12 ms·

787 Dreamliner teaches Boeing costly lesson on outsourcing

129 points by pointillistic 16y ago

gaius 16y ago
Sure, it's immoral to abandon your loyal American workers in search of cheap labor overseas. I know a lot of people who talk like this. However when it comes to spend their own money, they always go for whatever's cheapest, whether it's clothes, electronics, whatever. You can literally see these people ranting about worker's rights while wearing Primark and talking on a Huawei OEM'd handset. Me, I'm a capitalist, and proud of it, but y'know, I'm the one willing to spend a little extra for a UK PLC product. Bullshit talks, money walks.
- jmm 16y ago
  Kind of unfortunate that this is the top comment here since the article has nothing to do with the immorality of outsourcing. I took his mention to be a throwaway nod of the head to the typical discussion of outsourcing. Then he moved on.
  - gaius 16y ago
    No, the agenda of the author is clear. A few paragraphs below: a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits
    - jmm 16y ago
      That might be a sad state of affairs but I didn't see the author making it out to be the result of an immoral decision. Just a bad decision.
      - jhghjmhnbgv 16y ago
        There are suggestions that part of the motivation was to reduce the power of the heavily unionized workers in Seattle and allow the company to transfer to a cheaper assembly plant in the south - just as car makers had done. If you are only doing final assembly you can move the plant every 10years or so to get the best deal from local government. It's difficult to do that if you need an army of people with a lifetime of skills.
    - borism 16y ago
      full sentence doesn't make this agenda so clear: 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. of course it is still designed in Seattle, and many of those parts and outsource partners are still in the USA, only 30% is from abroad according to the article.
      - nitrogen 16y ago
        Contrast the positive adjective "storied," applied to the term "aircraft factory," against the negative adjective "mere," applied to the term "assembly plant." Reading only that sentence, it's quite clear which the author prefers.
    - deleted 16y ago
      [deleted]
- jhghjmhnbgv 16y ago
  It wasn't the foreign suppliers that were the problem - Mitsubishi delivered the wings on time. It's was the excessive outsourcing to layers and layers of subcontractors without enough oversight. So a one mall plating shop in Albuquerque goes out of business and a critical path component is missing. This is fairly common in defense, highly specialized components are subbed out to small shops - there are lots around LA - the problem here was that there was so many layers of sub-sub-sub contractors all being bidded out to the cheapest supplier nobody had any idea who was making what. That works for Walmart - it doesn't work for Boeing. How they thought they were going to ensure40years supply of spare parts is anybodies guess
  - quanticle 16y ago
    Just to elaborate on your point, the outsourcing model works for Walmart because Walmart is selling numerous separate products, rather than an integrated whole. It seems that Boeing forgot that lesson and started thinking of their airplane as a "collection of parts flying in close formation".
    - jhghjmhnbgv 16y ago
      Also very few of Walmart's products are critical path - if they run out of lemon scented cleanup squares the store still opens (gratuitous hitch hikers reference)
  - ChuckMcM 16y ago
    How does it work for EADS ? (Airbus manufacturer)
    - jhghjmhnbgv 16y ago
      There are very much fewer sub-contractors. Major system components are built in different plants in different countries but all by a handful of airbus subsidiaries or major aerospace corps. So the supply chain is much shorter and shallower There were still screwups, a different version of the CAD package meant changes didn't propagate and the Airbus 380 wiring looms were all made the wrong length. There were early warnings of Boeing's problem. The prototype had to be built with non-aerospace rivets which had to all be removed and the plane rebuilt for it's first flight. Aerospace grade rivets were in short supply and Boeing was just looking for the cheapest supplier who didn't deliver. Japanese companies taught us about the value of close working relationships with suppliers 20years ago, the car makers have learned it but Boeing didn't - they acted more like a Walmart buyer and it cost them.
- hyperbovine 16y ago
  Assuming the foreign workers are not being exploited or abused, I don't understand why it is any more or less moral to channel your commerce to them as opposed to people in your own country.
  - lotusleaf1987 16y ago
    Well, when you spend your money in a local economy the money tends to circulate back around. Say I shop from a farmer's market, I support people living in my community who can then spend that money on other local goods/services, and eventually some of that money may make it's way back to myself. If I shop at Wal-Mart, the money leaves my local economy forever and basically just goes to shareholders and overseas manufactures. I also think local merchants are more likely to sell goods/services that are better for their local economy than a big box retailer that is completely disconnected from the local economy.
    - pavel_lishin 16y ago
      So the reason it's moral is because you might get the money back? Isn't that just self-interest?
