A budgetary process refers to the process by which a budget is prepared and approved. For a business undertaking, this process is either enshrined in the firm’s constitution or dictated by its culture.
The budget process at Boeing Company involves a team comprising representatives from its core departments. This team is made up of upper level operation and functional managers and those from the middle level management positions. This is important because while the upper level managers are in a position to access business intelligence efforts tools to assess the company’s environment the middle level managers understand business procedures and often have valuable information that can impact on both the short and long term goals.
There is also an aspect of interdependence between Boeing and its affiliates, particularly where outsourcing is desired. A good example was its relationship with aircraft engines suppliers. General Electric to develop engines for the 777-200 and 777-300 models in Boeing 777 commercial airplane series. Representatives of both companies have to meet so that estimates of their joint functions are incorporated in the budgetary projections. Resultant budgetary estimates are then presented to the board of directors for approval.
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Boeings process of budgeting allows for an organized and structured group exercise. Despite the loopholes in the execution, Boeing’s budget has never been grossly outdated by uncertainty in its market. According to the Chigago tribune (2009) even when the US government cut its funding leading to laying off of close to 1000 employees, and this in the face of global financial crisis, the company is still the most profitable in its niche. This attests to the effectiveness of its budgetary process.
Since the deregulation of commercial airline industry in the early 1990’s, Boeing aim has always been to streamline its processes while improving quality, empowering employees while improving profits and at the same time, responding quickly to customer demand. A part from the budgeting process encouraging invention and innovation, from within, the outsourcing of LEAN manufacturing from Shingijustsu Company placed it on the path to global competitiveness.
It can therefore be said that its budgetary process has been of value. However, there is a caveat. There has been instances whereby certain functions were dogged by budgetary bottleneck born out of under costing. Again, a series of write – offs related to collapsing space market and integration problems from some of the acquisitions made in an attempt to diversify away from commercial aircraft. Hence the process need not be abandoned, but improved by filling the loophole that has already been seen.
Chicago Tribune, July 27, 2009
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