Boeing Outsourcing Analysis

For 20 years, Boeing has engaged in collaborative product development with numerous suppliers, leading to outsourced R&D and manufacturing involving over 50 key suppliers.
These key suppliers then further outsourced parts of the modules they produced to their own suppliers, creating a complex, multi-tiered supply chain.
Historically, Boeing was vertically integrated, with most product development and manufacturing done in-house. Now, it serves as a case study on how not to outsource a supply chain.

Recent quality issues have plagued Boeing, including:
- January 5th incident: A mid-exit door on a 737 Max 9 blew off at 16,000 feet during an Alaskan Airlines flight, resulting in rapid decompression. It was fortunate that no one was sucked out of the plane because passengers were not seated next to the door.
- February 6th: The National Transportation Safety Board (NTSB) released a report indicating that missing bolts were the likely cause of the door incident.
- Stock Price Impact: Boeing’s stock price fell 16% from January 5th to February 12th, while Airbus's stock rose nearly 6% during the same period.
- Past Fatal Crashes: There were two fatal crashes of the 737 Max 8 in 2018 and 2019, claiming a total of 346 lives and leading to a 20-month grounding of the aircraft.

Dr. Christopher Tang, a distinguished professor at the UCLA Anderson School of Management, suggests that problems are likely to persist unless significant sanctions are imposed due to Boeing's design and production-quality issues.
He argues that the current crisis is rooted in changes Boeing made to its R&D and manufacturing processes during the development of the 787 Dreamliner.

Launched in April 2004, the Dreamliner program aimed to develop the aircraft quickly and inexpensively to compete with the Airbus A380.
Boeing outsourced 70% of the design, engineering, and manufacturing of entire modules to over 50 strategic partners.
At the time, this program was considered groundbreaking.

PLM (Product Lifecycle Management) is the strategic process of managing a product's entire journey from ideation to disposal.
Designer Dassault Systèmes announced that their software would "comprise Boeing’s Global Collaboration Environment," creating a "virtual product development platform" involving Boeing’s key suppliers.
This harmonization aimed to improve collaboration, innovation, product quality, time-to-market, and return on investment.
The Boeing contract accelerated the development of collaborative PLM solutions by over a decade.
In 2017, Boeing and Dassault signed a $1 billion extension contract covering 30 years.
Boeing’s chief information officer at that time hailed the adoption of Dassault’s platform as a key milestone in their digital transformation.

An ex-chief executive officer at Boeing expressed concerns last year that the company needs to undertake "real honest-to-God" product development, or it will lose the skills required to do so.

Dr. Tang points out that Boeing failed to establish the close supplier relationships that took Toyota decades of effort and commitment to develop.
Without close communication and coordination among the partners, Boeing was unable to manage its external development process effectively.

Recent investigations have revealed serious production control problems within Boeing’s supply chain operations.
An incident on January 30th involved missing bolts required to fasten the fuselage panel of an Alaskan Airlines aircraft when the plane left Boeing’s facility.
This oversight might be due to issues in documentation and procedures at Boeing’s Renton factory in Washington.

Spirit AeroSystems, which manufactures the fuselages of the 737 Max jets, notified Boeing that two holes may not have been drilled exactly to Boeing’s specifications.
This raises concerns about Boeing's ability to manage its partner’s manufacturing processes effectively.

Airbus also uses advanced PLM software to codesign their planes and has largely outsourced production of key aircraft modules.
However, in recent years, Airbus’s safety history is much better than Boeing’s.

CIOs commonly emphasize that implementing technology alone is insufficient; companies need to pay attention to people, process, and technology.
There is growing certainty that Boeing is not paying enough attention to their own and their partner’s quality culture and processes.

How many years has Boeing taken to observe the outcomes of its Global Market Opportunity Assessment (from Lecture 12)? How has the perception of the strategy evolved?
How does the Boeing case assist in comprehending the importance of selecting suitable partners when designing global sourcing strategies?