Outsourcing is an integral part of most businesses. For instance, small companies routinely outsource their payroll processing, accounting, distribution, and many other important functions. Others might outsource their IT needs, their logistics needs, or even their needs for temporary employees. For many however, outsourcing relates to the sourcing of key components for the manufacturing of products and services. It could be anything from buying a simple wire assembly, or in the case of Boeing, sourcing an extremely complicated wing assembly for the new Boeing Dreamliner.
If you’ve been following the news over the past couple of years, the Dreamliner - an engineering marvel, has experienced repeated and costly delays. A recent article in the NYT titled “A Dream Interrupted at Boeing“ details many of the challenges Boeing has been facing, and how it is costing them. Here are but a few of the points mentioned in the article.
The company’s chief, W. James McNerney Jr., concedes that Boeing lost control of the process by farming out more design and production work than ever and not keeping close tabs on suppliers. He says the company is retaking control.“You ultimately get to the question: Is it worth it?” Mr. McNerney says. “And my answer is yes. And that is why you take the risks. But could we have done it smarter? Yes…” With the Dreamliner, Boeing aimed to expand its longtime outsourcing efforts, which had mainly focused on manufacturing parts, to a risk-sharing program in which the suppliers would also be Boeing’s partners. “The idea was to get the risk off their books and get other people to do the heavy lifting for them,” Mr. Aboulafia said. “But the flaw was that led to a kind of ‘engineering light’ approach, and the problems on the 787 can be traced to that.” For instance, Boeing contracted out the design and construction of the wings — one of the most exacting parts of the aircraft — for the first time ever. It also let other companies wrestle with the complicated task of baking and shaping the plastic composites.And instead of being paid when they shipped parts, the partners agreed to wait and recover their capital — and receive a share of the profits — once Boeing delivered the planes to the airlines. But Boeing officials now say that this left the whole process vulnerable, should any part of the chain face delays.
Outsourcing is a viable and oftentimes, an essential business practice. However, outsourcing can complicate a business’s strategy - exponentially. Such is the case of the Dreamline project. While the NYT does an excellent overview of the many challenges the Dreamline is currently facing, it comes up short in one area. Who and where are the internal naysayers that pointed out the potential shortcomings of the Dreamliner strategy? Have they left the company? Have they been demoted? Or, has their voice finally been recognized and heard?
I’ve followed the Dreamliner project for many years. I’ve also pondered about the many silent problems exist inside the Boeing organization and Dreamliner project. We are just now beginning to understand what they are, and the impact they are having. But more importantly, what is happening is indicative of Boeing as an organization, and I expect it will continue to hinder their ability to perform into the future.
Bottom Line: Boeing’s ability to design and build the Dreamliner is a huge project. Now the cost overruns and fingerpointing are frontpage news. I’m concerned what we’re now seeing is but the tip of the iceberg. Their real challenge will be to identify and act upon the numerous silent problems inside the organization.
