...Global Production, Outsourcing, and Logistics Chapter Outline OPENING CASE: Building the Boeing 787 INTRODUCTION STRATEGY, PRODUCTION AND LOGISTICS WHERE TO PRODUCE Country Factors Management Focus: Philips in China Technological Factors Product Factors Locating Production Facilities THE STRATEGIC ROLE OF FOREIGN FACTORIES Management Focus: Hewlett Packard in Singapore OUTSOURCING PRODUCTION: MAKE-OR-BUY DECISIONS The Advantages of Make The Advantages of Buy Trade-offs Strategic Alliances with Suppliers MANAGING A GLOBAL SUPPLY CHAIN The Role of Just-in-Time Inventory The Role of Information Technology and the Internet SUMMARY CRITICAL THINKING AND DISCUSSION QUESTIONS CLOSING CASE: Li & Fung Learning Objectives 1. Explain why production and logistics decisions are of central importance to many multinational businesses. 2. Explain how country differences, production technology and product features all affect the choice of where to locate production activities. 3. Discuss how the role of foreign subsidiaries in production can be enhanced over time as they accumulate knowledge. 4. Identify the factors that influence a firm’s decision of whether to source supplies from within the company, or from foreign suppliers. 5. Articulate what is required to efficiently coordinate a globally dispersed production system. Chapter Summary This...
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...STUDY BUILDING THE BOEING 787 PREPARED BY: PERCIVAL IGNATIUS V. SIVANANDAN Q1. What are the benefits to Boeing of outsourcing so much work on the 787 to foreign suppliers?What are the potential risks?Do the benefits outweigh the risk? Benefits :- A. Outsourcing reduces the risks associated with technological gamble i.e. always abreast with latest design innovations. B. In return for a share of the work the partners would contribute towards the estimated $8 billion in development costs. C. Able to tap expertise of most efficient producers worldwide, hence driving downcost of making plane. D. Outsourcing some work to foreign countries will help to garner sales in those Countries E. Outsourcing the design of so many components could cut down time to develop aircraft to four years from six years. Potential risks:- A. Not being able to meet Boeing delivery schedules B. Possibility of paying millions in penalty clause for late delivery. C. Parts not assembled as required D. Assembly instruction not available in English E. Partners may outsource mission critical design work to other company F. Other company might find it hard to meet Boeing quality standards G. Since other company reporting to partners and not Boeing, it takes times for Boeing to know the problem ...
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...The Pennsylvania State University Department of Industrial & Manufacturing Engineering IE466: Concurrent Engineering Individual Homework #1 – Boeing 787: The Dreamliner Boeing 787: The Dreamliner Case Study (download from Angel) During the past decade, Boeing watched as their competitor, Airbus, launched several new and very successful aircraft. In 2004, Airbus surpassed Boeing in commercial airplanes delivered and future orders placed. This is the first time that Boeing has ever lost its leading market share. The 787 is the first new airplane that Boeing has introduced to the market in a decade. This case study examines how the 787 is strategically transforming Boeing’s approach to aircraft design and development, and Boeing itself. Questions for Boeing 787 Dreamliner Case Study 1. Is the 787 appropriately positioned in the marketplace with a high likelihood of success? Why or why not? The Boeing 787 is in fact positioned in the marketplace with a high likelihood of success. The 787 has a good design, and the aircraft is designed in a way that is tailored to its customer. Composed of a new material composite, the aircraft has a lighter weight and higher fuel efficiency than any other aircraft. The aircraft also made sure the composite materials are non-corroding so that the aircraft lasts longer. It has a unique feature both for cargo and passengers. The seats/cabins are bigger, and new technology is installed for the...
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...Executive summary Boeing was founded in 1916 in Seattle, Washington and became one of the World’s largest and leading manufacturers in making commercial and military aircrafts. The company has been involved in acquiring international firms and making strategic alliances with many aerospace pioneers in the past. Some of the big acquired and merged aerospace companies are Hughes Space and Communications, North American Aviation, McDonnell Douglas, Rockwell International and Jappesen (Boeing, 2012). The purpose of this report is twofold and accordingly the report is divided into two parts. The first part consists of a critical evaluation of the internal and external business environments of Boeing to find out to at what extent Boeing is strategically fit with its current business environment. In the second part, an improvement strategy will be recommended to the company to effectively manage its supply chain practices after critically reviewing the feasibility, acceptability and suitability of the strategy. Contents Executive summary 1 Introduction to Boeing 787 Dreamliner 3 (PART A) 4 S.W.O.T analysis of Boeing 787 Dreamliner 4 Strengths: 4 Weaknesses: 5 Opportunities: 6 Threats: 6 Boeing 787 Dreamliner competitiveness 7 Business model of Boeing Dreamliner 787 9 B787 SYSTEMS AND EQUIPMENT: 9 MANUFACTURING/QUALITY: 9 Design and features of Boeing 787 Dreamliner: 10 Strategic alliance of Boeing 787 Dreamliner 12 Challenges posed by the business...
