The travails of aerospace giant Boeing as it attempts to bring its long-delayed 787 Dreamliner to market read like a primer of How Not to Do Outsourcing. I've written about the company's experiences several times since late 2007, most recently in September of 2009 when I knocked Boeing for its lack of governance.
Boeing had hoped to farm out much of the design and production of components of the 787, with Boeing employees assembling all of the parts at its Seattle manufacturing facility. I hadn't thought much about the Dreamliner project lately, until I saw a Los Angeles Times story recounting many of Boeing's outsourcing issues I'd already written about and a few I hadn't.
Based on the LA Times story and others mentioned in my previous posts, here are some of Boeing's biggest mistakes:
- Not enough due diligence. According to the LA Times, at least one major supplier didn't even have an engineering department when it won its contract. One of the stories I cited quoted a Boeing senior executive who said the company "made some poor judgment calls in terms of what people's capabilties were."
- Lack of transparency. The LA Times quotes the former head of the 787 program, who said problems were compounded when some of Boeing's suppliers used subcontractors. Some subcontractors weren't able to meet production quotas, which created gaps in production. And in some cases, components didn't fit together, a problem not discovered until they showed up in Seattle for assembly.
- Not balancing risk. Instead of taking a phased approach to outsourcing, Boeing took a quantum leap. The LA Times shares statistics from the Society of Professional Engineering Employees in Aerospace, the union representing Boeing engineers, which says 30 percent of the 787 is foreign-made content vs. just over 5 percent in Boeing's 747 airliner. Boeing didn't just ask its suppliers to manufacture the components, it also asked them to do much of the design work too. As if adding new suppliers and processes wasn't enough, Boeing also added an entirely new element, carbon-fiber fuselage.
- Outsourcing core business activities. The main activity Boeing opted to keep in-house was final assembly, one of the least profitable aspects in the aerospace business. As the LA Times points out, suppliers could earn revenue by producing parts over the lifetime of the aircraft.
- Not nipping problems in the bud. Even when problems began to mount, Boeing continued to pour money into outsourcing rather than bringing work back in-house.