Boeing outsourced 70% of the contents of the 787 to various other manufacturers from different countries largely to slash production costs, which in effect it did. The development cost that was estimated at $8 Billion was therefore shared between the different companies that were charged with the responsibility of building specific Boeing 787 parts. The idea here was that tapping world class expertise at its current location was much cheaper that flying them out and hiring them as part of the already large Boeing work force. This greatly reduced the cost of production by huge margins, much to Boeing’s advantage. Outsourcing also helped Boeing to tap new markets in the countries where the outsourcing was done. Several orders for the 787s were made in the countries where several Boeing parts were built driving sales through the roof (Sanders 2009).
Several potential risks exist with outsourcing. First off, as experienced by Boeing, there is a chance that the outsourced product might fail to meet the quality standards expected by the company. In Boeing’s case, for example, Italy’s Alenia Aeronautical of Italy manufactured fuselage that did not meet the quality standards set by Boeing. In some cases outsourcing creates delays in the delivery of the outsourced product thereby creating increasing the cost associated with production and prompting litigation battles over breach of contracts. Unfortunately, this was also experienced by Boeing. In my view, the benefits outweigh the potential risks (Gapper 2007).
In 2007 and 2008 Boeing experience problems with regard to the management of its global supply chain due to technicalities in production, specifically with regard to the supply of the fasteners for the fuselage which created delays in deliveries. Companies like Boeing need to closely monitor and supervise outsourced production centers to ensure that strict time schedule is adhered to and that the quality standards set are met (Gapper 2007).
In all honesty, extreme outsourcing exports homeland jobs overseas. Whereas this is true, it is important to note that every company’s core goal is to make a profit and in effect business sense. If Boeing’s margins are impressive as a result of outsourcing, then I suggest that Boeing keeps at it. However, a well though balancing act should be done to ensure that more jobs stay in the United States, especially where outsourcing is not necessary (Sanders 2009).
Works Cited
J.Gapper. "A Clever Way to Build a Boeing." Financial Times 9 July 2007: 11.
P.Sanders. "Boeing Takes Contol of Plants." The Wall Street Journal 29 December 2009: B2.