    - yummyfajitas 16y ago
      This claim is ridiculous. Your mental model of the economy involves tracking the movement of a particular dollar bill and ignoring the movement of dollar bills which start at distant locations. This is a fallacy. If you shop at Walmart, that particular dollar bill is put on a truck and sent to Walmart Secret World Headquarters hundreds of miles away, and it eventually makes it's way to producers a world away from you. On the other hand, Walmart (and other businesses located hundreds of miles away) will buy goods from your locality, ship them to other distant locals, and send you a different dollar bill in return. The fundamental issue is whether gains due to comparative advantage > shipping/logistics costs. As a result of shipping/logistics costs dropping rapidly (walmart has been a pioneer here), the non-local goods have won out. (Granted, none of this has anything to do with the morality of giving a job to a guy named Jose instead of a guy named Joe.)
- retube 16y ago
  Can't upvote enough. People have no problem that they can buy a kettle for £5 that was made in China, but take issue withe the fact that manufacturing jobs are going to... China.
  - dragons 16y ago
    >> People have no problem that they can buy a kettle for £5 that was made in China, but take issue withe the fact that manufacturing jobs are going to... China. Well, some people have a problem with that. Some people try to buy fair trade goods, and don't mind paying more for locally made items. But it's getting harder and harder to find an item that's not made in China. A few years ago I tried to find a blood pressure monitor that was made anywhere but China. No luck. The only choice I had was not to buy one at all, and that wouldn't work for me. I've experienced this problem time and again.
    - retube 16y ago
      > Some people try to buy fair trade goods, and don't mind paying more for locally made items Some, yes. I'll wager it's a minority though.
microarchitect 16y ago
The title should really be 787 Dreamliner teaches Boeing a costly lesson in due-diligence. This sort of thing has nothing to do with outsourcing and everything to do with poor decision making by management.
- gnaffle 16y ago
  Here's the problem, though: Who is capable of doing the due diligence? By outsourcing, you end up losing a lot of the in-house knowledge necessary to spot problems early on.
  - gaius 16y ago
    That's not necessarily true; systems integration is a skill in its own right. It's just about what level of abstraction you work at. As software people we ought to understand this better than anyone.
    - varjag 16y ago
      You need freshmen code grunts first to become analysts later. Once you remove the low level design work, you lose (in time) the experts as well. You can't have someone figure out how to put wings to hull properly if he never ever drawn a single fastening bolt in his life.
      - gaius 16y ago
        You can hire those pre-experienced in that from your vendors. This happens tonnes in industry; if you want a well-paid senior networking job, get a low-paying entry-level job in Cisco TAC and wait to be poached...
        stcredzero 16y ago
        You can hire those pre-experienced in that from your vendors. Just how loyal and committed are these folks one is poaching from vendors?
pmorici 16y ago
In Boeing's case wasn't there a secondary goal in outsourcing of drumming up foreign demand? I seem to recall reading an article a few years back where Boeing agreed to outsource the wing sub assembly to some Asian country and in return that country agreed to buy some number of Boeing planes. I can't seem to find the article now though.
- dagw 16y ago
  Yea, that's what I've heard as well. I think India for example basically told Boeing and Airbus, "we're buying from whoever creates the most local jobs for us". So it has nothing to do with outsourcing to save money, and everything to do with outsourcing to close sales.
  - stcredzero 16y ago
    It's the Aerospace industrial complex! Only instead of representatives and US states, it's corporate boards and other nations.
- dicemoose 16y ago
  Mitsubishi, Kawasaki and Fuji Heavy Industries in Japan are building several of the components for the 787 and All Nippon Airways is to be the first airline to receive a 787. http://www.seattlepi.com/business/275465_japan27.html http://www.seattlepi.com/business/275465_japan27.html There were issues with where the wing meets the body (both parts built in Japan), but the responsibility supposedly lies with Boeing who designed the parts. http://seattletimes.nwsource.com/html/boeingaerospace/2009565319_boeing30.html http://seattletimes.nwsource.com/html/boeingaerospace/200956... Japanese and Korean suppliers are working to ramp up production of parts. http://www.bloomberg.com/news/2010-10-01/boeing-787-suppliers-fuji-kawasaki-to-add-parts-lines-in-2011.html http://www.bloomberg.com/news/2010-10-01/boeing-787-supplier...
- notahacker 16y ago
  This is part of it. Its also part of the reason why Airbus/EADS quite successfully builds bits of aircraft all over Europe (and even proposed expansions of operations in Alabama as part of their bid for USAF tankers) Also, it may surprise the article author to learn that there are outside specialists who have capabilities that Boeing couldn't effortlessly replicate in Seattle. Italy and Sweden certainly don't have low labour costs and they don't have much of a domestic market for long range airliners either. Ultimately Boeing's logistical cockups have more to do with the overall ambition and complexity of the project than cost cutting.
