McCarty said that by relying so heavily on foreign partners for their engineering, Boeing devalues the so-called tribal knowledge that facilitates practical application of complicated, academic engineering concepts that eventually produce a new plane.
Acquired on the job and over time, tribal knowledge is a key ingredient in the development of a new plane, some experts say. It is the shared method of performing countless daily tasks efficiently and in coordination with colleagues.
In short, tribal knowledge is the grease that cuts friction throughout the design and assembly process. McCarty says the loss of tribal knowledge could have far-reaching consequences for American engineering. Many aviation experts say Boeing began to put a lower premium on in-house labor after its merger with rival McDonnell Douglas.
That was the same year Boeing posted its first full-year loss as Airbus stole market share. Some critics view the merger as the point at which BCA began to favor a corporate culture that prized near-term profits over long-term engineering dominance.
Around this time, Boeing moved its corporate headquarters to Chicago after 85 years in Seattle. Labor unions complain the departure drove a wedge between executives and Seattle-area rank-and-file. But the global corporation cited a need to be near Wall Street, Washington D. BCA headquarters remained in Seattle, its attention fixed on the next big project.
Responding to airline demands for greater fuel efficiency, Boeing began developing the design that in would be dubbed Dreamliner. The carbon-composite structure would be lighter than aluminum planes of comparable size and would consume 20 percent less fuel.
But when it came time to build the , Boeing turned away from its stable of engineers and mechanics to embrace a complex web of suppliers. For the first time in its history, Boeing would outsource the wing design and manufacturing. He did what he had to do to launch the program given the tremendous adversity he was facing. For its part, Boeing maintains that it never abandoned its standards for design and engineering. The company had planned to make a first test flight of the Dreamliner around late August and first delivery in May But that target began to slip in when Boeing postponed the first test flight due to a shortage of bolts and flight control software.
More delays followed as production problems mounted. In , the company blamed another delay on a day strike by Boeing assembly workers over contract terms. The next year, Boeing bought portions of business units of two of its suppliers to help regain control of its Dreamliner production.
Boeing did not disclose financial terms of that deal. The Dreamliner finally made its first flight on December 15, But less than a year later the company postponed delivery again -- this time to early -- because of a delay in the availability of a Rolls-Royce engine needed for the final phases of flight testing.
In October , Boeing said it would tell suppliers to halt deliveries of sections for its Dreamliner for two weeks because of delays at Alenia, a unit of Italian defense and aerospace company Finmeccanica SpA. Alenia makes the horizontal stabilizer for the tail of the On November 9, the Dreamliner schedule endured a new hiccup when a fire on a test flight forced an emergency landing in Laredo, Texas.
Boeing halted the test flight program to determine the cause of the fire, which it later attributed to foreign debris in an electrical equipment cabinet. The company resumed flight tests in late December, saying it had installed an interim version of updated power distribution system software and conducted a rigorous set of reviews. Then, earlier this week, Boeing announced that it had moved first delivery to the third quarter of from the first quarter. That at least had the effect of assuaging Wall Street concerns about an even longer delay.
Nowadays, Boeing is quick to acknowledge the rocky road the Dreamliner has traveled so far. Boeing executives declined to be interviewed for this story, but the company replied to written questions submitted by Reuters. McNerney came to Boeing in after a tenure as CEO at 3M Co, a conglomerate that produces tens of thousands of diverse products like Scotch tape, medical masks and optical film used to brighten flat screen TVs and computers.
He recalled a time on the program when he ran out of a particular washer to fit with a screw on the plane. He said he had to fill out paper work to order a single washer and waited one day to receive it from the outside supplier. You have contractor agreements that have slowed the whole process down. Prior to that post, he was a structures mechanic on the where he put the airplane body sections together.
Learning From Boeing's Outsourcing Disaster. Evaluate the pros and cons of Boeing's outsourcing strategy. But that strategy can backfire in the longer term, according to a new study. Second, for the first time, Boeing applied the family concept in aircraft A long article 10 pages when printed discusses the pitfalls Boeing had by outsourcing so much work on the Worthy of note is the fact that Boeing avoided outsourcing the production of wings because it believed that doing so might give away valuable technology to potential competitors.
Federal investigators have grounded all of Boeing's new Dreamliner jets after reports that the aircraft's lithium-ion batteries were overheating and catching fire. Boeing introduced new project Abstract: Boeing , the Dreamliner, was the fastest-selling plane ever in the Development design and fabrication outsourcing provides Boeing The case of Boeing Dreamliner provides with a qualitative research to the Boeing programme, the outsourcing strategies adopted by Airbus towards.
Brief Company Background Boeing is a largest American aerospace company manufacturing commercial jetliners, military aircraft. Can they take these ideas any further? In fact, Boeing launched global outsourcing strategy by focusing on the components that were outsourced by foreign suppliers such as China, India, and Italy and so on. Global companies struggle with decisions on how much to outsource. March 10, Strategic Deterrence Systems.
