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1
It is supported by General Social Science Project of Beijing Education Commission, no: 896967406
2
Corresponding author
787’s supply chain was based on a 3-tiered structure for companies to i mplement outsourcing strategy .
that would allow Boeing to foster partnerships with Before the 7 87 project started, Boeing' s Board of
around 15 T ier-1 strategic partners. These T ier-1 Directors approved a development budget estimated
partners were to serve as “integrators” who assemble at $7 billi on as Boeing management claimed that
they would "require subcontractors to bear the
majority of costs",whic h shows the most basic
reason why they outsourced a lot on this project.
Boeing wanted to reduce the production and
development costs by leveraging suppliers' expertise.
Outsourcing eludes the need to hire individuals
in-house, hence recruitment and operational costs
can be reduced to a great e xtent by taking advantage
of the cheap labor force in other countri es. There is
less need for plants, inventory maintenance and
Fig.2 Traditional supply chain labor .The outsourced company would maintain the
resources inventory, pay the taxes and other fees for
different parts and subsystems produced by Tier-2 creating the parts.
and Tier-3 suppliers. 2.2 Spreading the financial risks
Boeing 787 established a risk-sharing
cooperation network with Tier-one suppliers to share
research and developm ent costs and resources.
Outsourcing certain co mponents of the business
process helps the com pany to shift certain
responsibilities to the outsourced vendor. The
implementation of the gl obal supply chain strategy
enables enterprises to be m ore flexible and adapt
quickly to changes in the external environment, thus
Fig.3 New supplier network
realizing risk sharing with global partn ers. Since the
(Source: The Seattle Times)
outsourced vendor is more professional in the part
Figure 3 illustrates Boeing's supplier network of
outsourced, they can plan the risk-mitigating factors
Tier 1, Tier 2 and T ier 3 suppliers.Through such a
better and ef fectively enhance the abil ity to resist
three-tier supply chain network, Boeing could focus
external shocks. Boeing 7 87 subcontracted a lar ge
more attention and resources on its cooperation with
amount of work to Tier-one suppliers, and
Tier-one suppliers (pre-integration stage), instead of
established a long-term gl obal partnership network
raw material procurement and early components.
with suppliers, bringing suppliers from the upper
2 Reasons of outsourcing reaches of the industrial chain to the level of
strategic partners.
Outsourcing was a common pract ice in the
2.3 Time saving
Boeing company, it enthusiastically e mbraced
In 2003 , the biggest com petitor of Boeing—
outsourcing both locally and internationally, but it’s
Airbus sold m ore airplanes than Boeing and
quite rare that Boeing would cho ose to outso urce
introduced 5 new designs of aircrafts with Boeing
such a significant proportion of the 787 Dreamliner,
still stuck with their next plane design. Airbus has
the main reasons are listed as follows.
more deliveries ever since. Boeing needed
2.1 Reducing costs
something to regain market share from Airbus. This
Cost reduction is o ne of t he important reasons
heavy competition was that would help the
what drove Boeing to reclaim dominance of
create a new plane the aircraft market.
E-ISSN: 2224-2899 50 Volume 17, 2020
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DOI: 10.37394/23207.2020.17.49 Rongshan Li, Yu Lu
increase profits, he 2013, another aircraft requisite components suppliers di d not input
wrote, instead, it drove was found to have a for the sections, the accurate and timely
profits and knowledge fuel leak. On January Boeing recognized information owing to
to suppliers while 16, 2013, due to the the need to reg ain cultural dif ferences
increasing costs for the continuous safety more control over the and lack of trust. As a
mother company. As a accidents, the US supply chain.Boeing consequence, neither
result of the over- Feder al Aviation announced plans to Boeing nor Tier-1
outsourcing of Boei ng Administration buy Vought Aircraft suppliers became
787, not only the announced that all Industries' interest in aware of the problems
delivery schedule was Boeing 787 Global Aeronautica; in a timely manner.
delay ed again and Dreamliner planes A later agreement
again, but also the was also
5 Lessons from
made to buy
were temporarily
safety accidents Vought's factory in the outsourcing
grounded.
occurred frequently North Charleston. failure
4.1 Boeing t ook
after the delivery of appropriate remedial 4.3 Boeing Outsourcing
the aircraft. A Japan measures after introduced a web- strategy is a double-
Airlines (JAL) 787 discovering a series based communications edged sword for
experienced a fuel leak of problems in the tool called Exostar in enterprises,it
on Januar y 8, 2013, suppl y chain, but the which suppliers may
and its flight from ef fect was very were supposed to u be profitable,but
Boston wa s canceled. limited. In Dece mber pload the the outsourcing
On January 9, United 2008, Boeing set up a latest information company might also
Airlines reported a "product operation about the progress of suffer losses due to
problem in 787 with center" to control all their work,which over-outsourcing.
the wiring near the the suppli ers' aimed to provide Most critics claim that
main batteries. Later, products and solv e visibil ity of the s the lowered cost of
on January 11, problems quickly. upply chain, improve oper ation comes along
The center worked 24 control and inte with t he threats of
hours a da y and gration of key reduced level of
employed a variet y processes. However, efficiency and that
of personnel: t this tool didn’t play its even if there is a
ranslators in due role, part of t he
28 languages, sense of guide and avoid risks in
purchasers, supplier accountability the implementation
managers, and global placed on process, so as to obtain
logistics experts. respective the expected benefits.
