Transformational Outsourcing Boeing's 787 Design

The 787's supply chain was also targeted to spread the financial risks of development to Boeing's suppliers.

Transformational Outsourcing

Boeing’s 787 design and development was truly a transformational outsourcing project. Boeing set out to create a new product, which was significantly different from what the company had been producing. Through this project, it aimed at creating a new business model for sourcing, assembling and producing aircrafts.

Boeing aimed at decentralizing the design and manufacturing of 787 Dreamliner. Boeing decided to have a tiered supplier system like Toyota’s. Boeing’s Tier-1 suppliers would both design, and manufacture the major modules of 787 based on the specifications provided by Boeing. The management of the sub-contractors was also to be handled by the Tier-1 suppliers. By entering into this partnership with the Tier-1 suppliers, Boeing tried to speed up the development process.

Cost reduction was just one part of the deal. Boeing wanted to spread the risk to its suppliers, something visible in the payment structure. None of the strategic partners were to receive any payments until the first 787 was delivered to Boeing’s customers. This way the company wanted to provide incentives to the strategic partners so that they would collaborate and coordinate the development of the plane.

Structuring of the outsourcing plan

For Boeing 787 Dreamliner, the design and production of the sections of the plane were outsourced to over 50 Tier-1 suppliers. These strategic partners of Boeing were to serve as “integrators” who assemble different parts and subsystems produced by Tier-2 and Tier-3 suppliers. This gave Boeing the flexibility of working with just Tier-1 suppliers, rather than itself buyin...

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