Did outsourcing shoot down Boeing 747?

Published on September 22, 2017 By , 0 Categorised in:

Some “experts” were yelling and shouting from the rooftops that outsourcing is to blame for the failure of the Boeing 787 Dreamliner project. They say, that outsourcing as a business model doesn’t work and no one should take it into his head and business. Do everything yourself or you are a loser.\


However, here is the question. How can the model designed to increase efficiency, reduce costs and time not work? Comparatively long history and successful experience of many leading international companies demonstrate that outsourcing works and keep showing perfect results. Perhaps the answer suggests itself: the thing is that the management of The Boeing Company had two left hands and worked only with short-term goals. So, let us assume that in the situation with the Boeing 787 the problem was in wrong management decisions.


The history of failure

Several years ago, there was the almost simultaneous forced landing of 50 Boeing 787 Dreamliner aircraft around the world. The carriers suspended the operation of aircraft due to the risk of ignition of lithium-ion batteries. For the «dream liner», it was a blow below the belt since these batteries were one of the key components of its innovative energy-saving system.


The project cost billions USD, the aircraft deliveries were postponed at least for 7 times, the carriers received the first models with a three-year delay. Only 6% of the ordered Dreamliners were brought into service. This situation caused serious losses and reputation risks for The Boeing Сompany.


What was the matter?

Nothing special. The American giant just wanted to save money and outsourced design, engineering solutions and production of aircraft components. They saw the lower cost of the labor force, but did not see the situation in a whole and did not take into account other vital factors. This is a classic example when a company was deceived by bright figures of labor saving without taking into account the «hidden» long-term risks. It is interesting, that Boeing recognized that the key mistake was not even the transfer of production processes abroad, but the outsourcing of engineering solutions.


Where was the brain?


This ridiculous and very expensive error is explained easily. The reason was traditional: in excessive devotion to maximizing the shareholder value of the company, managers wanted to demonstrate the fastest result. The emphasis on the short-term growth of capitalization eclipsed the strategic long-term goal of any business. This miscalculation killed the project.


Writing in Forbes, contributor Jonathan Salem Baskin, said the 787 Dreamliner has been vexed since its inception. «While this idea might make sense for sourcing coffee makers, it was a nonsense approach to assembling perhaps the most complicated and potentially dangerous machines shy of nuclear reactors. Parts did not fit together with others. Some suppliers subcontracted work to their suppliers and then shrugged at problems with assembly.”


Outsourcing must be a part of the business strategy, not a short-term step to reduce costs. Companies need to be as clear as possible with their tasks and then outsourcing will become one of the most effective tools for progressive strategic development.


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