{"id":26905,"date":"2017-11-15T22:59:35","date_gmt":"2017-11-16T03:59:35","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/its-complicated-the-relationship-between-boeing-its-customers-and-its-supply-chain\/"},"modified":"2017-11-15T23:00:44","modified_gmt":"2017-11-16T04:00:44","slug":"its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/","title":{"rendered":"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain"},"content":{"rendered":"

\u201cWe know as we\u2019re investing there we\u2019re also creating a competitor.\u201d <\/em><\/p>\n

-Dennis Muilenburg, CEO of The Boeing Company [1]<\/p>\n

\n

Few companies in the world have benefited more from and done more to enable globalization than Boeing, the US-based manufacturer of commercial and military aircraft. Boeing derives about 70% of aircraft revenue from international customers in more than 150 countries [2]. Accordingly, their supply chains increasingly reflect the prevailing geographies of their airline and military customer base.<\/p>\n

One driver of this global supply chain diffusion is the use of offset agreements in contracts for aircraft sold to state-owned airlines and militaries. Offset agreements are stipulations included in contracts that require the seller to manufacture, procure, or invest resources within the buying country equal to a percentage of the value of the contract. Although terms are not always disclosed publicly, offset credit requirements typically vary between 30% and 100% of the final contract value [3].<\/p>\n

While this mechanism has helped both Boeing and Airbus to establish a customer base in international markets, as these markets have matured and demanded more aircraft their governments have required further domestic commitments from Airbus and Boeing.<\/p>\n

Although Boeing and Airbus have had a well-defended position in the commercial aircraft industry, the fact is that their size and technological advantages are eroding rapidly. Countries such as Japan and China have steadily gained know-how through decades of manufacturing contracts and joint ventures with Boeing, enabling them to design and build their own aircraft [4]. The state-owned Chinese aircraft manufacturer, COMAC, will soon produce an aircraft similar in size and capability to the Boeing 737 and Airbus A320, the best-selling aircraft at each manufacturer. Additionally, Mitsubishi, a long-time Boeing supplier, will begin producing a smaller passenger jet that could be a launchpad for development of future products that could allow it to compete directly with Airbus and Boeing.<\/p>\n

Realizing that competitive pressure from new entrants is increasing, management at Boeing is attempting to react to this situation in a few ways.<\/p>\n

There has been a concerted push by Boeing to cross-sell services products to its customers that could provide even more attractive unit economics to airline operators in these countries [5]. This tactic should further increase the value that Boeing products provide making it more difficult for airlines to switch to or integrate new equipment.<\/p>\n

Further, Boeing is bringing some work that had been done in Japan back to the United States as automated manufacturing and new designs provide attractive opportunities to do so. The latest variant of the Boeing 777 will have wings that are entirely produced in the US, as opposed to partially supplied by suppliers in Japan.<\/p>\n

Looking farther out, Boeing is developing an entirely new commercial aircraft that possess greater technological and cost advantages over existing products. Offering a higher level of service and capability to airlines that can act as a further competitive advantage. Just as Boeing broke new ground in airline operations with the 787, the next anticipated Boeing plane, tentatively named the 797, is expected to have a passenger capacity and range that could significantly differentiate it from competitors\u2019 offerings [6]. The prospect of an entirely new airplane program and the revenue that comes with it is understandably attractive to Boeing\u2019s current supply chain, however, not decisions have yet been made about where the plane will be produced [7].<\/p>\n

In trying to sell more aircraft into rapidly expanding international markets, Boeing should consider renewing or even expanding current supplier contracts for current aircraft in China and Japan. Increasing the volume of existing production would not necessarily transfer as much know-how or intellectual property as expanding supplier production to new aircraft products would.<\/p>\n

Boeing could also allow Chinese or Japanese suppliers to bid for components supplied at the lower tiers of the supply chain. Again, this could shift production volume and revenue to those countries, but not risk transferring valuable intellectual property.<\/p>\n

However, Boeing\u2019s current emphasis on developing advanced manufacturing capability within the US could provide an alternate solution. If manufacturing processes can be sufficiently automated, it may be feasible to produce a larger portion of a new aircraft domestically and at lower cost, enabling Boeing to pass those savings onto airline customers in China and Japan.<\/p>\n