4.2 After re vendors.Therefore, 5.1 Outsourcing
alizing that some enterprises should be based on
Tier-1 strategic should decide whether complete
partners did not have to im assessments of all of
the know-how plement the costs
to develop different outsourcing Make or buy
parts of the aircraft or strategy decisions sh ould not be
experiences in according to their made until after the
managing their specific actual product has been full y
Tier-2 suppliers to situation, and pay defined and the related
develop the attention to correctly costs established.The
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DOI: 10.37394/23207.2020.17.49 Rongshan Li, Yu Lu
consequences fro m has achieved little and corresponding penalty aircraft was first asse
taking place if they the response was not regulations should also mbled at Everett asse
had performed a timely. b e imposed. At the mbly plant in March
risk analysis of Subsequently, a lar ge same time, reward is 2008, the components
outsourcing. As a number of u better to be given to su from partners around
matter of fact, nexpected problems ppliers who deliver in the world didn’t fit
Boeing has adopt ed serio usly affected the time and com plete together with others.
a risk management progress of the with high quality. This When one part was
plan called "Boeing project. Therefore, kind of incentive m unavailable, the next
7 87 Dimension risk assessment is echanism can promote one that depen
Management crucial t o all suppliers to carry out could not be attached
Method". However, it the outsourcing production work more and the global supply
decisions. work, and build pre- efficiently. chain was almost stuck.
5.4 Establish assembled sections, but 5.5 The project The stretched supply
organization
an this assu mption would
should not be chain has ad ded to the
effective prove invalid. What’s com plexity of Boeing
too complicated
cooperation more, Boeing relied 787 project. So it’s
There are 13 5
mechanism with on poor suggested that for
partners i nvolved in
trusted suppliers contractual large-scale projects, it
Boeing 787 aircraft
There are arrangements,which is not only neces sary
manufacturing and
many created perverse to strengthen the
fabricatio n worldwide.
ways to incentives by providi control of the project
The supply chain was
dim inish the ng penalties for delay process, b ut also t
stretched to an
disadvantages of but no rewards for t mplify the complexity
unprecedented length.
outsourcing. One of imely delivery. This of the progra m as
The former project
them is to choose has reduced the impetus much as possible in the
manager of B787
quality partners to of s uppliers to s ome prior stage.
pointed out that m any
outsource the tasks to. extent. In a word, 5.6 Project
suppliers recruited sub-
When selecting outso effective cooperation progress
suppliers, some
urcing partners,don't mechanism with must be
suppliers subcontracted
simply select the suppliers is strictly
work to their suppliers
suppliers based on indispensable. The ou controlled
and shrugged at proble
price.A tsourcing company Boeing did not
ms with assem bly, the
number of alternative should ensure that the intervene early enough
sub-suppliers could no t
suppliers should be set partners are reliable, in the process to assist
even meet the basic
up to be compared and honest and will always the suppliers and
requirements of
evaluated beforehand deliver quality work. finally lead to the
production. When
from multiple Only those who hav e outsourcing out-of-
Boeing 787
dimensions such as proven their ability to control.
tech nology, quality, deliver with the
progress and service. required timeliness, Understanding th e
Boeing made an quality and continuous processes in the
assumption that the innovation should be entire supply chain
chosen partners would selected as trustwo rthy globall y is crucial to
have the required partners.For supplier delivery
capabilities t o do partners who delay
performance. Boeing
design and integration delive ry,
and its partners needed
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DOI: 10.37394/23207.2020.17.49 Rongshan Li, Yu Lu
a way to quickly prod uction site and with shared risks, [2]Yong Lin,Li
identify potential confirm in the report. benefits and common Zhou.The impacts of
problems across the I f serious quality development. pro duct design
supply chain and problems are found, Therefore, any changes on supply
immediately analyze outsourcing company who wants to chain risk: a case
their suppliers should be outsource should carry study[J] . International
impact on required to stop out sufficient and Journal of Physical
other partners or production and thorough trade-off Distribution &
manufacturing rectify.Through on- analysis whenever and Logistics Management
processes. In order site supervision or wherever necessary, it’s . 2011
to ef application of new supposed to gradually [3]V.Holzmann.A.
fectively industrial Internet establish and perfect Shenhar,The
control the whole technolog y, it’s the outsourcing Unfulfillnees(or
supply chain easier to achieve management system, delayed)Dreamliner’s
network and ensure effective control of strictly implement it to Design: the
the quality of the entire productio n ensure the quality of Boeing
products,the process. outsourced products. 787Dreamliner”,Wor
outsourcing com king paper No3/2010.
pany can send
6 Conclusion:
References: May 2010.
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net work co-definition
more than to save should be based on a
under regional market
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factory into a final the situation of the
mirroring hypothesis
assembly workshop, enterprise, rather than
application,
but the result turned blindly imitating the
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Lippman, S. A.,
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McCardle, K., & Tang,
discussed in this together to form a
C. S . (2009).Time-
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based contracts with
E-ISSN: 2224-2899 51 Volume 17, 2020
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2020.17.49 Rongshan Li, Yu Lu
delayed payments.
Working paper.Los
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