Boeing Case Study Group 2

Embry Riddle Aeronautical University

Question 1 The benefits of Boeing outsourcing are; cost in manufacturing 787 parts and labor, finding experts that make specific parts, and introducing the 787 to different countries expecting to increase sales. The risks of having different manufactures to make one plane include; delays in manufacturing parts, factories having to move or close, costs of resources in different parts of the world can fluctuate, and taxes and tariffs can change during the course of manufacturing. If the company can produce the 787 cheaper by outsourcing then, yes the benefits do outweigh the risk. However, from the scenario there are several drawbacks of the foreign companies and the risk is too high. Boeing should do the work themselves.
Question 2 Boeing failed to ensure that the other nations brought onboard to manufacture certain components of their aircraft were properly set up and prepared to start manufacturing. Boeing should have had more oversight of Italy’s issues with building a factory and they should have required proof that Italy already had adequate property to build the factory. Boeing also should have verified that there would be no local government interference that would hinder the ability to meet delivery deadlines. The other issue was one of their suppliers, Vought, outsourced to a different nation. Boeing should have had a clause in their contract with Vought, stating that if they outsourced some of their obligations, it would be vetted through Boeing first. This would allow Boeing to assess the sub-contracted nation’s ability to meet Boeing’s quality of standards. Boeing should have also had a penalty clause for outsourced components that held manufacturers financially responsible should their factory cause Boeing to deliver an aircraft late. To prevent such events from occurring again Boeing should have one of its executives visit factories in foreign nations more frequently and have greater oversight of their manufacturing processes. This would ensure deadlines and quality standards are being met before they become too big to deal with.
Question 3 There has been a lot of debate over this question. The problem many companies face today is profit margin. Astronomical salaries of CEOs and other high salary employees coupled with the company’s need to make profits for shareholders has forced them to find the best way to make their product cheap and sell for much higher prices. One of the best ways to make products cheap is to find subcontractors in foreign countries. Not only are the wages lower, Boeing would not have to worry about maintaining factories, following EPA regulations, or covering health care for their employees. There are several more reasons for companies like Boeing to outsource jobs. The example given in the case study is that outsourcing some of the production to other countries may influence those countries to buy aircraft from Boeing (Hill, 2013).
Outsourcing is such a common practice now by many different companies, and the sole purpose of any company is to make a profit. It would not be fair to criticize Boeing for doing their part to increase profits by outsourcing. Boeing will have to do its part to explain why it outsources parts of their production and know that not everyone will agree with it, but hopefully understand why.

References
Hill, C. (2013). International business: Competing in the global marketplace (9th ed.). New York, New York: McGraw-Hill.