What should management at Boeing do when deciding on supplier arrangements for an all-new airplane, the 797? Should it engage further with existing suppliers despite the risk of aiding their domestic aerospace industry, or should it dial back international manufacturing and produce the new plane primarily in the US?<\/p>\n

 <\/p>\n

Word Count: 753<\/p>\n

 <\/p>\n

    \n
  1. Moss, Trefor. 2017. “China Aircraft Exports Cleared For Takeoff Under FAA Deal”. WSJ. https:\/\/www.wsj.com\/articles\/china-aircraft-exports-cleared-for-takeoff-under-faa-deal-1509947425.<\/li>\n
  2. “Aerospace Offset Opportunities In India”. 2017. Lucintel.Com. http:\/\/www.lucintel.com\/lucintelbrief\/aerospaceoffsetopportunityinindia.pdf.<\/li>\n
  3. “Boeing Eyes Opportunities In China’s Surging Services Market – Xinhua | English.News.Cn”. 2017. News.Xinhuanet.Com. http:\/\/news.xinhuanet.com\/english\/2017-11\/04\/c_136727640.htm.<\/li>\n
  4. “Boeing Overview”. 2017. Boeing.Com. http:\/\/www.boeing.com\/resources\/boeingdotcom\/company\/general_info\/pdf\/boeing_overview.pdf.<\/li>\n
  5. “Boeing\u2019s Key Suppliers In Japan Want An Upgrade”. 2017. The Seattle Times. https:\/\/www.seattletimes.com\/business\/boeing-aerospace\/boeings-key-suppliers-in-japan-want-an-upgrade\/.<\/li>\n
  6. Cameron, Doug. 2017. “Boeing Eyes Twin-Aisle Design For New Jet”. WSJ. https:\/\/www.wsj.com\/articles\/boeing-eyes-twin-aisle-design-for-new-jet-1488940878.<\/li>\n
  7. “China Sets Its Sights On Breaking The Boeing-Airbus Duopoly”. 2017. The Conversation. https:\/\/theconversation.com\/china-sets-its-sights-on-breaking-the-boeing-airbus-duopoly-34181.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    Boeing has depended on a network of suppliers across the globe to fuel decades of growth, now those suppliers threaten to begin producing their own aircraft, upending the Boeing-Airbus duopoly.<\/p>\n","protected":false},"author":9746,"featured_media":26906,"comment_status":"open","ping_status":"closed","template":"","categories":[1202],"class_list":["post-26905","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-globalization","hck-taxonomy-organization-boeing","hck-taxonomy-industry-aerospace","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nIt\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Boeing has depended on a network of suppliers across the globe to fuel decades of growth, now those suppliers threaten to begin producing their own aircraft, upending the Boeing-Airbus duopoly.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2017-11-16T04:00:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/gary-lopater-183558-1024x683.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"683\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/\",\"name\":\"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/gary-lopater-183558.jpg\",\"datePublished\":\"2017-11-16T03:59:35+00:00\",\"dateModified\":\"2017-11-16T04:00:44+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/gary-lopater-183558.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/gary-lopater-183558.jpg\",\"width\":6000,\"height\":4000},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/","og_locale":"en_US","og_type":"article","og_title":"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain - Technology and Operations Management","og_description":"Boeing has depended on a network of suppliers across the globe to fuel decades of growth, now those suppliers threaten to begin producing their own aircraft, upending the Boeing-Airbus duopoly.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/","og_site_name":"Technology and Operations Management","article_modified_time":"2017-11-16T04:00:44+00:00","og_image":[{"width":1024,"height":683,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/gary-lopater-183558-1024x683.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/","name":"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/gary-lopater-183558.jpg","datePublished":"2017-11-16T03:59:35+00:00","dateModified":"2017-11-16T04:00:44+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/gary-lopater-183558.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/gary-lopater-183558.jpg","width":6000,"height":4000},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/its-complicated-the-global-relationship-between-boeing-its-customers-and-its-supply-chain\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"It\u2019s Complicated: The Global Relationship between Boeing, its Customers, and its Supply Chain"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26905","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/9746"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=26905"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26905\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/26906"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=26905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=26905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}