Boeing Discovers You Get What You Pay For

The LA Times outlines what happens when a major manufacturer of advanced technology, offshore outsources for cheap labor. Guess what? Their entire design and process turns into a disaster. Such is the tale of Boeing:

Sure, it's immoral to abandon your loyal American workers in search of cheap labor overseas. But the real problem with outsourcing, if you don't think it through, is that it can wreck your business and cost you a bundle.

Case in point: Boeing Co. and its 787 Dreamliner.

The next-generation airliner is billions of dollars over budget and about three years late.; the first paying passengers won't be boarding until this fall, if then. Some of the delay stems from the plane's advances in design, engineering and material, which made it harder to build. A two-month machinists strike in 2008 didn't help.

But much of the blame belongs to the company's quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing's dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house.

The 787 has more foreign-made content — 30% — than any other Boeing plane, according to the Society of Professional Engineering Employees in Aerospace, the union representing Boeing engineers. That compares with just over 5% in the company's workhorse 747 airliner.

Boeing's goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits.

The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn't fit together. Some subcontractors couldn't meet their output quotas, creating huge production logjams when critical parts weren't available in the necessary sequence.

Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints.

Some then farmed out their engineering to their own subcontractors, Mike Bair, the former head of the 787 program, said at a meeting of business leaders in Washington state in 2007. That further reduced Boeing's ability to supervise design and manufacture. At least one major supplier didn't even have an engineering department when it won its contract, according to an analysis of the 787 by the European consortium Airbus, Boeing's top global competitor.

Amazing, so much is the push to screw over your employees Boeing didn't even bother to check if there was any engineer before awarding a contract. Their best people told them it would cost more, yet executives didn't care. Such is the herd behavior and mindset of executives, even ones whose business is advanced technology.

Boeing isn't the one corporation sold a bill of goods thinking labor arbitrage will save them a bundle.

Offshore outsourcing outright failure rate is over 50%. Additionally often there are no costs savings and statistics are hidden, mainly due to the offshore outsourcers themselves wanting to continue to obtain contracts. For example, one of the worst outsourcer IBM, was just warned by Texas on their repeated failure to deliver on a contract. IBM has fired thousands of American engineers, software engineers, scientists and offshore outsourced to India, China as well as imported foreign guest workers.

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It is amazing to watch USA

It is amazing to watch USA and Europe’s Companies giving away intellectual property and expertise for cheap short term gain it will bite you on the arse eventually.
But what is even more amazing is that there politicians don’t see it either. Be sure everyone else does.

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Boeing outsourcing

Re excerpt: Economic populist.
"The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn't fit together. Some subcontractors couldn't meet their output quotas, creating huge production logjams when critical parts weren't available in the necessary sequence".
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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 to use that cumbersome anachronism without hitches? Airbus outsourcers a lot of 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 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 labour for the wealthy lot to exploit.

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Metrics

Trust me, U.S. engineers know the metric system. They even know how to convert from inches to centimeters.

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This is what watching the Stock Market does...

All managers of public listed businesses aer ruled by the Stock Market. The Share Price is everything.

I bet when this NEW model was created by the bean-counters in Boeing it was primarily targeted at the men and women of Wall Street. I also bet that Share Prices soared and the people who managed made a lot of money on their shares.

The people who run the USA are primarily Financiers, Bankers, Lawyers and Accountants. They don't respect any one who makes their living in any other way(except possibly doctors?)because to them it's the cost which is important - not the value.
An experienced Engineering Team at Boeing is expensive - for good reason - they combine Skill with Knowhow peppered with experience and a Love of the business.

That means nothing to an accountant. He and the rest of the financial world are looking for low costs and a quick profit. Much better to get the work done by people who cost less - whatever their skill and wherever they are.

What they don't realise and probably wouldn't care about if they did is that they have drilled some big holes in the hull of USS Industry for a quick profit. They can walk away from the wreckage with a few millions and not look back.
For those who do a days work to earn their dime this is not an option and they CARE for their Industry and their Neighborhood.

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787 outsourcing wasn't really to low cost countries!

I'm surprised by the number of articles that associate the delays and cost over-runs of the 787 program to outsourcing to "low cost countries"...guys, please check the suppliers of the 787 yourself: http://www.airframer.com/aircraft_detail.html?model=B787..they are mostly US, European and Japanese suppliers and not low cost!

The true issues were Bad planning and control of outsourcing activities. This article should really be talking about how Boeing squeezed its suppliers so much that they had to cut corners at its expense!

Totally sympathise with anybody loosing his/her job due to outsourcing/restructuring or down-sizing, but good people can move easily and there's always demand on engineering skills (to suppliers e.g.) but a greater loss would happen if Boeing losses its credibility and long term profitability

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not there isn't

Hello Outsourcer.

This is what I am referring to in the article comments. Offshore outsourcers will stop at nothing to try to claim their failure rate isn't what it is or their cost savings are great.

Sorry, there are U.S. engineers not working or forced out of their careers all over the U.S. Secondly, Boeing did offshore outsource to low cost countries, the article mentions the list, so it is about labor costs as well as production costs.

You outsourcers plan screwed up and I think most Americans couldn't be happier. Unfortunately the screw ups never make it to the press.

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A program too far

Boeing was always conservative with their new airplane programs in the past and made small increments from program to program because they risk a tremendous amount of money on each airplane. The 767 which was certified in 1982 only had composite ailerons and rudder. The 777 designed in the 90's only had a composite vertical tail. For some reason Boeing leapt to an all composite design and a huge increase in outsourcing. The outsourcing was based on the assumption that if the suppliers were risk sharing partners, Boeing executives could put them on the honor system to keep their work on schedule. That assumption failed.

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Boeing shouldn't be squeezing workers at all

Never mind trying to do cost savings global sourcing on something as advanced and complex as a new type of aircraft. It's ridiculous and it's also evident it would be fraught with problems from the downward spiral of car quality of "globally sourced" parts.

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another lovely fire everyone pay yourself

This is another story in reference to the absurdity of screwing over workers while paying yourself, covered under "corporate executive compensation".

Balkin:

After seven months, they laid off 841 workers, which at a reasonable guess of $125,000 all-in cost per employee (salaries, benefits, space, phone, etc.) would represent annual savings of more than $100 million. And then the two partners borrowed $1.1 billion more on Travelport's balance sheet and paid that money to themselves, presumably as a reward for their hard work. In just seven months, that is, they got their $1 billion fund investment back, plus a markup, plus all those banking fees and annual management fees, and they still owned the company. And note that the annual $100 million in layoff savings would almost exactly cover the debt service on the $1.1 billion. That's elegant---what the financial press calls "creating value."

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