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Advantages of Outsourcing Manufacturing In Other Countries
Currently, the cost of manufacturing goods and products in America is very high. The developing countries present an advantageous and cheap platform to produce high-quality goods, parts, and components quickly and cheaply. Outsourcing manufacturing services and operations present several benefits to Boeing. Firstly, outsourcing manufacturing services and operations save a significant figure on a company’s operational costs. Instead of investing in manufacturing plants, the company could save that money and invest in other critical services or equipment (Jo et al. 155). Although Boeing mainly faces competition from Airbus, saving money would help them focus on raising the viability of their business, and eventually, profitability.
Secondly, it will help Boeing focus on core business areas. Boeing spends heavily o research, development, assembly, and manufacturing. The three operations are essential for its operations in producing high-end aeronautical products (Kivelä 150). By outsourcing manufacturing to other countries, the company can focus on more important issues like research, assembly of different parts, sales, and marketing. It also ensures the risks of faulty manufacturing do not befall the company.
Thirdly, the company will be able to lower its labor costs. Labor costs are significantly high in America than in Asia and Eastern Europe. As a result, outsourcing manufacturing ensures the company harnesses the low costs to its advantage. The company will also have access to advanced facilities which might not be present in America. Countries like China have better and more efficient factories. Outsourcing their services ensures Boeing enjoys such services without having to invest in them (Mishel 75). Outsourcing manufacturing helps Boeing produce a large number of parts and components in record time.
Potential Costs and Risks of Outsourcing Manufacturing
Outsourcing manufacturing processes has several risks which could impact the performance and reputation of Boeing at some point in time. First, is the loss of control over technology and the quality standards of their processes. Usually, tasks and processes carried out by Boeing staff will be carried out by other organizations over whom Boeing has no oversight power. Secondly, Boeing will lose innovation as it will not have to recruit skilled personnel into the manufacturing division. Instead, the contracted companies will innovate while Boeing stagnates (Sandhu et al 100). Sometimes, the cost of outsourcing could be higher than when the company carried out its operations. Lastly, Boeing customers could lose trust in the company when faculty occur and contracted companies are blamed. It implies to the customers that Boeing is not i control of its operations, resulting in dire consequences.
Beneficiaries and Losers in Manufacturing Outsourcing
In outsourcing, the advantages and disadvantages befall all players. First, Boeing enjoys low labor costs, saves money, and focuses on key operations and managerial areas. The contracted companies gain revenue and can build their reputation and invest in talent. The transaction sees the flow of funds from the US to the countries of the contracted companies. However, there is a mismatch in the technology and talent gap. Outsourcing kills jobs in America, creating them in other countries which affects the global labor and talent gap (Hernandez and Abubaker 150). At the end of the day, while Boeing benefits, the American labor force loses. On the other hand, the outsourced companies benefit alongside their labor force.
Effect of Keeping All Manufacturing in America
Many politicians have pushed for manufacturing operations to be returned to America, citing job losses and intellectual propriety theft. However, corporations like Boeing are profit-driven and would do anything to reduce labor costs. Keeping all manufacturing in America would result in job creation, higher labor and operation costs, and the manufacturing of expensive end products (Hasan 93). it would also result in a subsequent drop in market share as competing brands would sell at lower prices.
Works Cited
Hasan, Rejaul. “Reshoring of US apparel manufacturing: a lesson from an innovative North Carolina-based manufacturing company.” Journal of Textile and Apparel, Technology and Management 10.4 (2018). 93.
Hernandez, Daniel Fierro, and Abubaker Haddud. “Value creation via supply chain risk management in global fashion organizations outsourcing production to China.” Journal of Global Operations and Strategic Sourcing (2018). 150.
Jo, Hyun-Joon, Timothy Connerton, and Hyun-Jung Kim. “Dynamic outsourcing development for sustainable competitive advantage in a High-Tech backend semiconductor equipment firm.” Sustainability 12.1 (2019): 155.
Kivelä, Alexander. “Manufacturing a Robot for the Boeing Company.” (2020). 150.
Mishel, Lawrence. “Yes, manufacturing still provides a pay advantage, but staffing firm outsourcing is eroding it.” (2018). 75.
Sandhu, Maqsood Ahmad, Ahm Shamsuzzoha, and Petri Helo. “Does outsourcing always work? A critical evaluation for project business success.” Benchmarking: An International Journal (2018). 100.
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