Integrated decision support model for global sourcing

Abstract

Over the last decade, the U.S. aircraft industry has experienced increasing levels of international integration as companies seek to access global talent and resources, cut production costs, spread financial risk, and secure access to airplane markets throughout the world. In an increasingly complex environment, decision makers seek an effective framework to evaluate the true benefits, costs and risks of sourcing alternatives-both relating to the short-term effects of selecting particular suppliers or groups of suppliers, as well as the long-term effects of redrawing their firm boundary and developing a more vertically disintegrated supply chain. This thesis is an examination of strategic sourcing decision practices at Boeing Commercial Airplanes, based on a six-month internship study with the Future Airplane Production group in Seattle, Washington. In this thesis we will discuss the application of strategic analysis, lean operational analysis, managerial accounting, and Failure Mode and Effects Analysis (FMEA) to improve existing sourcing analysis practices. An integrated decision support model is introduced to represent key sourcing decision factors, their relative importance, and the expected benefits, costs and risks to stakeholders related to each factor (comparing two sourcing alternatives). Using a weighted average, the model expressly indicates the relative value of each alternative. The model is applied to two case studies involving local insourcing and offshore outsourcing, respectively. This study demonstrates the need for incorporating explicit valuation of 'softer' strategic, operational and risk components along with the 'hard' financial analysis when making sourcing decisions.