Sample Essay on Boeing Outsourcing

You are a corporate R&D manager at Boeing and are thinking about transferring some R&D work to China, India, and Russia, where the work performed by a $70,000 US engineer reportedly can be done by an engineer in one of these countries for less than $7,000. However, US engineers at Boeing have staged protests against such moves. US politicians are similarly vocal concerning job losses and national security hazards. What are you going to do? As a Boeing manager I view the outsourcing of some jobs to countries like; India, China, and Russia to be completely ethical and beneficial to the homeland.

When referring to home land I am referring to the company’s place of origination. In this case the company is Boeing and the homeland is the United States. Multinational enterprises (MNEs) are becoming increasingly well known for their globalization strategies. MNEs like Boeing are known for concentrating their on their upstream and downstream aspects of their firms.

It is also recognized that focusing on these aspects of the respected firms adds great value (Mudambi, 2008).

Recognizing this characteristic Boeing is more than likely focused on the up and down stream of their firm and is able to take advantage of advanced technological countries like India and China. By outsourcing the middle of the value chain which includes research and development (R) Boeing is able to focus on what will inherently create more opportunities in the homeland. The Bloomsburg Business week online paints a clear picture of the driving force that is at the heart of Boeings integration by stating, ” Boeing seeks foreign suppliers with the best aerospace technologies and manufacturing skills regardless of the cost”.

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This only drives home the fact there are other countries that have advanced in technology and integrative systems. To touch on what was stated in the previous paragraph Boeing appears to be focusing on the upstream and downstream attributes of their company. Hence, new and innovative jobs are getting created on this level. The some of the middle portion of the value stream which includes R is being outsourced to countries who are on the brink of innovation. In closing, Boeing is not only doing what is best for its company by outsourcing aspects of the value chain like R.

But, they are ethically focusing on aspects of the company that will bring value to the homeland. http://www3. druid. dk/wp/20100019. pdf for new aircraft, develop the system architecture, monitor the parts production from suppliers, integrate the systems with the fuselage and engines, and also oversee all testing of the airplane. Mudambi (2008) suggests indeed that firms from advanced regions are finding that value-added is becoming increasingly concentrated in the upstream (R) and downstream (marketing) ends of the value chain.

For this reason, firms focus on these activities at home, while offshoring the middle of the value chain. Following Lewin et al. (2009), we push this argument further: Not only it does make sense to offshore the middle of the value chain, but part of the R activity can be offshored as well. We argue that this may happen without necessarily damaging the efficiency of the home region R base research on the internationalization of R activities has shown that multinational enterprises (MNEs) are increasingly internationalizing their R activities to tap into the 1 echnological capabilities of specific host locations to ultimately develop the firms’ own ability to combine knowledge into innovations While it is a possibility that offshoring will stifle innovative activity in the home region (see e. g. , Teece, 1987; Manning, Massini and Lewin, 2008) it is also possible that R offshoring to emerging economies will complement and hence enhance the value of R carried out in the home region (Kotabe, 1990; Verspagen and Schoenmakers, 2004). http://www3. druid. dk/wp/20100019. pdf Strategy and Practices

Boeing’s outsourcing strategy focuses on a few core competencies, such as high-end design, engineering and systems integration. It finds the best suppliers globally at lower cost to do the detail designing and manufacturing of parts. The eligible suppliers are those innovative and smaller companies who have proved by intense competition in the market that they could provide the best quality of a certain specialized component for Boeing’s end product. Those suppliers highly focus on core competencies of their own, and continually make the best of their expertise to create additional value for Boeing.

They release Boeing from trying to take a product from start to finish in-house. Since there are a lot of very competitive and very talented smaller companies available in the global market, which could do specific work faster, cheaper, and better, Boeing now does relatively little metal cutting or forming. At Boeing, about 70% of the content for a given airplane is procured from outside sources in more than 27,000 companies and nearly 100 countries (see Exhibit 6).

It gets almost everything from small to large subassemblies from suppliers; taking each piece and integrating them to build an airplane. The key mission of Boeing’s supplier management is to find the right suppliers to give best value for each piece of components. Cost is no longer the most important factor to determine vendor selection. Quality, agility and innovation have become the primary drivers. Quality is of course the minimum entry-level requirement for suppliers who want to do business with Boeing.

Agility is another primary criterion when Boeing selects suppliers because of the increase in reliance on suppliers of machined parts and subassemblies (Destefani, 2004). Given that the market requirements and conditions keep on changing incessantly, rapid response and adjustment to changes are crucial for competency. Any delay by a supplier for a tiny piece of component will result in the stagnancy of Boeing’s whole production. Benefits By using the best the world can offer and focusing on large-scale integration, Boeing is trying to explore the way to improve its competitiveness and grow its business. We look all around the world for the best technology, the best intellectual capability, and for the best manufacturing capability in a serious effort to improve our competitiveness,” says Jim Morris, Boeing’s vicepresident for engineering & manufacturing and the architect of the company’s outsourcing strategy. “We keep the best partners in terms of quality, cost, and capability. ” (Holmes, 2006) Boeing’s suppliers specializing in a specific type of part production and make the best of their highly focused core competencies to provide components with higher quality, agility, efficiency, and innovation than what Boeing used to do in house.

Boeing leverages these global resources to obtain the best that the world can offer at the best price. Released from part manufacturing and detailed designing, Boeing focuses its intellectual talent on the top level designs and core technology innovation. Boeing hires top engineers to be responsible for creating the conceptual design and requirements for new aircraft, develop the system architecture, monitor the parts production from suppliers, integrate the systems with the fuselage and engines, and also oversee all testing of the airplane.