Doing business in the aeronautics sector means dealing with highly competitive environment and after losing some share market to Airbus, Boeing decided in 2004 to build a new aircraft making it outsourcing strategy deeper in order to save money and to be more profitable on the market.
Building a new aircraft is very expensive and take very long time so the top management wanted to make it cheaper and faster in order to face the hard competition with the European leader airline Airbus (owned by EADS) Boeing expected to cut development costs from 7.3$ to 4.2£ billion, to use the different advantages of Multi-tier supply chain in order to reduce development time from 4 to 2years but also advanced technologies such as composite material structure …show more content…
To regain control on the supply chain they have purchase a company at the bottleneck stage called Vought Aircraft industries which was in charge of the rear fuselage of the plane. They have send hundreds of engineers to solve issues with underperforming partners at their sites. Then they reorganize top management and replaced program manager with supply chain expert and even paid penalties for delivery delays. In the same stream they have developed a public relations campaign to reassure customers and investors because of the negative image of both aircraft and company. However these shifts seemed to be not enough and these strategic, operational and management issues that the company was trying to fix were finally deeper than expected.
In order to make this outsourcing strategy work they first have to assemble a management team with requisite expertise because “Without the requisite skills to manage an unconventional supply chain, Boeing was undertaking a huge managerial risk in uncharted waters.” (Tang and Zimmerman 2009). The increasing complexity and the need for transparency have to be manage with ground rules for accurate and updated information but also with assessing cultural …show more content…
Some types of strategic issues can arise from outsourcing production to different places all around the earth, mostly if it is in low cost countries. The main issues is about the supply chain logistics. If a firm makes their operations on several different countries around the globe it is more vulnerable to become affected by the environment and non-forecastable events such as political issues or natural disasters. Furthermore, most of the time, the more a company have an outsourcing-based strategy the worse it will be in terms of time of answer to customer demands. So as the aerospace engineer Dr Hart-Smith had said when he warned Boeing way back in 2001 that outsourcing wasn't always a savvy business decision. "A strong case is made that it will not always be possible to make more and more profit out of less and less product and that, worse, there is a strong risk of going out of business directly as a result of this
Building a new aircraft is very expensive and take very long time so the top management wanted to make it cheaper and faster in order to face the hard competition with the European leader airline Airbus (owned by EADS) Boeing expected to cut development costs from 7.3$ to 4.2£ billion, to use the different advantages of Multi-tier supply chain in order to reduce development time from 4 to 2years but also advanced technologies such as composite material structure …show more content…
To regain control on the supply chain they have purchase a company at the bottleneck stage called Vought Aircraft industries which was in charge of the rear fuselage of the plane. They have send hundreds of engineers to solve issues with underperforming partners at their sites. Then they reorganize top management and replaced program manager with supply chain expert and even paid penalties for delivery delays. In the same stream they have developed a public relations campaign to reassure customers and investors because of the negative image of both aircraft and company. However these shifts seemed to be not enough and these strategic, operational and management issues that the company was trying to fix were finally deeper than expected.
In order to make this outsourcing strategy work they first have to assemble a management team with requisite expertise because “Without the requisite skills to manage an unconventional supply chain, Boeing was undertaking a huge managerial risk in uncharted waters.” (Tang and Zimmerman 2009). The increasing complexity and the need for transparency have to be manage with ground rules for accurate and updated information but also with assessing cultural …show more content…
Some types of strategic issues can arise from outsourcing production to different places all around the earth, mostly if it is in low cost countries. The main issues is about the supply chain logistics. If a firm makes their operations on several different countries around the globe it is more vulnerable to become affected by the environment and non-forecastable events such as political issues or natural disasters. Furthermore, most of the time, the more a company have an outsourcing-based strategy the worse it will be in terms of time of answer to customer demands. So as the aerospace engineer Dr Hart-Smith had said when he warned Boeing way back in 2001 that outsourcing wasn't always a savvy business decision. "A strong case is made that it will not always be possible to make more and more profit out of less and less product and that, worse, there is a strong risk of going out of business directly as a result of this