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BUSINESS CASE STUDY (4 POINTS):TWO QUESTIONSDURATION: 20 MINUTESBоeing's Glоbаl Prоduction SystemExecutives аt the Boeing Corporаtion, America's largest exporter, say that building a large commercial jet aircraft such as the 787 Dreamliner involves bringing together more than a million parts in flying formation. Half a century ago, when the early models of Boeing's venerable 737 and 747 jets were rolling off the company's Seattle-area production lines, foreign suppliers accounted for only 5 percent of those parts, on average. Boeing was vertically integrated and manufactured many of the major components that went into the planes. The largest parts produced by outside suppliers were the jet engines, where two of the three suppliers were U.S. companies. The lone foreign engine manufacturer was the British company Rolls-Royce.Fast-forward to the modern era, and things look very different. In the case of Boeing's super-efficient 787 Dreamliner, 50 outside suppliers spread around the world account for 65 percent of the value of the aircraft. Italian firm Alenia Aeronautica makes the center fuselage and horizontal stabilizer. Kawasaki of Japan makes part of the forward fuselage and the fixed trailing edge of the wing. French firm Messier-Dowty makes the aircraft's landing gear. German firm Diehl Luftahrt Elektronik supplies the main cabin lighting. Sweden's Saab Aerostructures makes the access doors. Japanese company Jamco makes parts for the lavatories, flight deck interiors, and galleys. Mitsubishi Heavy Industries of Japan makes the wings. KAI of Korea makes the wing tips; and so on.Why the change? One reason is that 80 percent of Boeing's customers are foreign airlines, and for the company to sell into those nations, it benefits to be giving business to those nations. The trend started in 1974 when Mitsubishi of Japan was given contracts to produce inboard wing flaps for the 747. The Japanese reciprocated by placing big orders for Boeing jets. A second rationale was to disperse component part production to those suppliers who are the best in the world at their particular activity. Over the years, for example, Mitsubishi has acquired considerable expertise in the manufacture of wings, so it was logical for Boeing to use Mitsubishi to make the wings for the 787.Similarly, the 787 is the first commercial jet aircraft to be made almost entirely out of carbon fiber, so Boeing tapped Japan's Toray Industries, a world-class expert in sturdy but light carbon-fiber composites, to supply materials for the fuselage. A third reason for the extensive outsourcing on the 787 was that Boeing wanted to unburden itself of some of the risks and costs associated with developing production facilities for the 787. By outsourcing, it pushed some of those risks and costs onto suppliers, who had to undertake major investments in capacity to ramp up production for the 787.So what did Boeing retain for itself? Engineering design, marketing and sales, and final assembly are done at its Everett plant north of Seattle, all activities where Boeing maintains it is the best in the world. Of major component parts, Boeing made only the tail fin and wing-to-body fairing (which attaches the wings to the fuselage of the plane). Everything else was outsourced.As the 787 moved through development, it became clear that Boeing had pushed the outsourcing paradigm too far (recent troubles with the 737 Max have only reinforced this conclusion). Coordinating a globally dispersed production system this extensive turned out to be very challenging. Parts turned up late, some parts didn't "snap together" the way Boeing had envisioned, and several suppliers ran into engineering and quality control problems that slowed down the entire production process. As a consequence, the date for delivery of the first jet was pushed back more than four years, and Boeing had to take millions of dollars in penalties for late deliveries. The problems at one supplier, Vought Aircraft in North Carolina, were so severe that Boeing ultimately agreed to acquire the company and bring its production in-house. Vought was co-owned by Alenia of Italy and made parts of the main fuselage.Boeing now seems to be rethinking some of its global outsourcing policy. For its most recent wide-bodied jet, a new version of its popular wide-bodied 777 aircraft, the 777X (scheduled for introduction in 2025), Boeing brought wing production back in-house. Like the 787, the wings for the 777X will be carbon fiber. Mitsubishi and Kawasaki of Japan produce much of the wing structure for the 787 and for the original version of the 777. However, Japan's airlines have recently been placing large orders with Airbus, breaking with their traditional allegiance to Boeing. This seems to have given Boeing an opening to bring wing production back in-house. Boeing executives also note that Boeing has lost much of its expertise in wing production over the last 20 years due to outsourcing, and bringing it back in-house for new carbon-fiber wings might enable Boeing to regain these important core skills and strengthen the company's competitive position.QUESTION 24A (2 POINTS):Explain TWO reasons that motivated Boeing to pursue the globalization of production for its jet manufacturing.QUESTION 24B (2 POINTS):Explain TWO reasons why Boeing decided to withdraw from the globalization of production and describe the effects of this decision.Please answer all questions below. Before each response, indicate the question number, for example, "QUESTION 24 A," so I can identify which question you are addressing.
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