The benefits accrued to Boeing for its initiatives to outsource so much work on the 787 to foreign suppliers included the following;
- It was going to tap into the expertise of the most reliable and efficient producers wherever they may be situated in the world, therefore cutting down on cost production of airplanes and other cost overheads.
- The reduction of the risk that was associated with this technological venture because of bringing on board experienced personnel.
- The company would benefit financially, that is development costs estimated at $8 billion and sharing of their work with the partners.
- Through outsourcing, the company would be able to bring in sales from several countries which they have partnered with for mutual benefits.
- Cutting down on the airplane development time which used to take 6 years down to 4 years.
The potential risks were that problems started manifesting themselves in Boeing due to the globally dispersed supply chain such as delays in delivery of parts for assembly at the main industry, and paying a lot of money in penalties to its leading customers (Hill, 2012). The fuselage sections delivered to Boeing did not meet the required quality standards. When the parts finally arrived at Everett, the assembling location, they realised that many components were not installed in the fuselages as required. The user manuals were only available in Italian language. Some partners outsourced the manufacture of parts to other manufacturers without the consent of Boeing, for example, Vought outsourced Israel.
The risks outweighed the benefits because the company spent a lot of money paying penalties to its customers, quality standards were compromised, and the management made a decision not to outsource the key components required for the aircraft such as wings in the future. Boeing learnt that if it was going to outsource production of parts to other partners they had to employ a management team which would coordinate and have an oversight of the production process. The company launched the Boeing 707 airplane 3 years later thereby attracting stiff competition from Airbus Company due to delays from the outsourced international companies. In order to ensure that such problems did not occur later in future, the management decided not to outsource the production of the key components of the airplane to their partners, and most of the design work for the airplanes was brought back to be done in-house for the new upcoming model 787-9.
Regardless of the advantages that have come with outsourcing, Boeing has had to deal with critics who have stated that the company has been exporting American job overseas. The economists have stated that outsourcing of the company has resulted to increased jobless state in the manufacturing sector by 10 percent in the United States and this has caused a battered community to evolve among the U.S citizens. In order to respond to such criticism the company had to
- Account for every job in the manufacturing sector according to data from the government.
- The manufacturing company did not have competition at the time because it was after the world war two.
- They brought on board in-house labour from their partners thus creating employment to the U.S citizens.
- Boeing management defended their company and said that change was inevitable due to international customers, therefore demand for the company to diversify their global operations.
References
Hill, C. W. (2012). International business: competing in the global marketplace. (9. Ed.). New York: McGraw-Hill/Irvin.
Denning, S. "What Went Wrong At Boeing? - Forbes." Information for the World's
Business Leaders - Forbes.com. Forbes, n.d. Web. 27 Mar. 2013.
Peterson, K. " Special Report: A wing and a prayer: outsourcing at Boeing| Reuters."
Business & Financial News, Breaking US & International News | Reuters.com. Reuters, 20 Jan. 2011. Web. 27 Mar. 2013.
