The annual projected expenditures on
outsourced engineering projects by 2020
Source: Booz & Co.
Commercial Airplanes, told The Seattle Times in
March that the company will send out less work
in the future.
“We outsourced too much. … We didn’t con-
sider the extent of the risk we’d take on by going
outside,” said Mr. Albaugh, who joined Boeing as
a project engineer in 1975. “We will make sure
the voice of the engineers is much more involved
in the decision-making as we go forward.”
Mr. Albaugh specifically mentioned the con-
cerns of Boeing engineers who felt the company
was making a long-term mistake by outsourcing
work that relied on proprietary knowledge. He
also told the newspaper that key engineering
elements of future Boeing designs—including
airplane flight controls, wings and composite
fuselage—should never be outsourced.
IN YOUR OWN BACKYARD
Even when companies outsource engineering
project tasks to their own offshore offices or subsidiaries, the move can backfire.
Japanese car titan Toyota’s chief executive, Akio
Toyoda, reportedly admitted in a meeting with
investors last September that the company’s efforts to
dramatically boost global sales outstripped the abilities of its engineers, according to a February report
by Bloomberg. That led Toyota to outsource key
design work—but the plan came with a heavy cost.
Bloomberg reported that in one case, Toyota
Boshoku Corp., the lead supplier for a Camry
redesign project in 2006, chose a carbon fiber
material that hadn’t been validated by the parent
company’s engineers. The material required such
a high temperature to mold that sometimes
components caught fire, leading Toyota to scrap
30 percent of the parts.
“When companies outsource engineering
projects, they have to be very specific about the
specifications, design and goals for the project or
it won’t be a success,” says Ron Kyslinger, Detroit,
Michigan, USA-based director of manufacturing
and industrial operations in North America at
industrial technology manufacturer Comau Inc.
“And getting global alignment with offshore
operations is a challenge.”
Unlike stand-alone projects, engineering tasks
must align with the assembly of the larger product,
whether it’s a plane, a car or heavy equipment. If
the outsourced engineering team doesn’t follow
the specifications, the final product cannot be
assembled. And differences in regulatory stan-
dards, design strategies, corporate culture and
measurement systems can all throw off a project.
Mr. Kyslinger recently sent a project to incorporate design changes for an automotive connector cable machine tool application to a Comau
team in Romania. He outsourced the effort in
response to a sudden uptick in work, but the
decision came with hidden expenses.
He explained what was required to the
Romanian team. Yet due to cultural and language
barriers and the unusual nature of the request—a
new customer with less-than-clear specifications—
the Romanian team made incorrect assumptions
about what he wanted.
“We had to send the designs back twice
because of the miscommunication,” Mr. Kyslinger
says. “That’s a lot of lost time.”
Despite the clear downsides, engineering outsourcing has been slowly gaining ground over the
past decade and could generate annual revenues