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...As per your request, this memo provides an analysis of the Boeing 787 project and recommendations for the Boeing Company overcoming their challenges. The Boeing 787 is positioned to target airlines which wish to provide nonstop service on routes that required long range but did not justify larger airplanes. Since the 787 would be the first of its kind, it creates a potential market for the Boeing Company and avoids direct competition with its major competitor, the Airbus Company. Besides, with the supply of non-renewable sources of energy remained a major concern for the new generations, aircraft like the 787 that is more fuel-efficient may become a leading trend in the near future. Exchange rate in recent years also creates advantage for Boeing 787 orders as the US currency has been weak since the 2008 economic downturn in the US. In order to achieve its goal of minimizing cost, the Boeing Company has outsourced most of the components to its structural suppliers for the 787 project. By outsourcing, the company can avoid incurring unnecessary expenses such as stock up cost, wages for workers and the need of having a larger plant. Nevertheless, outsourcing would also create problems to the company. One of the major problems faced by the Boeing Company is the difficulty of ensuring the project could be completed on schedule as Boeing do not have as much control as before they outsourced. More technical problems may arise as the final assembly takes place as different components...
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...The Boeing 787 Experiment Joe Appleby Saint Leo University The Boeing 787 Experiment Many of the normality’s of our everyday are often go unthought-of of about what it took to make them a reality. Take flying for instances. Many of us, myself included step on or use an airplane to travel for leisure, to conduct day-to-day business, use for supply chain movement and never even think twice about what goes into making an aircraft. One of what is considered an elite aircraft manufacturing company; Boeing knows all too well what it takes to deliver a premier aircraft to service. Boeing did not arrive at this point easy as they found out when trying to launch their Boeing 787 aircraft. This essay will give a brief company profile of the Boeing Company and in addition the major problem the company experienced when launching its Boeing 787 aircraft and recommended solutions. The problematic area that will be highlighted is Boeings supply chain management, which caused Boeing to rethink its 787 strategy. The History of Boeing The history of Boeing began essentially with the vision of five men. William Edward Boeing, born in 1881 in Detroit, Mich., began building floatplanes near Seattle, Wash. Donald Wills Douglas, born in 1892 in New York, began building bombers and passenger transports in Santa Monica, Calif. James Smith McDonnell, born in 1899 in Denver, Colo., began building jet fighters in St. Louis, Mo. James Howard "Dutch" Kindelberger, born in 1895 in Wheeling...
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...Analysis of Boeing 787: The Dreamliner Boeing announced the launch of a new jetliner called the Dreamliner (Boeing 787) and hoped to regain its leadership role in the commercial airline industry. I will apply the theories of competitive forces model and the macro-environment to analyze the Boeing case in the following exploration, and then give my suggestions. According to the competitive force model, the first point of the risk of entry by potential competitors is neither high nor low because a new company produces on a small scale even can’t cover the multiple-billions R&D, and Boeing already have accumulated experience, patents, or trade secrets that they are more effective than new companies (Hill & Jones, 2012); while the new“global systems integrator” strategy tends to create potential competitors such as China and Japan. Secondly, the commercial airline industry is a consolidated industry that the launch of A380 from Airbus directly affect the market share of Boeing in 2003, and the fixed costs in this industry is very high; thus, the rivalry among established companies is intensive. Thirdly, A380, A350 etc. are the substitutes with similar basic needs, which are threats to Boeing 787 and leads to the operation risk. On the macro-environment, the economy of developing countries grows very fast that both Boeing and Airbus believed “the passenger traffic in China would surge over 8.0% annually” (Nolan & Kotha, 2005), which tends to ease competitive pressures...