wazoox 16y ago
Not much different from what happened to airbus only a couple of years before.
- yardie 16y ago
  Hasn't Airbus always been some sort of multinational/EU-national plane manufacturer? I believe thats how it started as instead of a bunch of small enterprises siloed in each country they were pooling resources and talent to take on the American hegemony in aerospace.
- CaptainZapp 16y ago
  Not much different from what happened to airbus only a couple of years before. Uhh, no. That had much more to do with the structure of EADS (the airbus parent) and how it's a joint company between multiple European countries. Notably France, Germany, Spain and the UK. Airbus also had French / German co CEO's at that time, which didn't help decision making. The problem stemmed from the fact that manufacturing is divided between various plants in various countries. Notably between Toulouse (France) and Hamburg (Germany). This is certainly not the same thing as outsourcing critical components to external suppliers (which I'm sure Airbus does too to a lesser extent). Upon final assembly of the A380 in Hamburg they bungled the cabling which hit them back another six month or so. They where other problems of course, which there are always bound to be on such an ambitious project and with the (likely) unrealistic time scale for delivery. The A380 was two years late, which is probably not bad for such a project. I wouldn't bank on it that the Dreamliner takes of in 2011. At least not commercially.
  - jhghjmhnbgv 16y ago
    The airbus style big block integration actually worked quite well - engines from RR, undercarriage from airbus and wings from Mitsubishi all worked well. The problem was that they eg. farmed out the avionics to mega corp, who farmed out the hardware to company A and software to B. Company B farmed out bits to company C and company D. Nobody realised that company D was a single contractor shop until they were late which went all the way up the chain. There was an article on here at the time, Boeing literally couldn't find out the name of the company doing a vital part of the avionics software.
pohl 16y ago
Among the least profitable jobs in aircraft manufacturing, he pointed out, is final assembly — the job Boeing proposed to retain. ...and... "I warned Boeing not to make the same mistake. Everybody there seemed to get the message, except top management." If top execs aren't keeping an eye on where the profits are, you're screwed. Are they compensated too well to care?
- tomjen3 16y ago
  No. They are given stock options which means that they have an incentive to pump the price up short term even if it means that long term the company would loose more money.
  - yummyfajitas 16y ago
    Most of the stock options given to top execs have exercise dates well in the future and no-resale clauses. Short term gains in stock price may get them a bonus, but it won't boost the value of their long term options.
  - mistermann 16y ago
    Precisely, and this explains a wide swath of seemingly nonsensical decisions being made in western countries in the last decade.
    - acgourley 16y ago
      I feel like most execs are still concerned about their long term credibility and legacy ove their ability to pump some of their stock at a higher value in the short term. And I say that with full cynicism - it's simply suboptimal for them personally to do so.
- 6ren 16y ago
  The Innovator's Solution (by Christensen, who wrote the Innovator's Dilemma) says that assembly can be profitable or non-profitable, depending on what qualities are currently in demand in the market. As an example, Dell made a lot of money being an assembler.
ramkrishnapk 16y ago
Aim to establish India in global supply chain: Boeing http://timesofindia.indiatimes.com/business/india-business/Aim-to-establish-India-in-global-supply-chain-Boeing/articleshow/7458158.cms http://timesofindia.indiatimes.com/business/india-business/A...
motters 16y ago
It depends upon how the outsourcing is managed. By outsourcing you're adding extra complexity, unknowns and unmeasureables to the problem - increasing the variety in cybernetic terms. Unless you have a sufficiently good way of managing that additional complexity you're going to get into trouble, which in business terms means overruns or in the worst case failure of the enterprise. See Ashby's law for details.
Derbasti 16y ago
This makes it sound like US companies were better than foreign countries just because they are american. Me, I feel slightly insulted by that. Just look at american cars. I kid. There is nothing wrong with patriotism and there is nothing wrong with outsourcing, if both is done with due diligence and proper planning. But there is no way one company is any better than any other company just because it is registered in a different country. The 787 did not have problems because of outsourcing, it has problems because of bad planning--at the all-american Boing HQ itself.
- jasonkester 16y ago
  You're only insulted because you misread outsourcing to mean offshoring. Boeing farmed work out to other companies, and it bit them. The fact that some of those companies were based in other countries is not a point mentioned as a contributing factor.
  - Derbasti 16y ago
    Oh! My bad, you are right! I repent!
igrekel 16y ago
