Identify the Potential Drawbacks of Outsourcing Based on This Article

Identify the potential drawbacks of outsourcing based on this article

Shrinking Workforces: This is the major drawback of outsourcing. In the case of Boeing’s Dreamliner 787, most of the supply chain that used to be in-house previously has been shifted to vendors and suppliers that are overseas or from other states. Naturally as jobs are being sent to other companies to make parts of the plane like engines, horizontal stabilizer, fuselage etc. , the locals are losing their jobs since they have very little to contribute to the process of the value chain. There are many employees who have been working for 2 to 3 consecutive generations, however the concept is now at threat due to outsourcing.  Boeing is the world’s second largest commercial plane maker after Airbus and it boasts as the 24th largest US employer and the 4th largest employer in the US manufacturing sector. In 1978, Boeing employed around 250000 individuals in their workforce where the entire work was done in house, however after the 9/11 attacks as air travel dropped, Boeing dropped its workforce to 199000. Currently Boeing and its subsidiaries employ 160000 people in their workforce which clearly shows the drop due to outsourcing.

Change in work Culture: Now this effect has been demonstrated after Boeing’s merger with rival McDonnell Douglas. More often than not, we see this effect when two firms with different business strategies merge together. From changing hands of Harry Stonecipher to Jim McNerney, the merged giant has seen a lot of changes in the workculture when it was decided to outsource since before the merger, Boeing always assembled and manufactured full planes in their Seattle factory. It is clearly observable that due to outsourcing the concept of tribal knowledge is diminishing day by day. As Karen Kuren said that no company wants to outsource their core competency and in the case of Boeing, it was their level of tribal knowledge that made them edge past their rivals. Naturally the loss of tribal knowledge has consequences on their application of complicated designs and academic engineering concepts that cannot be taught in engineering classes. As jobs are being outsourced, the opportunity to carry forward this knowledge is being lost and it is removing the opportunities to learn this trade which is a trademark of American style of engineering.

Complicated process: Outsourcing as a concept might be easy to understand; however to put it into effective use and reap the benefits of it is easier said than done. Since in the case of Boeing, almost 90% of the job is being carried out by over 50 overseas partners, the integrity of the job can become very elaborate and complicated. This was exactly the case for Dreamliner’s 787 when the expected delivery had to be postponed twice due to the suppliers’ and vendors’ lack of maintaining a pre decided schedule. Daniel Swank, an aircraft technician mentioned that pre Dreamliner era was considered to be a legacy since at that time if they had run into any issue, it could be solved out by the respective department residing in the same vicinity. However after the outsourcing program, even for trivial things like washers of bolts to be obtained in case of scarcity, it needed to be addressed in a structured way that of vendors agreement, and if the agreement was duly respected, the ordered part would arrive after a few days delay due to transportation lag, which clearly shows the efficiency of the work process decreasing due to outsourcing.  Outsourcing creates a very elaborate process of supply chain and the degree of its complication is so great that even the suppliers do not have control over the manufacturing of the different parts, and the time taken to assemble one unit could increase exponentially, which not only is a blow to the budget, but also takes with it the reputation once associated with the company.

Analyze the factors which caused delay in delivery of dreamliner aircraft.

Inefficient Supply chain: Since Boeing wanted to lower risk and diversify their risk, they outsourced their supply chain to over 50 partners globally which meant that 70% of the job would be done out of house which proved to be detrimental to the production of Dreamliner 787. Now for a complicated supply chain, a synchronized supply and logistics information needs to be effective across multiple partner tiers so key components can arrive perfectly on time at the Everett facility of Boeing, since Boeing acted as the final assembler in the supply chain. Now Design engineers at Tier One locations such as Vought did not traditionally collaborate across multiple supply chains to develop coordinated designs. Naturally their plans fell flat. Companies such as Alenia could not supply fasteners quick enough to match the early production demand. The electronic system for the cockpit that was being prepared was not yet updated which caused delays in production. Naturally Boeing bought the two companies in order to regain control of its production system.

...