GSB011 International Business: Boeing's Outsourcing and the Economy

This essay explores Boeing's outsourcing strategy, implemented after the expiration of their contract with Airbus, focusing on the 'snap together' manufacturing policy. It examines the benefits, such as time and cost efficiency, resulting from international outsourcing for inbound logistics. The essay also discusses potential costs and risks, including delays and quality control issues, and analyzes the impact on labor markets and social-cultural interactions. Furthermore, it evaluates the effects of absent outsourcing on the community, employees, and the company, and assesses whether Boeing's outsourcing is beneficial for the American economy. The essay concludes that while outsourcing offers numerous advantages, careful market research and observation systems are crucial to mitigate potential risks and maintain brand equity. Desklib provides access to similar essays and study resources for students.

Running head: GLOBALIZATION OF BUSINESS
Globalization of Business
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1GLOBALIZATION OF BUSINESS
Table of Content
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................3
Benefits of outsourcing manufacturing of components:..............................................................3
Potential cost and risks of outsourcing:.......................................................................................4
The potential gainer and looser for outsourcing:.........................................................................5
Effect on community, employee and company is the absence of outsourcing:...........................6
Is the outsourcing of Boeing good for American Economy:.......................................................7
Conclusion:......................................................................................................................................8
References:......................................................................................................................................9

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Introduction:
Boeing is one of the world largest manufacturers of aircraft. In 2004-05, after the
expiring of corporate contract with Airbus, Boeing has announced the intervention of “snap
together” manufacturing policy, which is more cost and time efficient (Peterson 2011). Through
this outsourcing procedure for inbound logistics lot of new and advanced facilities were added in
the manufactured aircraft model for both the passenger and crewmembers. The management of
Boeing decided to outsource most of the parts from other companies. Currently, Boeing depends
on 50 outsourced international suppliers spread around the world that supplies the 65 percent of
the total aircraft manufacturing components (Tang, Zimmerman and Nelson 2012). The purpose
of this paper is to analyse the effectiveness of the outsourcing policy of Boeing from both
business perspective as well as the perspective of international economic, social, cultural
structure. In this paper, the potential effects due to lack of outsourcing on USA economy has
been examined.
Discussion:
Benefits of outsourcing manufacturing of components:
Being is an aircraft designing and manufacturing company, Boeing has realized the
operational dilemma and excessive burden at the early age of business, because of zero to
hundred manufacturing process without letting any additional outsourcing from suppliers.
Henceforth in their current manufacturing lifecycle, Boeing depends on international outsourcing
for inbound logistics in order to gain many operational advantages.

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One of the major advantages of this current outsourcing inbound logistics is time
efficiency due to the parallel manufacturing system. Outsourcing for aircraft body parts allows
the company focusing only on the particular production line. Currently, Boeing is internally
producing the Fuselage, Wing to body fairing and the Tailfin while the suppliers are producing
the other interior and exterior parts like vertical and horizontal stabiliser, flaps and spoiler
hydraulics connection, interior designs, modularly components and other simultaneously (Bean
2013). Therefore, it reduces the overall time consumption for manufacturing of an entire aircraft.
Only transportation and assembly times are additionally required, which is significantly lower
than the self-depended manufacturing time consumption.
Another essential benefit of outsourcing is cost efficiency. To maintain the manufacturing
process for all the aircraft components would require significant amount of development and
management expenses including land takeover and additional payroll. By the partnership
contracts with various international supplier Boeing can invest a stipulated amount of revenue
for production (Denning 2013). Apart from that, the operational maintenance cost of all the
production system under the suppliers, do not influence the main outbound cashflow of Bowing.
Potential cost and risks of outsourcing:
Boeing has faced many operational dilemmas throughout the history of their globalised
business. Several consequences have shown that excessive dependency on “snap together”
philosophy can cause declination of brand equity, poor competence and performance issues. As
an example, the delivery date of a particular jet aircraft was delayed four years because of the
inefficiency of one of their core supplier (Gilley and Rasheed, A., 2015). As a result, Boeing had

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to bare million dollars penalties for late delivery. Therefore, the partnership contracts with many
multinational companies ware also hindered.
The main cause of this operational dilemma was several core supply partners of the
manufacturing company ware unable to fulfil the Boeing’s delivery schedules. In some nations,
the manufacturing companies have to arrange multiple separately operational manufacturing
units. As an example, in Italy, the suppliers were unable to deliver on time. Some suppliers did
not able to meet the quality standards set by the company, as a result, the core manufacturer
company was unable to get the quality product on time while losing the brand reputation as well
as consumer loyalty.
Higher dependency on inbound logistics can also reduce the overall quality control
efficiency of any manufacturing company. Apart from that, distribution of functional integrity of
a manufacturing company can make the whole business operation risky as well as market
sensitive where the bargaining power of the suppliers can be extremely higher than usual
(Pritchard and MacPherson 2014). Therefore, this condition can also induce the market
competition while making the way out narrow and difficult.
The potential gainer and looser for outsourcing:
A globalised business has significant influence over the national and international
economy that regulates the additional regulatory power of the business in both national and
international social and cultural field. At the same time, the labour market is highly dependent on
the overseas activities of any global organisation. In order to analyse the potential benefit from
the organisational operation and outsourcing of Boeing, the labour market should be considered
as the chiefly effected factor (Jain and Swarup 2011). The national labour market can have wider

