Introduction
From the case study, Boeing Corporation is amongst the largest universal airplane developing firms. The corporation is supplying diverse products and services to clients in various marketplace sectors. For example, this aircraft organization provides merchandise to consumers in the legislative units, such as the division of security and airliner manufacturing. The products that Boeing Corporation offers consist of the armed forces planes and commercial airlines. Boeing Corporation assumed subcontracting activities to aid in the expansion of its mechanized practices as well as to spearhead the construction of 787-airline.
When Boeing outsourced airliner 787 development to other foreign-based companies, both its clients and the company experienced some negative effects. Outsourcing services at first brought about increment in the organizational production expenses and outlays. It equally influenced merchandise provision negatively to consumers and the succeeding aircraft selling. This paper highlights and discusses the risks, benefits, and criticisms that Boeing encountered in the course of operations (Yenne, 2005).
Issue: Outsourcing airliner 787
The Boeing Corporation found it rather difficult to manufacture its airliner 787. This corporation then decided to outsource its aircraft development activities to overseas manufacturing corporations. The intention was to minimize the cost of manufacturing Boeing 787. The corporation opted to have a various contractor s to produce and supply different 787 airliner segments. The contractors who were taking part in Boeing 787 aircraft manufacturing were situated differently around the globe. There were contractors situated in Japan, Toronto, and South Carolina. Each contractor had to manufacture and deliver assorted components to the Boeing Corporation to be assembled (Hooper & Newlands, 2009).
Onex group manufactured the 787-plane nosepiece in Toronto. One of the South Carolina companies produced the back fuse-large component. Japan produced the Boeing 787 arms while the central fuse big-piece was produced in Italy. The Boeing outsourced the manufacturing of various parts of the 787 aircraft, and this had depressing impacts on the corporation, including setback in releasing Boeing 787 to the marketplace. It emerges that the company management hardly assessed the benefits and costs allied to outsourcing the built-up processes. This resulted in poor manufacturing outcomes (Yenne, 2005).
The opportunities of outsourcing
Through outsourcing Boeing 787 aircraft parts, the corporation had the chance to improve its manufacturing processes. This could have been realized since Boeing incorporated several overseas-based corporations in developing the 787-aircraft. While this corporation had manufacturing processes outsourcing chances, there were disadvantages and advantages associated with such opportunities.
Boeing 787 outsourcing benefits
To companies, outsourcing is apparently a regular event due to its ensuing paybacks. It assists corporations in focusing on their key undertakings rather than concentrating on minor events. In turn, this boosts the corporations’ returns. The Boeing Company might have concentrated on various key organizational undertakings rather than developing 787-aircraft from scratches. Besides, through service outsourcing, Boeing might have reduced product development costs. That is, the company could share the product development outlays with its assorted contractors. Boeing mainly turned to subcontract the construction of plane 787 to curtail the allied overheads through dispensing such expenses to the contractors. Boeing 787 has different parts that required services from various suppliers who had to supply them for assembly purposes. This, in turn, reduced the total costs of plane manufacturing (Newhous, 2008).
Outsourcing further assists corporations in utilizing technological capacities in different firms. Any corporation that has no sophisticated expertise depends on overseas suppliers to manufacture its merchandizes since such firms have the approved technologies. By outsourcing airliner 787, Boeing Company might have derived benefits from other corporations’ technological capabilities. Forth, corporations that outsource services are likely to produce superior products. This follows the fact that such corporations could utilize human resources and technological capacities that they lack, but other firms have. Aircraft 787 was outsourced by Boeing to benefit from corporations’ technological and human resource abilities. The main aim was to improve on airliner 787 values by using other firms’ human capital and technological aptitudes (Hill, 2010).
Outsourcing moreover, aids firms to enhance their innovative capacities. Corporations tend to utilize knowledge from the external sources to add-on their abilities to produce innovatively novel merchandises. The time for marketing products is often reduced through outsourcing. This is because firms have the abilities that are supported by the suppliers’ competences and this helps them to produce market products swiftly. According to Hill (2007), Boeing Corporation focused on reducing the promotion period for airliner 787 through speeding up its production. The corporation had the assurance of supplementary suppliers’ capabilities.
The potential risks of outsourcing
Although when companies outsource their services abroad they tend to derive benefits, outsourcing itself has several associated risks. First, companies that outsource their services are prone to delays. It may perhaps take such an aircraft firm quite some time prior to discharging the constructed goods to marketplace consumers. Such a risk occurs whenever the suppliers fail to deliver the essential components promptly. From the case study, the suppliers could not provide the essential components to Boeing in the exact amount as initially stipulated. Most suppliers delivered unfinished parts that fell short of the required quantities (Newhous, 2008). Therefore, Boeing had to re-develop such incomplete parts in order to reach the desired quantities.
Outsourcing furthermore affected the products qualities. From the case study, most suppliers failed to comply with the requirements of the Boeing Corporation. For example, when Boeing 787 was outsourced, its value was affected given that most contractors delivered low quality components. Besides the provision of low valued components, the overseas contractors lacked skilled and qualified workforces and this significantly affected the Boeing 787 product excellence. There are teams of qualified workforces and engineers at Boeing who could manufacture various kinds of airliners not to mention the Boeing 787. Thus, Hill (2007) claims that it is not necessary for such products to be outsourced by Boeing.
