The 787's supply chain was also targeted to spread the financial risks of development to Boeing's suppliers.
Boeing’s 787 design and development was truly a transformational outsourcing project. Boeing set out to create a new product, which was significantly different from what the company had been producing. Through this project, it aimed at creating a new business model for sourcing, assembling and producing aircrafts.
Boeing aimed at decentralizing the design and manufacturing of 787 Dreamliner. Boeing decided to have a tiered supplier system like Toyota’s. Boeing’s Tier-1 suppliers would both design, and manufacture the major modules of 787 based on the specifications provided by Boeing. The management of the sub-contractors was also to be handled by the Tier-1 suppliers. By entering into this partnership with the Tier-1 suppliers, Boeing tried to speed up the development process.
Cost reduction was just one part of the deal. Boeing wanted to spread the risk to its suppliers, something visible in the payment structure. None of the strategic partners were to receive any payments until the first 787 was delivered to Boeing’s customers. This way the company wanted to provide incentives to the strategic partners so that they would collaborate and coordinate the development of the plane.
Structuring of the outsourcing plan
For Boeing 787 Dreamliner, the design and production of the sections of the plane were outsourced to over 50 Tier-1 suppliers. These strategic partners of Boeing were to serve as “integrators” who assemble different parts and subsystems produced by Tier-2 and Tier-3 suppliers. This gave Boeing the flexibility of working with just Tier-1 suppliers, rather than itself buying raw materials and subassemblies for the production of major components. Boeing wanted to reduce the supply base and focus on sourcing completely built sections of plane. This would result in potential savings in development costs.
Boeing looked to leverage upon the expertise and collective capability of the suppliers to produce different parts at the same time.
On the Dreamliner, Boeing handed complete control of the design of their respective section of the plane, to the Tier-1 contractors. These major partners had to make the upfront investment, and were responsible for managing their own subcontractors. Boeing had successfully shared the risk of development of 787 Dreamliner. (Gates, 2013)
Management of Suppliers
There was larger scale collaboration with numerous suppliers worldwide for development and production of the 787 Dreamliner. Boeing put a lot of trust in its Teir-1 suppliers, who were to build entire sections of the plane. Boeing allowed its subcontractors across the globe to source and manufacture the modules themselves and deliver completed modules to Boeing for final assembly. This approach was adopted to achieve a thinner and more efficient assembly line,...