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...Global Partnering: The Boeing 787 Dreamliner Story? VERSION 1.2 This case was prepared using publicly available information by Sveinn Vidar Gudmundsson, Professor, Toulouse Business School, France. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2015 S V Gudmundsson, Toulouse, France. Global Partnering: The Boeing 787 Dreamliner Story? C28-1-2015-1.1 "In retrospect, our 787 game plan may have been overly ambitious, incorporating too many firsts all at once -- in the application of new technologies, in revolutionary design-and-build processes, and in increased global sourcing of engineering and manufacturing content." Boeing CEO, Jim McNerney Speech in the Wings Club of New York on November 11, 2014 When giants learn to dance The world's second-largest commercial aircraft-maker, Boeing a Chicago-based aerospace giant, was founded in 1916 in Seattle by William Boeing. In 2013 the company earned $86.623 billion in combined sales for defense and commercial aircraft divisions. The U.S. aerospace industry achieved $273 billion in sales in 2013.1 All told, Boeing and its subsidiaries employ 168,000 (160.000 in 2009) people. Boeing is the 24th largest U.S. employer, including private companies and government. Boeing, with almost half of its workforce located in Seattle, was adamant that modern economics dictate a new strategic model for the company,...
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...How would you evaluate what are the potential successes of the Boeing 787 for the American aviation industry in the next five years? In particular, what data would you need? You may wish to focus on one aspect in particular (e.g., market share); however, you need to ensure your answer covers the wider issues too. Before we begin the analysis we must first understand the industry. If not a practitioner it would be reasonable to research by asking questions targeted at Industry leaders, friends in the business, etc. Locating and reading books, articles, and journals on the U.S. Airline industry’s rivals, consumer preferences, air carrier route dominance, threat of substitutes, and threat of new entrants into the market. Understanding the Boeing Company and its 787 Dreamliner would be next on the agenda, all done with the goal of becoming as fully informed as possible. In researching the Boeing Company, I would need to know their strengths and weaknesses. What other business ventures are they associated with, e.g., aerospace, defense, or exporter? I would also want to know the funding method for research and development (R&D). An over reliance on Internal Research and Development (IRAD) could cause stress on any planned modifications or on the normal manufacturing process itself. It would make sound financial sense to acquire funds from the requesting customer or investors prior to beginning any R&D efforts. Researching Boeing’s R&D funding methodology would be...
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...Individual assignment - Boeing DQ7. In April 2004, Boeing launched the new 787 Dreamliner with 50 firm orders from All Nippon Airways of Japan. Boeing aimed to secure 200 firm orders by December. However, by December 2004, Boeing had only 52 orders. Then Airbus introduced the A350, a derivative of the existing A330, enhanced with a new wing, more fuel efficient engines, and other new technologies. Airbus's Chief Commercial Officer, John Leahy, predicted that the A350 would draw Boeing customers and so “put a hole in Boeing's Christmas stocking”. (Source: “350: Airbus's counter-attack”, Flight International, January 25, 2005.) a) Draw a timeline to mark when a manufacturer incurs the costs of development and production. As you can see in the image value obtained from an another Commercial aircraft manufacturer, the development process takes about 6 years before the first aircraft its delivered. Development and production costs are incurred long before the delivery and test of the aircraft. Ex: of developing b) How would the costs of developing the 787 Dreamliner vary with the total quantity manufactured? The production of the 787 have both fix a variable cost, where fix cost doesn’t depend on the quantity produced. For example the non-recurrent cost of development or R&D is fixed or sunk cost independent from the quantity produced. Since average cost is the result of dividing the total cost by the quantity produced, as much unit of 787 are produced as cheaper will...
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...5 o Constraints .............................................................................6 o Unpredictability ..................................................................... 6 Conclusion........................................................................................ 7 Sources............................................................................................. 8 1 TC2Gr1 Strategy The Boeing 787 (or DreamLiner) is a long range haul developed by Boeing Commercial Airplanes. It was called firstly 7E7 “E” for efficiency) but it was changed to 787 in January 2005. Actually there are 4 existing variants of this plane, proposing different sizes, length, seats (from 210 to 330 seats according to Wikipedia), etc… It is still in development, flight testing and early production. According to Boeing itself, it launched this plane to respond to the overwhelming preference of airlines around the world. Boeing doesn’t hesitate to highlight the new technologies developed by Boeing and...
