Manufacturing Competence Is An Innovation Resource

Visiting separate Boeing locations can seem like visiting separate companies. Different projects and different histories have shaped the cultures of this company’s widely separated plants. Still, when I made my most recent trips to sites in Seattle and Saint Louis (Why Boeing Is big On Right-Size Machine Tools and Tools For Titanium), the visits illuminated a common theme. Personnel at both locations were learning to manufacture better in the hope of sharing what they learned with suppliers.

The challenges were different. In Seattle, the focus was on using small and simple production equipment. In Saint Louis, the challenge was to machine features that make titanium parts lightweight. In both cases, however, the prospect of serving as a knowledge resource for suppliers was seen as an important value of this work.

Boeing has outsourced a lot of production. The Saint Louis location testifies to this, with Boeing personnel having departed certain production areas to let a supplier take them over. The logic of this shift—embraced by many businesses today—says that a company selling a product should focus on innovation and marketing, outsourcing as many other functions as it can. Thus, manufacturing goes out the door. Or, in the case of Saint Louis, the door gets moved.

Yet the Saint Louis example also illustrates that the matter is not quite so simple. Boeing personnel involved in machining here are actually serving design. They are learning what machined features designers can specify. External suppliers could not be expected to perform this open exploration. Similarly, the insights in Seattle ultimately should influence the cost of work performed both inside the company and out.

These examples show how product innovation can depend on manufacturing knowledge. Manufacturing competence can affect a product’s capabilities, performance and cost, regardless of who makes the parts. And harnessing this knowledge for the sake of innovation can be difficult if the knowledge resides elsewhere.

In other words, it’s possible to outsource too much. I think some companies have done this. Boeing may be trying not to do this, though I think it still struggles with how much or how little manufacturing to keep. It’s a difficult question.

For a company selling a product today, however, this is the right question. The issue is no longer whether to consider outsourcing production to suppliers, because that issue has been settled. The issue instead is how far to go with this outsourcing. There is a line, and it’s difficult to see. But crossing that line means losing vital understanding, along with a source of value that might not even be appreciated once that understanding is gone.