15.769 Operations Strategy, Lecture 7 - MIT OpenCourseWare

Boeing 787 • Issues – Strategic design of supply chain: Outsourcing/VI decisions – Nature of relationships – Limits of outsourcing?

• Discussion – – – – – 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 • • • •

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 • • • •

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 • • • • • • • • 9

Arm’s length Modified vendor relationships Contracts Collaboration Equity stakes Joint ventures Asset ownership Full ownership

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15.769 Operations Strategy Fall 2010

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