Question:
Conduct a critical analysis on a real-world service organization’s make or buy strategy. In addition, perform a detailed analysis on the chosen organization’s supplier selection and evaluation system and provide recommendations of improvement.Initial purchasing decisions often require in-depth considerations and analysis on an organization’s long term directive and goals also provide a detailed purchasing cost analysis on the chosen organization.
Introduction
Purchasing has been an important organisational function that is required to be carried out by businesses in performing the efficient meet out of their customer requirement. In performing the purchasing decision, it is essential for businesses that they should consider the make or buy decisions in ensuring that they make the most efficient performance of organisational processes. Purchasing decisions also require proper level of alignment with respect to the organisation’s long term goals and objectives (Day, 2002). This report is aimed at performing an analysis of Boeing Company with respect to its purchasing processes. The analysis also focuses towards the supplier selection process of the company and finally, there would be an analysis of the detailed cost analysis of the chosen organisation. Based on the findings from entire analysis, it will be concluded in the conclusion section of this report.
Decisions regarding make or buy strategy is crucial and this decision is mainly undertaken by organisations with a view to achieve cost efficiency in their existing organisational processes. The decision that suits better between the make or buy is considered and this leads to enhancement of not only the operational performance of the company, but it allows in efficiently meeting out the needs and requirements of its customers. However, such make or buy decisions are not always based on achieving cost efficiency in the operations, but such decisions are also undertaken aimed at achieving excellence in respect to the service delivery process or they may be undertaken if the organisation feels that they would not be able to meet out the requirements and this ultimately requires them to buy the necessities instead of making them (Boeing, 2015). An analysis of the case of Boeing also indicates that it has specific make or buy strategies that allows it in delivering the final products in the form of aircrafts to its customers. Boeing is known for the manufacturing of aircrafts and supplies large variants of its products to its target customers worldwide. However, in performing the manufacturing of its products and services efficiently, there are a large range of requirements that needs to be fulfilled. In the manufacturing of aircrafts, there are large range of raw materials and equipments that are needed to the company, and it is therefore crucial to have accessibility to large number of suppliers. However, the decision of make or buy still rests with the organisation. A critical assessment of the case of Boeing indicates that the company has make or buy strategies aimed at performing the development of its final product i.e. aircrafts. In this context, an analysis indicates that Boeing has made certain errors in respect to handling its outsourcing and offshoring activities (What Went Wrong At Boeing?, 2013).
Development of complicated products such as aircrafts involves outsourcing risks and this is mainly because firms lack sufficient level of expertise in performing all the major areas such as engineering and avionics. As a result, the companies such as Boeing have to largely dependent on outsourcing some of the areas where it lacks necessary expertise. An analysis indicates that the company has made considerable level of outsourcing efforts in order to perform the development of aircrafts. The main focus behind its outsourcing strategy is to achieve cost efficiency with respect to its performance and it also includes spreading the financial risks of development to its suppliers. However, the strategy as considered as not been highly effective to Boeing, and instead, it increased the risk of manufacturing to the company. This is mainly because an analysis indicates that there have been certain loopholes in such outsourcing strategy of the company (What Went Wrong At Boeing?, 2013).
In respect to Boeing’s outsourcing strategy, it has been evaluated that Boeing has not defined the product and instead, and it has outsourced the engineering and construction of the plane long before such definition of the product. This strategy has proved to be highly ineffective in respect to Boeing, and rather than achieving reduction over the cost levels, there has been an increase in the overall cost to the company being witnessed. The project was mainly the Boeing’s 787 project and this strategy has cost additionally to the firm in terms of many million dollars over the budget. The results are therefore considered as disastrous. In addition to cost factor, there has also been ineffectiveness being identified in respect to the time needed in performing the development of 787 aircraft, as the first planes were delivered three years late. This suggests that the performance of project has been highly ineffective at Boeing and the resulting impact is therefore inefficient buying decisions being performed within the company (What Went Wrong At Boeing?, 2013).
As Boeing is known for the manufacturing of aircrafts, there has been large number of articles and materials needed in accomplishing the manufacturing of final aircraft. Since a company cannot able to produce everything by itself, and in respect to such aircraft manufacturing, as there are many such materials needed, it is highly essential that there should be efficient tie-ups with the suppliers that should be maintained. As in respect to Boeing, it should consider for efficient tie-ups with suppliers in supplying large range of its products, and in this respect, an analysis of the company suggests that the company has stronger tie-ups with suppliers in sourcing requisite level of materials needed in performing its operations. An analysis of Boeing indicates that the company works with its suppliers as one team, and the supplier selection process is also performed rigorously whereby the company has specific considerations that must be fulfilled in becoming its supplier. Boeing require its suppliers to completely understand its processes before becoming the supplier of its component parts, and it requires its suppliers to remain efficient in areas including cost, quality and delivery factors. It is essential that suppliers should be financially healthy and focus continuously towards achieving lean operations. This suggests that in becoming a supplier to Boeing, it is highly essential that there should be the complete satisfaction of the above indicated criteria (Boeing Suppliers, 2015).
Although there has been higher level of effectiveness needed on the part of suppliers in becoming the supplier at Boeing, an analysis indicated that there still persist certain major deficiencies with respect to the performance of Boeing in its supplier selection process. This has therefore negatively affected company’s performance. As for instance, the analysis of the case of Boeing indicates that company has entered into partnerships with tier 1 suppliers, tier 2 suppliers and tier 3 suppliers, but later on it has been analysed that the tier 1 supplier did not have requisite know how in supplying products and services to the company. As per Boeing’s supplier selection, it necessitates its suppliers to have complete knowledge about its operations, but lack of adequate details in this respect has affected the performance of the company in a negative way. The suppliers in Tier 1 were not able to meet the requirements of the company (Boeing Suppliers, 2015).
Recommendation for Improvement: In relation to the above, it has been analysed that despite having specific supplier selection requirement, they have not been adequately met at Boeing. As a result, it is recommended that there should be a separate team within Boeing and it should make complete inspection of the supplier’s premises to analyse the required know how and technologies that must be possessed by them. This would result into the efficient selection of suppliers by the company in supplying requisite material to it (Boeing Expectations, 2015).
Detailed Purchasing Cost Analysis: In performing the purchases of needed requirements, the organisation is likely to incur significant number of costs. As in respect to Boeing, because of its significantly larger level of requirements, the company has to incur huge costs in its purchasing process. The major costs that have to be incurred by the company are especially in terms of cost of the material which is needed in performing the procurement of materials. Apart from this, distribution cost in the form of logistics management etc is also included within the purchases as made by the company.
Conclusion
In this report, a critical assessment has been carried out in relation to the make or buys decision, and the supplier selection process as applicable in the context of Boeing. The analysis indicated that the make or buy decision is significantly applicable in respect to Boeing but there has been certain major ineffectiveness that have been noted in respect to Boeing’s performance. As a result, the decision regarding the make or buy needs to be taken after making a critical assessment of the requirements.
The analysis of the supplier selection process of Boeing has also been performed and it is evaluated that the supplier selection process is extensively rigorous at Boeing. However, despite having such rigorous buying process, there are loopholes being identified in respect to company’s buyer selection process, and as a result, it is highly crucial that there should be a separate team that should be made responsible in performing the selection of suppliers. The analysis also indicated that there are significant level of costs that have to be incurred by the company.
References
Boeing Suppliers, (2015)
Boeing Expectations, (2015)
Boeing, (2015)
Day, M. (2002), ‘Gower Handbook of Purchasing Management’, Gower Publishing, Ltd.
What Went Wrong At Boeing?, (2013)
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