Interesting viewpoint from hat retired employee who said the final assembly has the least value. Kind of put the fact that the final assembly of electronics such as the iPhone is outsourced while some of the component are home mad or at least home designed.
- lurker17 16y ago
  Why do you believe that components are home made? They are only home-designed. Nearly all of the iPhone is built and assembled outside of Apple and outside of the US. The (non-standard parts of the) hardware are "designed by Apple in California", and the bulk of the software is created in Cupertino as well. http://texyt.com/iphone+manufacturer+supplier+assembler+not+apple+00113 http://texyt.com/iphone+manufacturer+supplier+assembler+not+...
spoiledtechie 16y ago
Boeing has been late on almost all their projects. The Australia tanker is behind by 2 years, the Japanese shipment is behind by 3 years and counting. Its sad to see a company that is politically corrupt still win contracts by the U.S. Government even though it delivers years behind schedule.
- sanj 16y ago
  Unlike software, which is always on schedule.
  - calloc 16y ago
    Not if you are part of the highway bandits!
- bediger 16y ago
  The US Government (Department of Defense and "Intelligence Community") doesn't have a lot of choice. They've let the already incestuous aerospace industry contract to about 4 main companies, and those 4 don't compete with Boeing in the passenger aircraft space. Boeing probably hasn't had a "farm team" of design engineers for 20 or 25 years, now. Designing a new passenger jet isn't something that comes around more than once in a lifetime.
- quanticle 16y ago
  To be honest, though, its not like any of the other aerospace companies are any better. Airbus, for example, experienced huge delays in getting the A380 built, simply because its engineers were using two different versions of the same CAD tool (http://www.cadalyst.com/management/what-grounded-airbus-a380-5955 http://www.cadalyst.com/management/what-grounded-airbus-a380...).
- crs 16y ago
  Politically Corrupt? That is a fairly large blanket statement your throwing out there.
jdfreefly 16y ago
I'll take planes I don't want to get in for 1000 Alex! Seriously, think of software projects that took years longer than predicted and went way over budget. What kind of product was finally delivered? I don't want to be a seller of fear (I hate that about the US) but I won't be surprised to see serious issues with this thing when it enters service. Anyone here ever work on a 3 year long 1 year project? I have and its rare to see the attention to quality at the end of that 3 year death march that you see in the beginning.
pgroves 16y ago
I'm surprised no one is talking about the fact that this is one of the most complex projects ever undertaken by human beings. It was being designed and orchestrated in the only way we know how, and it broke down. I don't believe bringing in the people 20 layers below the top management and giving them a paycheck that says 'Boeing' on it would solve all the problems. They were building something too complicated for their basic process (blueprints, documents, proposals, etc.) Many of the problems such as parts that don't fit and supply chain problems could be solved by current machine learning techniques. Too bad Google and Facebook hire all those people and sets them to work optimizing ad placement.
- jey 16y ago
  > Many of the problems such as parts that don't fit and supply chain problems could be solved by current machine learning techniques. How? I know a bit of ML but don't understand what you're saying.
  - pgroves 16y ago
    Optimization research is most directly applicable. Genetic algorithms are probably the most widely known. But in general, the problem involves doing pattern detection between possible designs and their quality metrics. When the whole thing is in software the designs can be verified ahead of time. For instance, you can create a language for designing airplane wings, and then the optimizer can generate potentially good designs, they can be verified to be manufacturable, and then they can be fed into a virtual wind tunnel to figure out if the design performs well. They can also be scored by things like weight and cost to manufacture. Let the optimizer iterate a few thousand times and you're really doing a machine learning problem where the blueprints and the quality metrics are the data set.
    - VladRussian 16y ago
      you didn't get the article. What you're saying requires [necessarily] common "virtual design studio" and/or at least very good communication channels between different participants. The article clearly mention that some subcontractors even didn't have their own engineering department. Be the task contained inside Boeing - there would at least be some "common workspace", though i'm not necessarily saying that it would be sufficient condition.
sagacity 16y ago
Off topic, but I'll keep this short: At the time I post this, there are just 52 comments on the story at LATimes site, while there are 75 here !!! I guess that'll surprise a few.
- T-hawk 16y ago
  Not too surprising. Any talk of outsourcing will hit a pretty personal nerve among the hacker and programmer community.
  - sagacity 16y ago
    A small clarification: :-) Being fairly new here at HN, I was not fully aware of the popularity of this community and actually speaking, the only context in which I made my observation was a comparison of general traffic/interest/engagement levels between HN and LATimes.

