List of Outsourcing Don'ts, from Boeing's 787 Project

Ann All

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.


Add Comment      Leave a comment on this blog post
Feb 23, 2011 1:30 AM Flier Flier  says:

In all this hand wringing about Boeing's outsourcing debacle the metrication elephant in the room is conveniently ignored. Isn't it so much easier to blame everybody else for mistakes made, but the company that still uses medieval inches and expects metric trained engineers and workers to use that cumbersome anachronism without hitches? Airbus outsourcers about 50% of its work and seems to do fine because almost everybody else, except Americans, speak the same measurement language.  Parts sourced in the US are easily made in mm and keep some Americans employed.

Maybe it is time for the States to push once again for metrication so they can sell their goods to a metric world. That doesn't look too promising right now with the navel gazing and gun toting lot in ascendancy.  All this yesteryear mob does is creating another cheap pool of American labour for the already wealthy to exploit.

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Feb 23, 2011 1:48 AM Lance Lance  says:

You are correct in confirming they did it all wrong! What they should have done was put out a RFA (Requirement For Aircraft). For eg: Aircraft required to be built: Looks like this (Drawing supplied), Carries this weight......, Low maintenance. Delivered ready to fly. Please quote best price on 100 units, 500 units, 1000 units.

Taa

Boeing.

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Nov 15, 2011 11:05 AM Ben Benjabutr Ben Benjabutr  says:

Outsourcing core competency seems to be the biggest mistake for me. Because one of big reason for outsourcing is to free resource and focus on core competency.

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Nov 18, 2011 5:27 AM Roy Roy  says:

I have read your article Really Nice one.because Now a days not only big companies like Adobe, Microsoft are doing software and product development in India at their development center. But now many other small to medium scale companies have started software and product development and started entering into outsourcing software product development. It is considered that, increase in business will be around 100% in offshore outsourcing product development.

                   Virtual Assistant from India for 299 pm,

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Feb 24, 2013 9:22 PM Stone Daniel Stone Daniel  says:
Now many other small to medium scale companies have began application and service and began entering into freelancing application service. Reply

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