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Boeing 787

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1. What are the benefits to Boeing of outsourcing so much work on the 787 to foreign suppliers? What are the potential risks?

* Outsourcing the state-of-the-art electronics on the flight deck and in the passenger compartments allowed Boeing to reduce the risks associated with this technological gamble; * Boeing was able to negotiate $8 billion in development costs from the partners in return for a share of the work; * Boeing was able to access the expertise of the most efficient developers/manufactures worldwide and this, in turn, drove down the cost of delivering the 787; * Boeing believed that outsourcing some work to foreign countries would help sales in those countries; * Outsourcing the design of many of the components might reduce time to develop aircraft to four years from six years.

Potential risks:

* The outsourced partners might not being able to meet Boeing delivery schedules; * Potential loss of millions due to penalty clauses for late delivery; * Boeing found out that parts were not being assembled as required; * Assembly instructions arrived in Italian and not in English; * Boeing found out that their outsourced partners might further outsource critical design work to other companies over which Boeing had no control. Since other companies reported to outsourcing partners and not Boeing, Boeing found out about the problem too late * Outsourced partners found it hard to meet Boeing quality standards;

2. In 2007 and 2008, Boeing ran into several well-publicized issues with regard to its management of a globally dispersed supply chain. What are the causes of these problems? What can a company like Boeing do to make sure such problems do not occur?

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