Is Outsourcing Causing You to Divest From Your Own Product?

Editor’s Note: Michael Gravier is an Associate Professor of Marketing and Supply Chain Management at Bryant University with a focus on logistics, supply chain management and strategy and international trade. This is his first blog contribution.

One of the biggest issues facing supply chains today are that companies are outsourcing too much of the process and development, and are therefore divesting themselves too much from their own product. This results in the company loosing control of the process, and going over on budget and time.

The Boeing Dreamliner debacle highlights this issue.

As the aircraft industry evolved in response to advancing technology, Boeing took the proactive approach to purposefully design a new supply chain for an entirely new kind of aircraft, the Dreamliner. As with many companies, when introducing a new product to the market, the unknowns quickly evolve into bugaboos. Boeing was no exception, its woes with the Dreamliner supply chain have made excellent fodder for business case studies.

The company tried to create a new supply chain with the vision of keeping manufacturing and assembly costs low, while spreading the financial risks of development to its suppliers. This was different than its traditional supply chain process where they played the role of both integrator and assembler of the different parts and subsystems produced by suppliers.

When it came to the Dreamliner, its new supply chain system created the environment where suppliers served as the integrators who assembled different parts and subsystems produced by Tier-2 and Tier-3 suppliers. As a result, Boeing struggled to keep the numerous suppliers in communication with each other, especially since the company didn't own enough of the supply chain to give it the power to enforce decisions, or even to know all that was going on.

The lesson learned from the Boeing Dreamliner debacle is that by the company outsourcing too much of the process and development, it lost its control over the process. In Boeing's case, it caused them billions of dollars beyond the initial budget and their product debuted three years behind schedule.

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