Out-Sourced Profits - The Cornerstone of Successful Subcontracting

tags

Outsourcing Boeing

Notes

not only is the work out-sourced; all of the profits associated with the work are out-sourced, too.

NOTER_PAGE: (2 . 0.3919803600654665)

The subcontractors on the DC-10 made all of the profits; the prime manufacturer absorbed all of the over-runs.

NOTER_PAGE: (2 . 0.44108019639934537)

company cannot control its own destiny if it creates less than 10 percent of the products it sells.

NOTER_PAGE: (2 . 0.853518821603928)

The inescapable problem with outsourcing work that could be done in-house is that it necessarily increases the tasks and man-hours to carry out the work

NOTER_PAGE: (3 . 0.30114566284779054)

out-sourcing work to regions of low labor rate is only a transitory phenomenon. The reason why the rates were low was that there had previously been no work there. Once the work became available, hourly rates increased, so that the primary electronic companies kept moving the work to yet another as-yet-under-developed area, and the cycle was repeated. This may be cost-effective for small items, with production lives of only a few years at most, but it is inappropriate for large aircraft that may need spare parts throughout a service live in excess of 50 years (80 or more for some military aircraft) and for which the manufacturing program itself may last 40 or 50 years.

NOTER_PAGE: (3 . 0.3584288052373159)

ask who receives the greatest largesse from extensive outsourcing. History suggests very strongly that it is the supplier,

NOTER_PAGE: (4 . 0.16775777414075288)

One must ask the question as to where the skills for writing such specifications will come from if there is no continued in-house production from which to learn.

NOTER_PAGE: (4 . 0.5507364975450082)

increased total span time

NOTER_PAGE: (4 . 0.604746317512275)

costs do not vanish merely because the work itself is out-of-sight.

NOTER_PAGE: (4 . 0.8903436988543372)

an even greater penalty — the loss of cost-savings from improved designs that cannot be implemented

NOTER_PAGE: (5 . 0.14811783960720132)

no incentive to design assembly tools that permit minimized rework for derivative products, for example, particularly when they have no guarantee that derivatives may ever be made or that that they would be awarded the work.

NOTER_PAGE: (5 . 0.23404255319148937)

minimizing each step in a process in isolation is guaranteed to prevent the attainment of any overall minimum cost.

NOTER_PAGE: (5 . 0.8363338788870704)

the performance of Engineering is better evaluated in terms of minimizing problems that occur in Manufacturing

NOTER_PAGE: (5 . 0.9091653027823241)

can be enhanced by either increasing the numerator or decreasing the denominator.

NOTER_PAGE: (6 . 0.3076923076923077)

one could easily convince oneself that decreasing assets was always a good thing, because doing so would always increase RONA

NOTER_PAGE: (6 . 0.3952536824877251)

here is absolutely no guarantee that a reduction in assets will ever result in an increase in RONA, let alone an increase in profits. That is the great fallacy about this metric.

NOTER_PAGE: (6 . 0.5261865793780688)

ratio of two sometimes totally unrelated variables

NOTER_PAGE: (6 . 0.6759410801963994)

RONA might be a worthy overall goal, but as a performance metric, it is usually meaningless — and a serious threat to the survival of any organization on which it has been inflicted.

NOTER_PAGE: (6 . 0.7193126022913258)

A typical stock-market analyst lacks the deep understanding of what makes different companies tick

NOTER_PAGE: (6 . 0.7831423895253683)

systems integrator cannot allow them to fail.

NOTER_PAGE: (9 . 0.2700490998363339)

The basic problem with being only a systems integrator is that it does not cover a sufficient fraction of the total work for a large company to remain in business.

NOTER_PAGE: (9 . 0.7561374795417349)

It really is better to out-source such work, IF AND ONLY IF the selected supplier has excess capacity on such equipment.

NOTER_PAGE: (10 . 0.44435351882160395)

add additional work to retain skilled workers, even if it means diversifying into non-traditional activities to do so.

NOTER_PAGE: (12 . 0.27168576104746317)

one global cost minimization is worth far more than even 20 sub-optimum cost reductions.

NOTER_PAGE: (15 . 0.3494271685761048)

perfect efficiency cannot possibly be achieved and that it is counter-productive to try

NOTER_PAGE: (15 . 0.3911620294599018)

Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products,

NOTER_PAGE: (15 . 0.49918166939443537)

Out-source only on the basis of better facilities;

NOTER_PAGE: (15 . 0.5646481178396072)

cost-saving techniques that work in other high-volume industries are often quite inappropriate for low-volume industries

NOTER_PAGE: (15 . 0.753682487725041)

Find work to fill excess capacity;

NOTER_PAGE: (15 . 0.7970540098199673)