Boeing has announced a major development in the acquisition of Embraer's E-Jet program. Some 17 partners in 10 countries were selected to produce major parts of the aircraft. There is nothing wrong with Boeing outsourcing the supply chain, it has worked before for the , , etc.
It remains the mystery at the heart of Boeing Co. About workers will be affected. Over-Outsourcing: Boeing relies heavily on outsourcing the manufacture of the components and parts for its planes. Was it too much outsourcing too soon? Seattle -- At the heart of the union machinists' strike against Boeing Co. Boeing has always outsourced the production of batteries.
First, as Boeing increased its reliance on outsourcing, six major subcontractors fabricated 70 percent of the value of the airplane, thereby helping Boeing reduce the project's risks. We get anything 22 Jan The flagship of Boeing, the new Dreamliner has taken a beating in the aerospace industry" according to the strategy consulting firm.
The move will enable Boeing to focus on setting strategy and governance, and driving business performance, says its chief information officer. Then there's Boeing, the poster company for outsourcing gone bad. This outsourcing strategy seems to way ahead to spread risks and lower cost levels.
First, from the LA Times much more at the linked article itself : The airliner is… Longtime Boeing engineers say the effort was complicated by a push to outsource work to lower-paid contractors. Boeing Touts Outsourcing For Suppliers To Mexico Boeing is encouraging its suppliers to attend a workshop next month to learn how to outsource business to Mexico.
Boeing could have done these things differently today. Analyze the current technology used and the impact of this technology on supply chain capability. Review Boeing's cooperative strategy. The IAM has made a lot of noise about the perils of outsourcing, but has not offered Boeing any alternative strategies.
This much is not new. Learn More. The Advantage of Boeing. Billion Generates nearly half of its revenue from North America. Boeing Strategy Analysis - tetrathreat, five forces, value chain, core competency, resource based view Boeing Corporation is widely known for its aircraft manufacturing services.
However, the ideal of a truly collaborative supply chain has undoubtedly been complicated through the outsourcing strategies of OEMs. There are limits to what Boeing can produce outside of Washington state. Subsequently, in the planning of program risk management for the A, Airbus was inspired by Boeing and its outsourcing strategy.
The outsourcing strategy was put place in by then-Boeing Chairman Harry Stonecipher, who was ousted in , and Commercial Airplanes Chief Alan Mulally, now chief executive at Ford. Theory of the firm is the branch of econ that explores the question of "why do corporations exist?
We all know Boeing has choosen for an outsourcing strategy. Do you agree with the company's decision to "offload" parts production? The company believed that by focusing on the activities in its operations that create value and by offloading parts production to end-use markets, Boeing would be most competitive globally. Competition among companies, is considered to be the main factor behind outsourcing and because of globalization, this practice has become ubiquitous in corporate environments.
Under Dennis Muilenburg, a longtime Boeing engineer who became chief executive in , the company has said that it planned to bring more work back in-house for its newest planes. However, what made Toyota a successful supply chain brought Boeing a nightmare, the relationship with suppliers.
Boeing's strategy was to serve as the final assembler of these large sections, reducing the historical production time in Boeing's Seattle factory from a month for large aircraft to just days. Some degree of outsourcing in other countries—i. For example, the capacity to manufacture Lithium-ion batteries lies outside the US. Boeing had no choice but to have the batteries made in another country. By contrast, just 5 percent of the parts of the , were foreign-made.
While there is nothing in principle wrong with necessary offshoring, the cultural and language differences and the physical distances involved in a lengthy supply chain create additional risks. Mitigating them requires substantial and continuing communications with the suppliers and on-site involvement, thereby generating additional cost. Rather than plan for face-to-face communications and on-site communcations, Boeing introduced a web-based communications tool called Exostar in which suppliers were supposed to input up-to-date information about the progress of their work.
The tool was meant to provide supply chain visibility, improve control and integration of critical business processes, and reduce development time and cost.
Instead of people communicating with people face-to-face, the computer itself was supposed to flag problems in real time. Not surprisingly, the tool failed. Suppliers did not input accurate and timely information, in part due to cultural differences and lack of trust.
As a result, neither Tier-1 suppliers nor Boeing became aware of problems in a timely fashion. The approach backfired, as labor relations worsened as a result of the outsourcing decisions and a costly strike ensued. Given the extraordinary risks of the project, one would have expected Boeing to assemble a leadership team with a proven record in supply chain management and diverse expertise to anticipate and mitigate wide array of risks. Amazingly, this was not the case.
Without the requisite skills to manage an unconventional supply chain, Boeing was undertaking a huge managerial risk in uncharted waters. The combination of the above risks constituted an existential threat to Boeing as a going concern.
Where then was the C-suite while these risks were being incurred? An interview in with Philip Condit , who was the richly compensated CEO of Boeing when the initial decisions were being made, is revealing.
The ostensible reason for the move was to be neutral among the various divisions of Boeing, which were scattered around the US. The dumbest idea in the world: maximizing shareholder value.
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