Outsourcing furthermore increased the incurred organizational expenses because the corporation could not promptly deliver the Boeing 787 to the marketplace. The manufacturing setbacks made the Boeing Corporation to incur additional costs such as billions of dollars penalties because it failed to deliver the airliner 787 to meet the consumers’ desires. Boeing Corporation for instance, was heavily penalized because it failed to deliver aircraft 787 to airplane consumers promptly. Finally, the effects of outsourcing were evident in the sense that the corporation reputation was affected. The clients believed that Boeing was undependable since it delayed to bring airliner 787 to the marketplace (Pelletier, 2010). The company thus lost most of its trusted clients and consequently reported low turnovers because consumers hardly bought its products.
From the highlighted risks and benefits, it is clear when Boeing outsourced airliner 787 to overseas contractors, the risks outweighed the derived benefits. Hill (2007) asserts that prior to developing airliner 787; the risks associated with product outsourcing should have been weighed against the ensuing benefits.
Sources of the problems experienced in the management of supply-chain
The fiscal 2007 and 2008 saw various individuals criticizing Boeing Corporation due to the management of its supply-chain. The setbacks in delivering airliner 787 were related to poor supply-chain administration. Boeing Corporation became unable to properly run and monitor its universal supply-chain. The effect was that the entire airliner 787-production processes were negatively impacted. The corporation managers sought after altering the assembling procedures and the supply-chain simultaneously at supply processes.
According to Hooper and Newlands (2009), the management failed to assess the associated risks of simultaneously altering the two. In fact, the corporation initiated the supply-chain innovation besides modernizing the assembling processes and the product itself. Despite lacking comprehensible technique for managing its supply-chains, the corporation outsourced the development of airliner 787 to overseas contractors. The result was delays because the concerned firms sought to distribute the profits and risks derived from developing novel 787 aircraft. The negligence in managing Boeing supply-chain brought about massive losses to the corporation because it failed to meet the requirements of the consumers. Scores of consumers wanted to be compensated due to the delays that Boeing caused (Hill, 2007). The clients for the alleged delays as initially acknowledged similarly fined the corporation.
To avoid the reoccurrence of such problems in the future, the supply-chain must be properly managed by Boeing. The management should have every supplier who participates in the product development process very close to its assembling lines. When the systems and suppliers are close to the assemblage points, it might facilitate teamwork amid Boeing and contractors. This will eventually minimize any setback, improve on deliverance period, as well as augment the product value. The strategy will also make it easier for Boeing to supervise closely the production of different components that contractors develop. This will ensure that both the corporation and clients needs are met. Allowing contractors to autonomously develop products lines and deliver the supplies for assemblage purpose could bring about delays. Boeing should equally comprehend different supply-chains in marketplaces where the company conducts its businesses (Hill, 2010).
Boeing Criticisms
While Boeing outsourced airliner 787 development to the overseas-based corporations, it faced numerous criticisms. Boeing Corporation depended on foreign-based workforces as opposed to using its labor to produce the airliner. The company linked up to abroad states thus exported aircraft production jobs. This happened despite Boeing having skilled and knowledgeable workforces who could carry out the outsourced jobs. The company failed to develop the product independently by effectively utilizing its resources. As the company outsources its services and products overseas, the local workforces are deprived of the employment opportunities (Pelletier, 2010). The negative impacts associated with outsourcing are the level f unemployment reduces in the overseas countries but increases in the domestic state. Thus, the criticism is generally fair since Boeing filed to act appropriately.
To respond to these criticisms, Boeing ought to have outsourced airline 787 manufacturing to American based contractors rather than overseas suppliers. Various US based corporations could have produced genuine airline parts. This could have in turn produced occupation openings for domestic public. Boeing must thus respond through altering the entire production processes. The corporation needs to create additional employment opportunities locally and shun exporting jobs overseas. All Boeing airline-manufacturing activities should be internalized to offer the company workforce to participate in aircraft production (Hill, 2010).
Conclusion
Boeing Corporation is widely known for its aircraft manufacturing services. The corporation produces armed forces airlines and trade aircrafts. Even though it is amongst the largest aircraft producers globally, Boeing encountered numerous outsourcing challenges that significantly affected the airline 787-production processes. The product quality was negatively impacted while the production expenses increased substantially. It emerges that the risks associated with outsourcing outweighed the derived benefits. Besides, the company was unable to deliver the planned product promptly thus being penalized and recording a slump in returns.
References
Hill, C. L. (2007). International business: Competing in the global marketplace. Canada, USA: McGraw-Hill/Irwin.
Hill, C. L. (2010). International business: Competing in the global marketplace. Canada, USA: McGraw-Hill/Irwin.
Hooper, M., J., & Newlands, D. (2009). The global business handbook: The eight dimensions of international management. Aldershot, United Kingdom: Gower Publishing, Ltd.
Newhous, J. (2008). Boeing versus Airbus: The inside story of the greatest international competition in business. Broadway, New York: Random House Inc.
Pelletier, A. (2010). Boeing: The complete story. Yeovil, United Kingdom: Haynes Publishing.
Yenne, B. (2005). The story of the Boeing Company. Minneapolis, MN: Zenith Imprint Press.