129 points by pointillistic 16y ago

gaius 16y ago

Sure, it's immoral to abandon your loyal American workers in search of cheap labor overseas. I know a lot of people who talk like this. However when it comes to spend their own money, they always go for whatever's cheapest, whether it's clothes, electronics, whatever. You can literally see these people ranting about worker's rights while wearing Primark and talking on a Huawei OEM'd handset. Me, I'm a capitalist, and proud of it, but y'know, I'm the one willing to spend a little extra for a UK PLC product. Bullshit talks, money walks.

jmm 16y ago
Kind of unfortunate that this is the top comment here since the article has nothing to do with the immorality of outsourcing. I took his mention to be a throwaway nod of the head to the typical discussion of outsourcing. Then he moved on.
- gaius 16y ago
  No, the agenda of the author is clear. A few paragraphs below: a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits
  - jmm 16y ago
    That might be a sad state of affairs but I didn't see the author making it out to be the result of an immoral decision. Just a bad decision.
    - jhghjmhnbgv 16y ago
      There are suggestions that part of the motivation was to reduce the power of the heavily unionized workers in Seattle and allow the company to transfer to a cheaper assembly plant in the south - just as car makers had done. If you are only doing final assembly you can move the plant every 10years or so to get the best deal from local government. It's difficult to do that if you need an army of people with a lifetime of skills.
  - borism 16y ago
    full sentence doesn't make this agenda so clear: 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. of course it is still designed in Seattle, and many of those parts and outsource partners are still in the USA, only 30% is from abroad according to the article.
    - nitrogen 16y ago
      Contrast the positive adjective "storied," applied to the term "aircraft factory," against the negative adjective "mere," applied to the term "assembly plant." Reading only that sentence, it's quite clear which the author prefers.
  - deleted 16y ago
    [deleted]
jhghjmhnbgv 16y ago
It wasn't the foreign suppliers that were the problem - Mitsubishi delivered the wings on time. It's was the excessive outsourcing to layers and layers of subcontractors without enough oversight. So a one mall plating shop in Albuquerque goes out of business and a critical path component is missing. This is fairly common in defense, highly specialized components are subbed out to small shops - there are lots around LA - the problem here was that there was so many layers of sub-sub-sub contractors all being bidded out to the cheapest supplier nobody had any idea who was making what. That works for Walmart - it doesn't work for Boeing. How they thought they were going to ensure40years supply of spare parts is anybodies guess
- quanticle 16y ago
  Just to elaborate on your point, the outsourcing model works for Walmart because Walmart is selling numerous separate products, rather than an integrated whole. It seems that Boeing forgot that lesson and started thinking of their airplane as a "collection of parts flying in close formation".
  - jhghjmhnbgv 16y ago
    Also very few of Walmart's products are critical path - if they run out of lemon scented cleanup squares the store still opens (gratuitous hitch hikers reference)
- ChuckMcM 16y ago
  How does it work for EADS ? (Airbus manufacturer)
  - jhghjmhnbgv 16y ago
    There are very much fewer sub-contractors. Major system components are built in different plants in different countries but all by a handful of airbus subsidiaries or major aerospace corps. So the supply chain is much shorter and shallower There were still screwups, a different version of the CAD package meant changes didn't propagate and the Airbus 380 wiring looms were all made the wrong length. There were early warnings of Boeing's problem. The prototype had to be built with non-aerospace rivets which had to all be removed and the plane rebuilt for it's first flight. Aerospace grade rivets were in short supply and Boeing was just looking for the cheapest supplier who didn't deliver. Japanese companies taught us about the value of close working relationships with suppliers 20years ago, the car makers have learned it but Boeing didn't - they acted more like a Walmart buyer and it cost them.
hyperbovine 16y ago
Assuming the foreign workers are not being exploited or abused, I don't understand why it is any more or less moral to channel your commerce to them as opposed to people in your own country.
- lotusleaf1987 16y ago
  Well, when you spend your money in a local economy the money tends to circulate back around. Say I shop from a farmer's market, I support people living in my community who can then spend that money on other local goods/services, and eventually some of that money may make it's way back to myself. If I shop at Wal-Mart, the money leaves my local economy forever and basically just goes to shareholders and overseas manufactures. I also think local merchants are more likely to sell goods/services that are better for their local economy than a big box retailer that is completely disconnected from the local economy.
  - pavel_lishin 16y ago
    So the reason it's moral is because you might get the money back? Isn't that just self-interest?
  - yummyfajitas 16y ago
    This claim is ridiculous. Your mental model of the economy involves tracking the movement of a particular dollar bill and ignoring the movement of dollar bills which start at distant locations. This is a fallacy. If you shop at Walmart, that particular dollar bill is put on a truck and sent to Walmart Secret World Headquarters hundreds of miles away, and it eventually makes it's way to producers a world away from you. On the other hand, Walmart (and other businesses located hundreds of miles away) will buy goods from your locality, ship them to other distant locals, and send you a different dollar bill in return. The fundamental issue is whether gains due to comparative advantage > shipping/logistics costs. As a result of shipping/logistics costs dropping rapidly (walmart has been a pioneer here), the non-local goods have won out. (Granted, none of this has anything to do with the morality of giving a job to a guy named Jose instead of a guy named Joe.)
retube 16y ago
Can't upvote enough. People have no problem that they can buy a kettle for £5 that was made in China, but take issue withe the fact that manufacturing jobs are going to... China.
- dragons 16y ago
  >> People have no problem that they can buy a kettle for £5 that was made in China, but take issue withe the fact that manufacturing jobs are going to... China. Well, some people have a problem with that. Some people try to buy fair trade goods, and don't mind paying more for locally made items. But it's getting harder and harder to find an item that's not made in China. A few years ago I tried to find a blood pressure monitor that was made anywhere but China. No luck. The only choice I had was not to buy one at all, and that wouldn't work for me. I've experienced this problem time and again.
  - retube 16y ago
    > Some people try to buy fair trade goods, and don't mind paying more for locally made items Some, yes. I'll wager it's a minority though.

