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Harvard Case - Bombardier Aviation: The Front Substructure Decision

"Bombardier Aviation: The Front Substructure Decision" Harvard business case study is written by David Wood. It deals with the challenges in the field of Operations Management. The case study is 6 page(s) long and it was first published on : May 14, 2020

At Fern Fort University, we recommend Bombardier Aviation adopt a hybrid approach to the front substructure decision, leveraging both in-house production and outsourcing strategies. This strategy will allow Bombardier to maintain control over critical core competencies while simultaneously minimizing production costs and maximizing flexibility.

2. Background

Bombardier Aviation, a leading manufacturer of aircraft, faces a significant decision regarding the production of front substructures for its new C Series aircraft. The company must choose between producing the substructures in-house at its existing facility in Belfast, Northern Ireland, or outsourcing production to a third-party supplier. This decision carries significant implications for Bombardier's operations strategy, supply chain management, and overall financial performance.

The main protagonists in this case are:

  • Bombardier Aviation Management: They must weigh the pros and cons of in-house production versus outsourcing, considering factors such as cost, quality, and flexibility.
  • Belfast Facility Workers: They are concerned about job security and potential layoffs if production is outsourced.
  • Potential Third-Party Suppliers: They are eager to secure the contract and offer competitive pricing and production capabilities.

3. Analysis of the Case Study

This case study can be analyzed through the lens of operations strategy, considering the trade-offs between cost, quality, delivery, and flexibility.

In-house production offers several advantages:

  • Control: Bombardier can maintain direct control over the production process, ensuring quality and adherence to its standards.
  • Core competencies: In-house production allows Bombardier to retain its core competencies in aircraft manufacturing and maintain a skilled workforce.
  • Flexibility: Bombardier can adapt production quickly to changing demand and product specifications.

However, in-house production also presents challenges:

  • Cost: Manufacturing in-house can be expensive, especially with the need for new equipment and skilled labor.
  • Capacity: The Belfast facility may lack the capacity to handle the increased production volume required for the C Series.
  • Risk: Bombardier bears the full risk of production delays or quality issues.

Outsourcing offers several advantages:

  • Cost: Outsourcing can significantly reduce production costs, especially if the supplier operates in a lower-cost region.
  • Capacity: Outsourcing can provide access to additional production capacity, meeting the increased demand for the C Series.
  • Focus: Outsourcing allows Bombardier to focus on its core competencies and strategic initiatives.

However, outsourcing also presents challenges:

  • Quality control: Bombardier must ensure the supplier meets its quality standards and specifications.
  • Dependency: Outsourcing creates a dependency on the supplier, potentially impacting flexibility and control.
  • Intellectual property: Bombardier must carefully manage the transfer of intellectual property to the supplier.

4. Recommendations

Bombardier should adopt a hybrid approach, combining in-house production and outsourcing. This strategy leverages the strengths of both options while mitigating their weaknesses:

  • In-house production: Bombardier should continue to produce critical components, such as the fuselage and wings, in-house. This ensures quality control, maintains core competencies, and allows for greater flexibility in product development.
  • Outsourcing: Bombardier should outsource the production of less critical components, such as the front substructure, to a third-party supplier. This will reduce production costs, increase capacity, and allow Bombardier to focus on its core competencies.

Implementation:

  • Supplier selection: Bombardier should conduct a thorough selection process to identify a reliable and cost-effective supplier for the front substructure. This process should include rigorous due diligence, quality audits, and negotiation of a comprehensive contract.
  • Knowledge transfer: Bombardier should facilitate the transfer of technical knowledge and specifications to the chosen supplier, ensuring a smooth transition and maintaining quality standards.
  • Capacity planning: Bombardier should carefully plan the capacity required for both in-house production and outsourced components, ensuring efficient allocation of resources.
  • Risk management: Bombardier should develop a comprehensive risk management plan to address potential challenges associated with outsourcing, including quality control, supply chain disruptions, and intellectual property protection.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core competencies: This approach allows Bombardier to retain control over its core competencies in aircraft manufacturing while leveraging outsourcing for less critical components.
  • External customers: This strategy ensures the delivery of high-quality aircraft to meet customer expectations and maintain Bombardier's reputation.
  • Competitors: By optimizing production costs and increasing flexibility, this approach allows Bombardier to remain competitive in the global aerospace market.
  • Attractiveness: The hybrid approach offers a balance between cost savings and control, resulting in a more attractive financial proposition compared to solely in-house or outsourced options.

6. Conclusion

By adopting a hybrid approach, Bombardier can achieve a balance between cost reduction, quality control, and flexibility. This strategy will enable the company to successfully launch the C Series aircraft while maintaining its competitive edge in the global aerospace market.

7. Discussion

Alternatives not selected:

  • Solely in-house production: This option would maintain control but could be expensive and limit flexibility.
  • Solely outsourcing: This option would reduce costs but could compromise quality control and create dependency on the supplier.

Risks and key assumptions:

  • Supplier reliability: The success of this strategy hinges on the reliability of the chosen supplier. Bombardier must carefully select a supplier with a proven track record and robust quality management system.
  • Knowledge transfer: The transfer of technical knowledge to the supplier must be thorough and effective to ensure consistent quality.
  • Capacity planning: Accurate capacity planning is crucial to prevent bottlenecks and delays in production.

8. Next Steps

  • Supplier selection: Conduct a comprehensive supplier selection process within the next 3 months.
  • Knowledge transfer: Develop a detailed knowledge transfer plan and implement it within 6 months.
  • Capacity planning: Revise capacity plans for both in-house and outsourced components within the next 6 months.
  • Risk management: Develop and implement a comprehensive risk management plan within the next 6 months.

By taking these steps, Bombardier can effectively implement the hybrid approach and achieve its strategic objectives for the C Series aircraft program.

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Case Description

In December 2018, the procurement director at Bombardier Aerostructures (Bombardier) was tasked with deciding whether to support the manufacturing department's proposal to expand capacity in order to produce the front substructure for the A220 aircraft in house or to instead propose that Bombardier outsource the production of this critical assembly. Demand had been growing steadily for the A220. Engineers had determined that expanding the current production capacity at Bombardier's headquarters in Montreal, Canada, was the least capital-intensive solution. However, the front substructure was a prime candidate for outsourcing, and the procurement director wanted to be sure she had considered all options before she made a final recommendation to the senior management team in two weeks.

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