Econ

Boeing 787 case study

1. The benefits to Boeing of outsourcing so much work on the 787 to foreign suppliers are:

* Boeing is able to negotiate 8 billion in development cost from the partner in return for a share of the work;

* It is able to access the more efficient developers and therefore, reduce the cost of delivery;

* Boeing believed that outsourcing some work to foreign countries will increase its sales force in those countries;

* Outsourcing many of the aircraft’s components might reduce time to develop aircraft to four years to six years;

Potential risks:

* Outsourcing partners might not deliver the components on time;

* Potential loss of money due to late delivery;

* Boeing found that parts were not assembled as required;

* Assembly instructions arrived in Italian and not in English;

* Outsourced partner found it difficult to meet Boeing quality standard.

Benefits of outsourcing outweigh risks as long as Boeing knew that if it has to outsource some work to foreign suppliers, it might provide closer coordination and management oversight. Also, it might not outsource key components which can cost it regarding its competitors.

2. The causes of the problem are complex supply chain of Boeing and its suppliers (overseas suppliers had their own domestic challenges such as Italy Alenia whom was given the responsibility to build the middle fuselage sections and tailpieces had difficulties to build their factories due to local regulations). Also, many assembly components did not fit Boeing quality requirement and worse, assembly manuals were in foreign language.

What Boeing can do to make sure such problems do not occur in the future is to develop in house design and ask its suppliers to follow the specifications; coordinate operations between the company and its suppliers, reduce the number of its suppliers and stick with few of them, to develop a supply chain software technologies to monitor and coordinate its...