Some Evils of Outsourcing

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Some Evils of Outsourcing

Post by RTH » Wed Apr 01, 2009 12:20 pm

About 15 years ago, aircraft companies hired Business School graduates (MBA’s) in order to gain fresh insight into the best business practices taught in our American institutions like Harvard and Wharton and Stanford. The current thinking then was that factories were obsolete and a better business plan was to job out all fabrication work to sources and countries around the world with cheap labor. As American labor costs were higher than those of China and places like eastern Europe, Mexico or India, it would be advantageous for companies to send the fabrication and assembly work out of town and therefore be able to save all kinds of money and maximize profits. Once the shops that produced aircraft parts no longer were needed, equipment was sold off, workers laid-off and the capabilities to build in-house diminished/vanished. In fact, it made sense to the business folks that reducing any capital expenditures for new equipment was an even better choice. So there was no need to train replacement shop technicians or to modernize manufacturing equipment as there would be no work done here to warrant such costs. And in the short term, profits increased.

When engineers design and shops build products in-house, there is a feedback between the two departments that are generally co-located in the same facility. Designers can easily walk down to the fab shops whenever a problem arises to see the effects of their design and to immediately give corrective action to a problem. And the engineers receive a definite advantage in recognizing faults/weaknesses in their designs by seeing the tangible results of their mental ideas. During the fab and assembly of the DC-XA reusable rocket at MDC, Huntington Beach, the designers were located on the shop floors to expedite immediate problem solutions and keep the work flowing. It worked great!

Should a part provide interference with another during assembly, the remedy can take a quick walk to the shop to see and redline a drawing for an immediate fix, followed by a design change the next day. The additional result is beneficial feedback and learning for engineers from the good and bad design choices. This system worked very well for 80 years and produced some of the best designers in aerospace plus establishing close rapport with the shop technicians who physically built aircraft. If a question arose about whether a ply layup was properly balanced or precured details didn’t match profiles, the engineer could go to the shop and communicate eyeball to eyeball with the worker to explain the logic or, in many instances, came to realize that such a design callout may be in error and could change it now. This exchange was absolutely necessary when doing development work on new programs where new technology was being generated each day.

Now separate those departments and put them 6,000-10,000 miles apart. When a problem comes up, it takes days to travel across continents and oceans to see the issues and days to return back to change designs. And that’s not counting the costs involved with travel, hotels, expenses, contract changes, etc. And what happened to the personal contact between design and fab shops? Gone and lost because the designer doesn’t get the local feedback to improve his work and not make the same mistakes on the next project. But while it works, the business guys pat themselves on the back for brilliant outsourcing concepts that make a buck today. It just seems to me that our industry loses so much capability when the basic work is given away.

As a compromise, you could keep the development capabilities viable in-house and just send out routine manufacturing tasks after the design is proven, to build at lower cost but maintain the stimulation and learning of the engineering and shop technicians.

In 20 years, there will be a breakthrough revelation one morning at Harvard by a new business professor, that if you actually positioned the design and manufacturing groups in the same facility so they could contact on a daily basis, production would improve tremendously and new designs would benefit from the interaction. This facility would be called a “factory” and it would be embraced as revolutionary thinking by our best business brains. And I’ll roll over in my grave and smile.
Bob H

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