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Boeing Learns Its Lesson On Costly Outsourcing

Outsourcing, as anyone who's ever had to manage a project staffed in another country will tell you, is rife with all kinds of pitfalls -- and it's almost never cheaper, no matter what Tom "The World Is Flat" Friedman would like you to believe.

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Outsourcing, as anyone who's ever had to manage a project staffed in another country will tell you, is rife with all kinds of pitfalls -- and it's almost never cheaper, no matter what Tom "The World Is Flat" Friedman would like you to believe. Boeing learned the hard way:

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.

Boeing executives now admit that the company's aggressive outsourcing put it in partnership with suppliers that weren't up to the job. They say Boeing didn't recognize that sending so much work abroad would demand more intensive management from the home plant, not less.

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