In order to implement the new philosophy of worldwide sourcing in the supply chain management Boeing decided to spread the risk among the suppliers and call on them to help shorten the cycle time. For this purpose, Boeing identified 30 key suppliers including Fuji, Vought and Goodrich who will be able to design and integrate subsystems in full so that the completed subassemblies will be shipped to assembly plant in Washington. The supply chain consisted of three tiers of suppliers each one complementing the other tier.
With this arrangement, the company had located supply chain partners all over the world starting from South Korea, Japan and European countries. “The essential problem,” according to Tim Opitz director of product operations and support with Boeing says, “is that although the new business model spreads risk and new responsibilities among Boeing's suppliers, it also reduces Boeing's visibility into where inventories are, how well suppliers are executing against production plans, and how production delays might affect critical processes” (Moad, 2007).
With the shift in the objective and nature of supply chain, the company had to resort to manage strategic suppliers who are entrusted with the management of supply chain and the company has moved from manufacture to assembly concept. This has necessitated the company to choose capable suppliers from different nations across the world. The worldwide sourcing instead of adding to the efficiency of the supply chain has created additional issues, which the management had to take care of.
Airbus also had similar experiences with their experiences creating complex management coordination and design integration challenges to the company. With the expected surge in the demand for aircrafts, in the emerging countries like China, India, and Russia, there is likelihood, that these countries would like take part in the supply of high value components for aircraft manufacturing. There is definitely the advantage of lower labor costs in these countries especially in China and India.
Study from McKinsey estimates that, despite the problems involved in the transportation, complexities of management coordination and expenses on account of supply chain disruptions, the cost of manufacturing a typical aircraft structure would be lower by at least 20-25 percent lower in these emerging countries. “The cost of labor, which on average is three to five times lower in these countries than it is in the developed world, also makes emerging markets attractive for labor-intensive maintenance and repair services” (Bedier et al, 2008).
However, there are barriers in the form of complexity of technology, intellectual property and military requirements and very high quality and safety requirements, which hinder the progress of aircraft manufacturing in the emerging economies. There are also business related practices like the lack of permanent supplier development teams and limited product maturity at the time of launch, which impede the progress in this direction.
There is the requirement of the ability to developing aircraft, managing the supply chain, coordinating the manufacture and assembling a plane’s structure for the emerging economies to develop their own industries in the field of aerospace. At this moment though countries like China and India have made progress in the required field, it cannot be said that these countries can progress at a faster rate due to various barriers and problems involved in the manufacture.