Outsourcing Case

Introduction

Outsourcing has become a major trend in recent years with more and more companies contracting work out to third parties. This work can be done in the same country by another company or it can be completed in countries thousands of miles away. The Boeing Company, aircraft manufacturer, is one example of a company outsourcing. The Boeing Company was not the first company to outsource work to other countries, but did utilize and profit from the use of 3rd party labor. However, this trend of successful outsourcing would end for Boeing with the introduction of the Boeing 787 Dreamliner. Boeing has outsourced more than 70% of the design and production of the plane (Seattle Times). However, there have been many complications that have led to costly delays and billions of dollars being lost. If Boeing would have done a more complete analysis of the project and its risks, the magnitude of what was being outsourced might have been decreased. At the same time, if Boeing could utilize a model, such as the 24 hour knowledge factory, the Dreamliner project could have been much more efficient and cost effective.

History of Boeing

The Boeing Company was founded in 1916. They worked in several different areas of work from commercial airplanes to launch and orbital systems. However, it was not until the 1950's when the jet aircraft was put into use for the first time that the Boeing Company started to control the commercial airline market (Harvard Business School). Boeing would go unchallenged for roughly the next fifty-three years. However, during this time the European company Airbus began to grow. Eventually, Airbus would grow into Boeing's only competition. In fact, in 2003 Airbus sold more airplanes than Boeing. Airbus has had more deliveries ever since (Airbus). Boeing needed something to retake control of the aircraft market. It was clear that Airbus was taking away from Boeing's market share. During this time, Airbus introduced five new designs of aircrafts with Boeing still stuck with their next plane design. This heavy competition is what drove Boeing to create a new plane that would help them reclaim dominance of the industry. However, they needed to complete the plane quickly and with minimum cost. This is what drove Boeing to outsource a higher proportion of the new plane compared to any model before it.

Primary Reason for Outsourcing

There are several reasons why Boeing would choose to outsource the production of its new plane. The first is because outsourcing was common practice in the Boeing Company. On several models, production of parts was outsourced. Different companies would manufacture the parts and Boeing would assemble them all in a single location. The second reason is the cost savings. If Boeing can outsource the work, then they do not as many employees in-house. They