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  • IA Comparative Analysis of Supply Chain Management Practices by Boeingand Airbus: Long-term Strategic Implications

    By Tzu-Ching Horng

    B.S. in Civil EngineeringNational Taiwan University, 2004

    SUBMITTED TO THE DEPARTMENT OF CIVIL AND ENVIRONMENTALENGINEERING IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

    DEGREE OF

    MASTER OF SCIENCE IN TRANSPORTATION

    AT THE

    MASSACHUSETTS INSTITUTE OF TECHNOLOGY

    FEBURARY 2007

    0 2006 Tzu-Ching Horng. All rights reserved

    MASSACHUS-TTS INSTiTUTEOF TECHNOLOGY

    FEB 2 2 2007

    RARIESBDARKER

    The author hereby grants to MIT permission to reproduce and to distribute publicly paper andelectronic copies of this thesis document in whole or in part in any medium now known or

    hereafter created.

    Signature of Author .......

    Certified by ..........................

    ......................................

    Departient if Civil anYTnvironmental EngineeringV October 16, 2005

    il.................. . .. . . ...........

    0 BozdoganPrin al Rese ch Associate

    Center for Technolog an dustrial DevelopmentThesis Supervisor

    Certified by .................................... ... ...... ', - . ...I................Yossi Sheffi

    Professor ivil an nvironmental EngineeringPro sor of Engineering Systems

    Director, MIT Center for Transportation an LogisticsThesis Reader

    A / i/ A

    A ccepted by ........................................................................ .. . . . . . . ....Chairman, Departmental Committee for Graduate Students

  • 2

  • A Comparative Analysis of Supply Chain Management Practices by Boeingand Airbus: Long-term Strategic Implications

    By Tzu-Ching Horng

    B.S. in Civil EngineeringNational Taiwan University, 2004

    SUBMITTED TO THE DEPARTMENT OF CIVIL AND ENVIRONMENTAL ENGINEERINGIN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF

    MASTER OF SCIENCE IN TRANSPORTATION

    AT THE

    MASSACHUSETTS INSTITUTE OF TECHNOLOGYAbstract

    The goal of this research is to develop an improved understanding of supply chain managementstrategies and practices being pursued by Boeing and Airbus in the 787 Dreamliner and the A380Navigator programs, respectively, and to identify their long-term strategic implications for supplychain management in the future. The research takes as its point of departure a review and synthesis ofsupply chain management principles and practices, with particular emphasis on lean supply chainmanagement concepts. Guided by this review, the research focuses on the common set of supplierssupporting both programs and employs a questionnaire survey, followed by telephone interviewswith representatives of selected suppliers. The research also makes extensive use of the open sourceinformation on both companies, on both programs and on the common suppliers. A major finding isthat Boeing's new supply chain model in the 787 program represents a significant break with pastpractices in the aerospace industry, allowing major partnering suppliers an unprecedented role interms of design, development, production and after-market support, where they are integrated earlyin the concept development stage and are incentivized to collaborate with Boeing, as well as amongthemselves, as risk-sharing partners with deep responsibility for system integration, involvingdetailed interface control at the system and subsystem levels. Airbus, as well, is found to rely heavilyon its major suppliers in connection with the A380 program, but acting as the primary systemintegrator in the more traditional mode and exercising much greater control of all design interfaces.Also, both Boeing and Airbus have been outsourcing more and more activities to suppliers located innon-traditional regions, such as Eastern Europe and the Asia-Pacific region. Finally, aerospacemanufacturers, in general, are aggressively adopting information technologies (e.g., EDI, PLM, 3-DDigital Model, RFID) to facilitate greater data sharing and communications with their partners andlower-tier suppliers dispersed in many geographical regions, as part of a broader trend involvingmore collaborative supplier relationships reaching down to the subtier level.

