety. Clients can choose to take demo flights of their single-engine composite aircraft before they purchase it. Cirrus currently employees 950 people and manufactures 9 different types of small commercial planes.
Firstly we will explore the value chain of both companies. Secondly, we specifically look at how both companies design and implement their manufacturing network, outsourcing parts and materials. Following that, we identify the efforts of both companies to keep the benefits of continuous improvement their operations. Finally, we discuss the upcoming challenges for operations management in the global industry.
2The Value Chain in the Airline Industry
2.1The Generic Value Chain in the Airline Industry
Manufacturing modern planes is a complex process that requires high technology. There are several factors involved: cost, safety, supply network and time. Building it consists of putting together thousands of parts, produced by hundreds of different suppliers. Once the parts and pieces are complete, they are sent to the manufacturer’s plant to be assembled.
Cirrus and Boeing are competitors in the airline industry, assembling commercial airplanes; however they tailor to different segments of the market. The transformation process that occurs in both companies is very similar. There are two resources (information and materials) that are transformed in the direct process and another resource (customer) that is transformed later on in the process, when the planes are sold to airline companies. Sometimes operations have all of them, others have one resource that is dominant.
The activities that mainly contribute to the transformation...