Another nail in the logic of outsourcing

Boeing, for a while after it took over McDonnell-Douglas, “owned” the commercial airliner business, with only the Airbus  consortium as competition in the large end of the business, although there are others in the small commuter end.

However, the 787 “Dreamliner” being 3 years late, and billions over budget, has seen a number of early adopter  airlines move to the big new Airbus A380. In the case of Qantas, this decision took them from a one supplier airline, Boeing, to a two supplier airline, a huge decision in the long term context of the life of an airliner model, the 747 introduced commercially in 1970, and still going pretty strongly, delivering sales of spares, upgrades, training, and maintenance to Boeing.  

Outsourcing, or “off-shoring” as it is in some cases often delivers a short term boost to a balance sheet, but the long term cost can be huge if  it is not done well, and few do it well. Boeing appear to have stuffed it up  with the 787, and will be paying the bill for many years.

I keep banging on about the phantom benefits of outsourcing, and the contrarian option of developing lean disciplines internally to retain and develop the capabilities to compete in the long term, and the very early appearance of a trend for bringing Intellectual Capital sensitive development “home”.  The apparent challenges facing Boeing in the delivery of the 787 will provide lots of fodder for the argument.