microarchitect 16y ago

The title should really be 787 Dreamliner teaches Boeing a costly lesson in due-diligence. This sort of thing has nothing to do with outsourcing and everything to do with poor decision making by management.

gnaffle 16y ago
Here's the problem, though: Who is capable of doing the due diligence? By outsourcing, you end up losing a lot of the in-house knowledge necessary to spot problems early on.
- gaius 16y ago
  That's not necessarily true; systems integration is a skill in its own right. It's just about what level of abstraction you work at. As software people we ought to understand this better than anyone.
  - varjag 16y ago
    You need freshmen code grunts first to become analysts later. Once you remove the low level design work, you lose (in time) the experts as well. You can't have someone figure out how to put wings to hull properly if he never ever drawn a single fastening bolt in his life.
    - gaius 16y ago
      You can hire those pre-experienced in that from your vendors. This happens tonnes in industry; if you want a well-paid senior networking job, get a low-paying entry-level job in Cisco TAC and wait to be poached...
      - stcredzero 16y ago
        You can hire those pre-experienced in that from your vendors. Just how loyal and committed are these folks one is poaching from vendors?

pmorici 16y ago

In Boeing's case wasn't there a secondary goal in outsourcing of drumming up foreign demand? I seem to recall reading an article a few years back where Boeing agreed to outsource the wing sub assembly to some Asian country and in return that country agreed to buy some number of Boeing planes. I can't seem to find the article now though.

dagw 16y ago
Yea, that's what I've heard as well. I think India for example basically told Boeing and Airbus, "we're buying from whoever creates the most local jobs for us". So it has nothing to do with outsourcing to save money, and everything to do with outsourcing to close sales.
- stcredzero 16y ago
  It's the Aerospace industrial complex! Only instead of representatives and US states, it's corporate boards and other nations.
dicemoose 16y ago
Mitsubishi, Kawasaki and Fuji Heavy Industries in Japan are building several of the components for the 787 and All Nippon Airways is to be the first airline to receive a 787. http://www.seattlepi.com/business/275465_japan27.html http://www.seattlepi.com/business/275465_japan27.html There were issues with where the wing meets the body (both parts built in Japan), but the responsibility supposedly lies with Boeing who designed the parts. http://seattletimes.nwsource.com/html/boeingaerospace/2009565319_boeing30.html http://seattletimes.nwsource.com/html/boeingaerospace/200956... Japanese and Korean suppliers are working to ramp up production of parts. http://www.bloomberg.com/news/2010-10-01/boeing-787-suppliers-fuji-kawasaki-to-add-parts-lines-in-2011.html http://www.bloomberg.com/news/2010-10-01/boeing-787-supplier...
notahacker 16y ago
This is part of it. Its also part of the reason why Airbus/EADS quite successfully builds bits of aircraft all over Europe (and even proposed expansions of operations in Alabama as part of their bid for USAF tankers) Also, it may surprise the article author to learn that there are outside specialists who have capabilities that Boeing couldn't effortlessly replicate in Seattle. Italy and Sweden certainly don't have low labour costs and they don't have much of a domestic market for long range airliners either. Ultimately Boeing's logistical cockups have more to do with the overall ambition and complexity of the project than cost cutting.