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opportunity to expand the potential workforce to the global market and earn foreign money. On
the other hand, from the individual aspect, the job opportunity and national employment rate
would be the major modifier because of the outsourcing business operation of Boeing.
Similar as national labour market, the international labour market will also affected by
any business decision making regarding the outsourcing business. Various multinational
suppliers like Mitsubishi, Kawasaki, Rolls-Royce, KAA and other company and their national
and global labour market also depend on the outsourcing business operation of Boeing. Not only
the potential employment, the social and cultural interaction and internationalisation will also be
affected because of any changes in outsourcing operation of Boeing (Allworth 2013). As long as
the outsourcing and other globalised business operations are functional, the cultural and social
diversity would increase. Therefore the international employment, labour market, social and
cultural mixing will be the major sufferer of any global operation like outsourcing of Boeing.
Effect on community, employee and company is the absence of outsourcing:
It will be wrong to state that outsourcing operation let only the job exportation overseas.
The national and global economic balance also depends on this outsourcing activity of a
company. Every national or global level business organisation always wants to make the profit
and wants to give the most acclaimed and appreciated product and services to their client. In this
process, some employment opportunities have been exported to the other countries that regulate
the economical and social interaction of both of the country (Sodhi and Tang 2012). In today’s
internationalised world, it is significantly difficult for any business organisation under the
regulation and legislative environment of a country to remain completely isolated while making
sufficient profits.

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Apart from the occupational and cultural exploration, the potential operational efficiency
of a business organisation can be highly boosted by sincere globalised partnership management
and trading relationship. On the other hand, the expansion of the business of being in other parts
of Globe can influence the work ethics and operational performance of a considerable number of
employees. Less global expansion or external dependency can reduce the employment level
economical alliance and industrial integrity. Even lack of business communication between
Boeing and the partner companies, who are located in the other countries to provide an adequate
supply and job opportunity to US citizens, can influence the brand reputation as well as the
corporate social responsibility of the Bowing (Varadarajan 2011).
Is the outsourcing of Boeing good for American Economy:
Boeing is able to regulate the excessive cost, time, maintenance, workforce and from
other many operational burdens of the American economy through outsourcing supply system.
On the other hand, being an aircraft manufacturer, Boeing does not need to maintain the product
quality and workflow procedure because of external manufacturing and inbound logistical
dependency. Additionally, it also allows the social environment of the country to minimize the
risk factors associated with the isolated economy, malfunctioned monetary cycle, scattered
labour market and vulnerable labour control and safety policies. The more isolated and complex
the organizational operation is the more burden and risk factors will be relevant to the company
as well as the home country (Elahi, Sheikhzadeh and Lamba 2014). Therefore, depending more
on outbound logistics and global supplier is beneficial for the company and the social, cultural
and economical factors of America from various aspects.

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In order to stop, the repetition of these types of operational failure and risky brand equity,
the company should carry out detailed market research globally for finding out the most
appropriate and efficient components manufacturer and suppliers of aircraft. On the other hand,
this operation also needs additional observation system in each manufacturing unit that can give
real time production report from the suppliers to the management of Boeing regarding the
situational progress of the parallel manufacturing. In case of any operational discrepancy or
malfunction, the management of the core manufacturing company can take effective action,
within time.
Conclusion:
After the expiring of corporate contract with Airbus, Boeing has announced the
intervention of “snap together” manufacturing policy, which is more cost efficient and time
efficient as well. From the above discussion, it can be said that, in their current manufacturing
lifecycle, Boeing depends on international outsourcing for inbound logistics in order to gain
many operational advantages. Outsourcing for aircraft body parts allows the company focusing
only on the particular production line. By the partnership contracts with various international
suppliers, Boeing can invest a stipulated amount of revenue for production. In this process, some
employment opportunities have been exported to the other countries that regulate the economic
and social interaction of both of the nations. In order to prevent the operational failure and risky
brand equity, the company should carry out detailed market research globally for finding out the
most appropriate and efficient components manufacturer and suppliers of aircraft.

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References:
Allworth, J., 2013. The 787’s problems run deeper than outsourcing. Harv. Bus. Rev. Available
at https://hbr. org/2013/01/the-787s-problems-run-deeper-t.
Bean, L., 2013. The profits and perils of international outsourcing. Journal of Corporate
Accounting & Finance, 14(6), pp.3-10.
Denning, S., 2013. What went wrong at Boeing. Strategy & Leadership, 41(3), pp.36-41.
Elahi, E., Sheikhzadeh, M. and Lamba, N., 2014. An integrated outsourcing framework:
Analyzing Boeing's outsourcing program for Dreamliner (B787). Knowledge and Process
Management, 21(1), pp.13-28.
Gilley, K.M. and Rasheed, A., 2015. Making more by doing less: an analysis of outsourcing and
its effects on firm performance. Journal of management, 26(4), pp.763-790.
Jain, S. and Swarup, K., 2011. Offshore Outsourcing: A Strategic Approach towards Maximizing
Organization Value. Synergy (0973-8819), 9(2).
Peterson, K., 2011. A wing and a prayer: Outsourcing at Boeing. Rep. Everett: Reuters.
Pritchard, D. and MacPherson, A., 2014. Outsourcing US commercial aircraft technology and
innovation: implications for the industry’s long term design and build capability. United States
Trade Center, Department of Geography, Buffalo, NY.
Sodhi, M.S. and Tang, C.S., 2012. Application: Mitigating New Product Development Risks—
The Case of the Boeing 787 Dreamliner. In Managing Supply Chain Risk (pp. 161-179).
Springer, Boston, MA.

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Tang, C.S., Zimmerman, J.D. and Nelson, J.I., 2012, January. Managing new product
development and supply chain risks: The Boeing 787 case. In Supply Chain Forum: An
International Journal (Vol. 10, No. 2, pp. 74-86). Taylor & Francis.
Varadarajan, R., 2011. Outsourcing: Think more expansively. Journal of business
research, 62(11), pp.1165-1172.