In order to reduce the development time for the aircraft, Boeing decided to follow a modified, Toyota style, multi-tier supply chain model. The company wanted to play a role of systems integrator, rather than that of a manufacturer in the production of 787 Dreamliner.
Boeing found itself underprepared to manage such a complex supply chain model. A number of issues like delays in production, poor quality control, improper coordination among suppliers, mismanagement of subcontractors, disgruntled employees and production related issues were rampant.
All this resulted in rising costs, and huge delays in production of the 787 Dreamliner, which prompted the company to take up costly remedial actions like acquisition of Tier-1 suppliers, providing additional technical support to various Tier-2 and Tier-3 suppliers, etc..
This case study proposes to analyze the outsourcing strategy of Boeing vis-à-vis 787 Dreamliner. The report attempts to identify the issues faced by Boeing and what was done to overcome the same.
TABLE OF CONTENTS
Executive Summary 2
History of Boeing 4
About Boeing 787 Dreamliner 4
Outsourcing strategy 6
Transformational Outsourcing 7
Structuring of the outsourcing plan 7
Management of Suppliers 9
Vendor selection 9
Vendor coordination 9
Drawbacks and Challenges 9
Cost and time overruns 11
Knowledge and Tech transfer 11
Works Cited 14
HISTORY OF BOEING
Boeing is an American multinational corporation that designs, manufactures and sells aviation products. It is a pioneer in this field since 1916, and is the largest exporter by dollar value. The highly established status of Boeing was under threat when in 1977, US government deregulated the air travel policies and many companies entered this industry. When the boundaries are relaxed there is always the issue of competitors. Boeing started facing immense competition from the European manufacturers and lost market share to Airbus in the late 1990s. Hence Boeing had to come up with competitive strategies and decide between two basic approaches:
• To reduce costs and thus the selling price of existing aircrafts, or
• To develop new innovative product to increase the revenues
Boeing decided in favour of the latter approach and came up with the innovative idea of 787 Dreamliner.
ABOUT BOEING 787 DREAMLINER
The idea of developing the 787 Dreamliner was based on two important strategies:
• Value creation for the end consumers (passengers)
• Value creation for the immediate customers (airlines)
The value creation strategy for the passengers was achieved by enhancing the travel experience of the customers with better comfort. Boeing planned to achieve this with a redesigned model, providing 30 percent larger windows, better air pressurization, and higher cabin humidity. (Cohen, 2011)
Boeing planned to create value for its immediate customers, the airlines, by offering big jet...