wazoox 16y ago

Not much different from what happened to airbus only a couple of years before.

yardie 16y ago
Hasn't Airbus always been some sort of multinational/EU-national plane manufacturer? I believe thats how it started as instead of a bunch of small enterprises siloed in each country they were pooling resources and talent to take on the American hegemony in aerospace.
CaptainZapp 16y ago
Not much different from what happened to airbus only a couple of years before. Uhh, no. That had much more to do with the structure of EADS (the airbus parent) and how it's a joint company between multiple European countries. Notably France, Germany, Spain and the UK. Airbus also had French / German co CEO's at that time, which didn't help decision making. The problem stemmed from the fact that manufacturing is divided between various plants in various countries. Notably between Toulouse (France) and Hamburg (Germany). This is certainly not the same thing as outsourcing critical components to external suppliers (which I'm sure Airbus does too to a lesser extent). Upon final assembly of the A380 in Hamburg they bungled the cabling which hit them back another six month or so. They where other problems of course, which there are always bound to be on such an ambitious project and with the (likely) unrealistic time scale for delivery. The A380 was two years late, which is probably not bad for such a project. I wouldn't bank on it that the Dreamliner takes of in 2011. At least not commercially.
- jhghjmhnbgv 16y ago
  The airbus style big block integration actually worked quite well - engines from RR, undercarriage from airbus and wings from Mitsubishi all worked well. The problem was that they eg. farmed out the avionics to mega corp, who farmed out the hardware to company A and software to B. Company B farmed out bits to company C and company D. Nobody realised that company D was a single contractor shop until they were late which went all the way up the chain. There was an article on here at the time, Boeing literally couldn't find out the name of the company doing a vital part of the avionics software.

pohl 16y ago

Among the least profitable jobs in aircraft manufacturing, he pointed out, is final assembly — the job Boeing proposed to retain. ...and... "I warned Boeing not to make the same mistake. Everybody there seemed to get the message, except top management." If top execs aren't keeping an eye on where the profits are, you're screwed. Are they compensated too well to care?

tomjen3 16y ago
No. They are given stock options which means that they have an incentive to pump the price up short term even if it means that long term the company would loose more money.
- yummyfajitas 16y ago
  Most of the stock options given to top execs have exercise dates well in the future and no-resale clauses. Short term gains in stock price may get them a bonus, but it won't boost the value of their long term options.
- mistermann 16y ago
  Precisely, and this explains a wide swath of seemingly nonsensical decisions being made in western countries in the last decade.
  - acgourley 16y ago
    I feel like most execs are still concerned about their long term credibility and legacy ove their ability to pump some of their stock at a higher value in the short term. And I say that with full cynicism - it's simply suboptimal for them personally to do so.
6ren 16y ago
The Innovator's Solution (by Christensen, who wrote the Innovator's Dilemma) says that assembly can be profitable or non-profitable, depending on what qualities are currently in demand in the market. As an example, Dell made a lot of money being an assembler.

ramkrishnapk 16y ago

Aim to establish India in global supply chain: Boeing http://timesofindia.indiatimes.com/business/india-business/Aim-to-establish-India-in-global-supply-chain-Boeing/articleshow/7458158.cms http://timesofindia.indiatimes.com/business/india-business/A...

motters 16y ago

It depends upon how the outsourcing is managed. By outsourcing you're adding extra complexity, unknowns and unmeasureables to the problem - increasing the variety in cybernetic terms. Unless you have a sufficiently good way of managing that additional complexity you're going to get into trouble, which in business terms means overruns or in the worst case failure of the enterprise. See Ashby's law for details.