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...INSURANCE LAW WK3 Insurable Interest It has been said that insurable interest is one of the great upstanding principles in the formation of the contract of insurance. It is the interest in which the law requires a person to have, to enable him to effect a valid insurance (Per Judge Patterson in Bernard v NEM West Indies Insurance Ltd). According to Lawrence J in Lucena v Carufurd, “Insurable interest is to be interested in the preservation of a thing, is to be so circumstanced with respect to it as to benefit from its existence, prejudice from its destruction.” Before the legislature intervened wagering contracts were not illegal and could be enforced in a court of law. The present position is that no one may effect insurance unless he has an insurable interest in the life or property which he desires to insure. A contract made without such an interest is void. Three statutes brought about this change: The Marine Insurance Act 1906; The Life Assurance Act; and the Gambling Act of 1845. Until the passing of the legislation there was no requirement for insurable interest. The general principle of every contract was simply that it was enforceable by the parties irrespective of the subject matter provided it was neither illegal, immoral nor contrary to public policy. According to Blackstone, gambling was considered a social evil which promoted idleness, theft and debauch among the lower class. Patterson expressed similar views: “A sense of antagonism is aroused in a community...
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...Boeing 787 #3 Critics and not just union members were concerned with the massive amount of outsourcing that was occurring with the Boeing 787. It is debatable whether this criticism was fair since Boeing had its reasons to outsource so much of the 787’s work. These reasons include cost control, hopes to win orders from the countries in which they were outsourcing to, efficiency, and the difficult relations between Boeing and the labor unions. Critics were afraid of losing jobs are and knowing the fact that outsourcing technology is risky because the country where that work goes may copy your technology and expertise to use as its own. Critics claim outsourcing up to 70% of the work caused incompatibilities in design and execution. For example, the battery fires that caused emergency landings. Many companies outsource, but Boeing may have gone too far with the 787. Some say that their core competencies were outsourced and that is very risky. When they got these parts back and started assembly they did not fit properly. Boeing now agrees that it outsourced too much. When the Seattle area increased employment and brought work back in-house that was an acknowledgment that something might be wrong with the massive amount of outsourcing that occurred. Even though America is still employed the most engineers for the 787, they outsourced a major part of their design process to nine other countries. They clearly outsourced their main competitive advantage. Since then Boeing has spent...
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...that in order for countries to do global trade, they need to have attractive fiscal and monetary policy in order to attract foreign direct investment. Most developing countries have recovered from the economic crisis and are growing at the fastest pace they can sustain without increasing inflation. Foreign governments have a big responsibility if they want to create business opportunities for multinational companies. It is their duty to give a lot of thought to how they would respond to global tightening. That’s why I think that by improving the long-term trade outlook and coming up with acceptable reform agendas can certainly go a long way when the emerging economies are trying to boost investor and market confidence. Companies such as Boeing, Pepsi, and Oracle are a few companies who are utilizing a vertical integration approach when trying to manage materials, manufacturing, and distribution. One way to view this opinion is whenever a company deals with a supplier that helps provide the next phase of the supply chain, both benefit from each other’s success. I think that businesses look for external suppliers because they are able to provide high quality goods at a minimum cost. Also, it helps shift the inventory risk from the company providing the end product to the consumer. Another key point to note is that maximizing company performance does not necessarily mean that one needs to focus on a...
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...The advent of technology and globalization has increased the potential for earning higher profits for businesses, but at the same time it has also escalated competition and the pressure to perform better, faster and at a lower cost. In order to survive, companies are forced to find innovative ways to cut costs and establish effective supply chains to reduce their overheads. Using the Toyota pioneered Just In Time (JIT) analogy, which emphasizes the need to have just the required parts, quantities and time needed for production and distribution. Using JIT, Toyota, Boeing, Dell and HP have substantially reduced their warehousing and work in process costs. Over the past decade, JIT has transformed from a manufacturing methodology to a profound manufacturing organizational model. However, by stretching supply chains globally, as pointed out by Evans, 2011 companies are exposed to greater catastrophe because they outsource many parts of their business to suppliers or service companies thousands of miles away. If any one link in the supply chain goes wrong, it can have a huge impact on the returns. This increased fragility of supply chains can be observed with the factors mentioned below. One of the main principles of JIT is centered on reducing waste. Auto manufacturers started using common parts across multiple product lines and consolidated suppliers in order to procure parts in greater scale. These practices helped reduce waste, but also introduced risk. If any of these suppliers...
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