    Thesis Supervisor: Kirkor BozdoganTitle: Principal Research Associate, Center for Technology, Policy and Industrial Development

    Thesis Reader: Yossi SheffiTitle: Professor of Civil and Environmental Engineering & Engineering Systems

    Director, MIT Center for Transportation and Logistics

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  • 4

  • Acknowledgements

    Now I am sitting in front of my laptop, watching the word "Acknowledgements" on thescreen. It has been a long way before I came to this moment. For the past two years at MIT, Ihave been through the most difficult, challenging and frustrating times in my life. However, Ihave had such good fortune that there was always somebody offering his or her hand when I washelpless, discouraged or lonely. This thesis is by no means a masterpiece, but I humbly dedicateit to all of the people who have given me love, care, support, and guidance during my studies atMIT.

    First, I would like to thank Dr. Kirk Bozdogan. When we met for the first time, I had justleft my first lab and was looking for new research direction, as well as for financial support. Atthat time I had nothing to show to prove my ability. Thanks to Kirk's generosity and trust, I havehad the opportunity to work with him as a Research Assistant. The experience of working withhim has been tremendously educational and inspiring. Kirk's profound knowledge, insistence onperfection and passion for research are the biggest contributors to the accomplishment of thisthesis. I particularly would like to note with appreciation Kirk's patience and kindness, as he hasallowed me the time and space to learn at my own pace. I also owe special thanks to Dr. LarryLapide and Prof. Yossi Sheffi for the financial support I have received under the auspices of theSupply Chain 2020 program.

    Further, I would like to express my gratitude to all of my very special friends whose careand encouragement have accompanied me through this bumpy journey. To my best friend for life,Amber ({)Ifi) -- for always being there for me, only a call away day or night, even though ahalf-hemisphere away in terms of geography; to my new friends at MIT Cecilia, Anuja, andMridula -- the greatest treasure I have found during my past two years at MIT, who have shapedmy perspectives on life; to Charisma -thanks for forgiving my mistakes and giving me anotherchange; and to Benjamin, Thierry, Pierre, Xavi, Nancy, Hui and Gunwoo -- who have broughtsuch joy and support when I needed help.

    Lastly, and most importantly, I would like to say thank you to my parents, who have alwaysgiven me their deep love, care and support without expecting anything in return, who havealways believed in me no matter what has happened, and without whom I would not be theperson I am today -- this thesis is not enough to honor what you have done for me, but I do wantyou to know that if I have ever achieved anything significant in my life, it's all because of you.

    October 16, 2006

  • Table of Contents

    CHAPTER 1 INTRODUCTION: RESEARCH GOALS AND STRATEGY...................................................10

    1.1 M O T IVA T IO N ..................................................................................................................................................... 101.2 RESEARCH GOAL AND RESEARCH QUESTIONS ................................................................................................. 11

    1.3 RESEARCH DESIGN AND METHODOLOGY......................................................................................................12

    1.4 CHAPTER OVERVIEW ........................................................................................................................................ 16

    CHAPTER 2 OVERVIEW OF COMMERCIAL AIRCRAFT INDUSTRY ........................................................ 18

    2.1 M AJOR PLAYERS IN THE COMMERCIAL AIRCRAFT INDUSTRY.........................................................................19

    2 .1 .1 . B o e in g ...................................................................................................................................................... 1 9

    2 .1.2 . A irb u s S .A .S ............................................................................................................................................ 2 1

    2.2 SUPPLY CHAIN STRUCTURE .............................................................................................................................. 24

    2 .2 .1 C u sto m er...................................................................................................................................................2 4

    2 .2 .2 S up p lier b ase ............................................................................................................................................ 2 6

    2.2.3 Product manufacturing............................................................................................................................26

    2.2.4 Policy and regulatory environment..................................................................................................... 27

    2.3 INDUSTRY DYNAMICS.......................................................................................................................................28

    CHAPTER 3. LITERATURE REVIEW .............................................................................................................. 43

    3.1 LEAN SUPPLY CHAIN MANAGEMENT PRINCIPLES AND PRACTICES ACROSS INDUSTRIES............................44

    3

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