What are the benefits to Boeing of outsourcing so much work on the 787 to foreign suppliers? What are the potential risks? Do the benefits outweigh the risks?
Boeing’s plan of outsourcing was to reduce the technological risks. The Boeing 787 had key features that needed great expertise. For instance, it was wide-bodied, unlike the previous planes. The plane would connect long distance destinations. It would also carry two hundred and fifty passengers. Rather than using the usual aluminum materials, the manufacturers would use the composite materials. The larger windows and state of the art electronics on the flight deck were part of the new features that made it look outstanding.
Another benefit was that Boeing wanted to involve its partners so that they can partly contribute towards the $8 billion development costs. It would also use the help of some of the best producers in the world at their locations. Due to this, the company would cut down on the manufacturing costs. The outsourcing plans would reduce the industry’s manufacturing time by two years.
One of the potential risks was that the partners could copy Boeing’s designs and come up with similar airplanes. Another risk was that Boeing did not know what the partners were doing until the time they delivered their products.
Outsourcing would remain the best option for Boeing since the ownership process became a shared responsibility. It was also part of the marketing strategies without allocating so much money into the marketing budget. On completion, the company would have ready markets because of outsourcing the manufacturing parts. The company would manage the few risks by closely monitoring the contracts issued to the other companies. Therefore, the benefits outweighed the risks.
In 2007 and 2008 Boeing ran into several publicized issues with regard to its management of a globally dispersed supply chain? What are the causes of these problems? What can a company such as Boeing do to make sure such problems do not occur in the future?
Boeing announced that there was going to be the postponement of the launch of the 787 series. It was because of the available and foreseeable challenges. Boeing was to pay additional development costs of $2 billion because of the delays. The delay would also cost them millions of dollars regarding fines. A couple of other suppliers could not meet Boeing’s delivery schedule. The Italian Company’s fuselage was missing some important components. The instructions were also in the Italian language. Boeing did not carry out close monitoring and evaluation. They would later discover some of the challenges their partners experienced when it was already too late.
For instance, Vought Aircraft Industries in South Carolina was supposed to make the rear fuselage. The company outsourced part of its work to an Israeli company. The company had problems meeting Boeing’s exact requirements. But it was only answerable to Vought. Boeing discovered this when it was too late. They had to send Engineers to Israel to help finish up the work.
The management had to change the company’s strategy to solve such problems. They had to work closely with the companies that they had given some work. They would also manage the outsourcing activities by not outsourcing the key components that added to their competitive advantage. The company could also acquire some of the key partners for efficient supervision.
Some critics have claimed that by outsourcing so much work, Boeing has been exporting American jobs overseas. Is this criticism fair? How should the company respond to such criticisms?
The company was not making good use of the locally available skilled labor due to its outsourcing policy. It was an unfair arrangement to American job seekers. Although the management outsourced the key jobs that involved expertise, they would have to reduce the work by a considerable percentage. Outsourcing might have reduced the costs, but the management could hire American experts to supervise the jobs. It would still be profitable to the company, and this would increase its revenue to America.