Derbasti 16y ago

This makes it sound like US companies were better than foreign countries just because they are american. Me, I feel slightly insulted by that. Just look at american cars. I kid. There is nothing wrong with patriotism and there is nothing wrong with outsourcing, if both is done with due diligence and proper planning. But there is no way one company is any better than any other company just because it is registered in a different country. The 787 did not have problems because of outsourcing, it has problems because of bad planning--at the all-american Boing HQ itself.

jasonkester 16y ago
You're only insulted because you misread outsourcing to mean offshoring. Boeing farmed work out to other companies, and it bit them. The fact that some of those companies were based in other countries is not a point mentioned as a contributing factor.
- Derbasti 16y ago
  Oh! My bad, you are right! I repent!

igrekel 16y ago

Interesting viewpoint from hat retired employee who said the final assembly has the least value. Kind of put the fact that the final assembly of electronics such as the iPhone is outsourced while some of the component are home mad or at least home designed.

lurker17 16y ago
Why do you believe that components are home made? They are only home-designed. Nearly all of the iPhone is built and assembled outside of Apple and outside of the US. The (non-standard parts of the) hardware are "designed by Apple in California", and the bulk of the software is created in Cupertino as well. http://texyt.com/iphone+manufacturer+supplier+assembler+not+apple+00113 http://texyt.com/iphone+manufacturer+supplier+assembler+not+...

spoiledtechie 16y ago

Boeing has been late on almost all their projects. The Australia tanker is behind by 2 years, the Japanese shipment is behind by 3 years and counting. Its sad to see a company that is politically corrupt still win contracts by the U.S. Government even though it delivers years behind schedule.

sanj 16y ago
Unlike software, which is always on schedule.
- calloc 16y ago
  Not if you are part of the highway bandits!
bediger 16y ago
The US Government (Department of Defense and "Intelligence Community") doesn't have a lot of choice. They've let the already incestuous aerospace industry contract to about 4 main companies, and those 4 don't compete with Boeing in the passenger aircraft space. Boeing probably hasn't had a "farm team" of design engineers for 20 or 25 years, now. Designing a new passenger jet isn't something that comes around more than once in a lifetime.
quanticle 16y ago
To be honest, though, its not like any of the other aerospace companies are any better. Airbus, for example, experienced huge delays in getting the A380 built, simply because its engineers were using two different versions of the same CAD tool (http://www.cadalyst.com/management/what-grounded-airbus-a380-5955 http://www.cadalyst.com/management/what-grounded-airbus-a380...).
crs 16y ago
Politically Corrupt? That is a fairly large blanket statement your throwing out there.

jdfreefly 16y ago

I'll take planes I don't want to get in for 1000 Alex! Seriously, think of software projects that took years longer than predicted and went way over budget. What kind of product was finally delivered? I don't want to be a seller of fear (I hate that about the US) but I won't be surprised to see serious issues with this thing when it enters service. Anyone here ever work on a 3 year long 1 year project? I have and its rare to see the attention to quality at the end of that 3 year death march that you see in the beginning.

pgroves 16y ago

I'm surprised no one is talking about the fact that this is one of the most complex projects ever undertaken by human beings. It was being designed and orchestrated in the only way we know how, and it broke down. I don't believe bringing in the people 20 layers below the top management and giving them a paycheck that says 'Boeing' on it would solve all the problems. They were building something too complicated for their basic process (blueprints, documents, proposals, etc.) Many of the problems such as parts that don't fit and supply chain problems could be solved by current machine learning techniques. Too bad Google and Facebook hire all those people and sets them to work optimizing ad placement.

jey 16y ago
> Many of the problems such as parts that don't fit and supply chain problems could be solved by current machine learning techniques. How? I know a bit of ML but don't understand what you're saying.
- pgroves 16y ago
  Optimization research is most directly applicable. Genetic algorithms are probably the most widely known. But in general, the problem involves doing pattern detection between possible designs and their quality metrics. When the whole thing is in software the designs can be verified ahead of time. For instance, you can create a language for designing airplane wings, and then the optimizer can generate potentially good designs, they can be verified to be manufacturable, and then they can be fed into a virtual wind tunnel to figure out if the design performs well. They can also be scored by things like weight and cost to manufacture. Let the optimizer iterate a few thousand times and you're really doing a machine learning problem where the blueprints and the quality metrics are the data set.
  - VladRussian 16y ago
    you didn't get the article. What you're saying requires [necessarily] common "virtual design studio" and/or at least very good communication channels between different participants. The article clearly mention that some subcontractors even didn't have their own engineering department. Be the task contained inside Boeing - there would at least be some "common workspace", though i'm not necessarily saying that it would be sufficient condition.

sagacity 16y ago

Off topic, but I'll keep this short: At the time I post this, there are just 52 comments on the story at LATimes site, while there are 75 here !!! I guess that'll surprise a few.

T-hawk 16y ago
Not too surprising. Any talk of outsourcing will hit a pretty personal nerve among the hacker and programmer community.
- sagacity 16y ago
  A small clarification: :-) Being fairly new here at HN, I was not fully aware of the popularity of this community and actually speaking, the only context in which I made my observation was a comparison of general traffic/interest/engagement levels between HN and LATimes.