Boeing 787
• Issues
– Strategic design of supply chain: Outsourcing/VI
decisions
– Nature of relationships
– Limits of outsourcing?
• Discussion
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1
Structure of supply chain
Why did they do this?
What is their strategy?
What happened?
Discussion
Partners Across The Globe Are Bringing The 787 Together
Wing Tips
KOREA
Wing
Wing/Body Fairing
Landing Gear Doors
NAGOYA, JAPAN
Fixed Trailing Edge
WINNIPEG, CANADA
NAGOYA, JAPAN
Center Fuselage
Movable Trailing Edge
Forward Fuselage
GROTTAGLIE, ITALY
AUSTRALIA
WICHITA, KANSAS
Tail Fin
FREDRICKSON, WASHINGTON
41
43
44
Horizontal Stabilizer
Cargo/Access Doors
SWEDEN
46
FOGGIA, ITALY
Fixed and Movable
Leading Edge
47
48
Forward Fuselage
TULSA, OKLAHOMA
NAGOYA, JAPAN
Engines
Landing Gear
Passenger Entry Doors
GE-EVENDALE, OHIO
ROLLS-ROYCE-DERBY, UK
GLOUCESTER, UK
FRANCE
Engine Nacelles
CHULA VISTA, CA
Center Wing Box
AFT Fuselage
CHARLESTON, S.C.
NAGOYA, JAPAN
Main Landing Gear
Wheel Well
NAGOYA, JAPAN
THE COMPANIES
US
BOEING
SPIRIT
CANADA
GE
GOODRICH
VOUGHT
AUSTRALIA
BOEING
KOREA
KAL-ASD
EUROPE
MESSIER-DOWTY
ALENIA
MITSUBISHI
ROLLS-ROYCE
SAAB
FUJI
LATECOERE
KAWASAKI
BOEING
MESSIER-DOWTY
JAPAN
Image by MIT OpenCourseWare.
2
COPYRIGHT © 2008 THE BOEING COMPANY
Summary: What factors do we consider in
Vertical integration and value chain design
– Strategic
– Market
– Economic
– Product and technology
3
Strategic Factors
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•
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•
4
Do VI/supply chain choices fit strategy?
Is the operation core?
Access to capacity
Scale, competency, and skill match
Market Factors
• Market power and structure (barriers,
availability of complementary assets, capital
structure)
• Economies of scale
• Market reliability and feasibility of alternatives
• Asset specificity and dependency risk
5
Economic Factors
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•
•
•
6
Factor costs and globalization
Investment costs
Transaction costs
Legacy issues
Product and Technology Factors
• Modularity of product architecture
• Technology differentiation
• Intellectual property
7
Some Historical Notes
• Trends in transaction costs
• Successful alternatives such as contracts
and joint ventures
• Factors that in general are leading away from
integration
– Information technology and e-commerce
– Past advantages of tariff, pricing, scale, and oligopolies
– Current advantages of focus, risk management, and
economies of scale and scope
– Globalization
• BUT, there is some evidence of a fad
8
Spectrum of Relationships
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9
Arm’s length
Modified vendor relationships
Contracts
Collaboration
Equity stakes
Joint ventures
Asset ownership
Full ownership
MIT OpenCourseWare
http://ocw.mit.edu
15.769 Operations Strategy
Fall 2010
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