BOEING'S OUTSOURCING OF 787 MANUFACTURING

Boeing's Outsourcing of 787 Manufacturing

Boeing's Outsourcing of 787 Manufacturing

Outsourcing 787

Boeing's (BA) latest and most promising entry in the commercial aircraft competition is the all new highly fuel efficient 787 Dreamliner. The 787 is made out of lightweight and highly durable composites incorporating advanced aluminum alloys and the conventional design sports sweptback wings with two pylon-mounted engines. Has Boeing's bold, innovative and controversial strategy to farm out manufacturing of the major components in its very late 787 Dreamliner failed? That partly depends on how much, if any, of the two-year and counting delay could have been avoided by making the aircraft largely on its own. So far, delays have played the starring role in losing Boeing 60 787 orders this year and winning it only 13 new ones.

The production of the 787 was supposed to revolutionize the way Boeing manufactures its planes. The company contracted with partners around the world to help it defray its projected $10 billion development costs by designing and building major components, which Boeing would then assemble at its Seattle factory. But the initiative has been fraught with numerous supplier problems and repeated production delays. When Boeing embarked on the production of its new 787, it did two things that were new. First, it designed its plane to be built mostly from carbon-fiber plastic instead of aluminum. Second, it outsourced much of the 787's design and manufacturing to other companies. A lot of what was done within Boeing earlier ended up being done elsewhere and managed through virtual teams consisting of employees from Boeing and the outsourcers. (Bowler 2005)

As it turns out, Boeing has run into problems. The 787 is at least six months late. Some of the problems that Boeing faced are common in writings about global virtual teams: language barriers and clashes with the traditions of the regions represented in the virtual team. But then there were other problems that typically don't get much coverage. One of them was that the outsourcers outsourced their work to others. The other problem was that Boeing overestimated suppliers' ability to handle the work assigned to them. Many bloggers and newspaper articles have discussed Boeing's problems as a supply chain problem. I agree that Boeing should have required its suppliers to locate closer to where the final assembly of the 787 is to take place. However, the problems at Boeing are quite likely an outcome of lack of proper controls in the virtual teams managing the outsourced projects. With controls in place, the problems would not have escalated to their current levels. (Woodward 2007)

Leaders of virtual teams have two options for implementing formal controls: outcome and behavior controls. Outcome control is achieved by measuring and regulating the outcomes sought, such as the quality and the quantity of the products or services being produced by the outsourcer who is working on the virtual team's project. On the other hand, behavior control relies on articulating procedures or processes to be followed by those working on the ...