Seven years later, said Pickering, “we now have eight hundred Russian engineers and scientists working for us and we're going up to at least one thousand and maybe, over time, to fifteen hundred.” The way it works, he explained, is that Boeing contracts with different Russian aircraft companies-companies that were famous in the Cold War for making warplanes, companies with names like Ilyushin, Tupolev, and Sukhoi-and they provide the engineers-to-order for Boeing's different projects. Using French-made airplane design software, the Russian engineers collaborate with their colleagues at Boeing America -in both Seattle and Wichita, Kansas-in computer-aided airplane designs. Boeing has set up a twenty-four-hour workday. It consists of two shifts in Moscow and one shift in America. Using fiber-optic cables, advanced compression technologies, and aeronautical work flow software, “they just pass their designs back and forth from Moscow to America,” Pickering said. There are videoconferencing facilities on every floor of Boeing's Moscow office, so the engineers don't have to rely on e-mail when they have a problem to solve with their American counterparts. They can have a face-to-face conversation.
Boeing started outsourcing airplane design work to Moscow as an experiment, a sideline; but today, with a shortage of aeronautical engineers in America, it is a necessity. Boeing's ability to blend these lower-cost Russian engineers with higher-cost, more advanced American design teams is enabling Boeing to compete head-to-head with its archrival, Airbus Industries, which is subsidized by a consortium of European governments and is using Russian talent as well. A U.S. aeronautical engineer costs $120 per design hour; a Russian costs about one-third of that.
But the outsourcees are also outsourcers. The Russian engineers have outsourced elements of their work for Boeing to Hindustan Aeronautics in Bangalore, which specializes in digitizing airplane designs so as to make them easier to manufacture. But this isn't the half of it. In the old days, explained Pickering, Boeing would say to its Japanese subcontractors, “We will send you the plans for the wings of the 777. We will let you make some of them and then we will count on you buying the whole airplanes from us. It's a win-win.”
Today Boeing says to the giant Japanese industrial company Mitsubishi, “Here are the general parameters for the wings of the new 7E7. You design the finished product and build it.” But Japanese engineers are very expensive. So what happens? Mitsubishi outsources elements of the outsourced 7E7 wing to the same Russian engineers Boeing is using for other parts of the plane. Meanwhile, some of these Russian engineers and scientists are leaving the big Russian airplane companies, setting up their own firms, and Boeing is considering buying shares in some of these start-ups to have reserve engineering capacity.
All of this global sourcing is for the purpose of designing and building planes faster and cheaper, so that Boeing can use its cash to keep innovating for the next generation and survive the withering competition from Airbus. Thanks to the triple convergence, it now takes Boeing eleven days to build a 737, down from twenty-eight days just a few years ago. Boeing will build its next generation of planes in three days, because all the parts are being computer-designed for assembly, and Boeing's global supply chain will enable it to move parts from one facility to another just in time.
To make sure that it is getting the best deals on its parts and other supplies, Boeing now runs regular “reverse auctions,” in which companies bid down against each other rather than bid up against each other. They bid for contracts on everything from toilet paper for the Boeing factories to nuts and bolts-the off-the-shelf commodity parts-for Boeing's supply chain. Boeing will announce an auction for a stated time on a specially designed Internet site. It will begin the auction for each supply item at what it considers a fair price. Then it will just sit back and watch how far each supplier wants to undercut the others to win Boeing's business. Bidders are prequalified by Boeing, and everyone can see everyone else's bids as they are submitted.
“You can really see the pressures of the marketplace and how they work,” said Pickering. “It's like watching a horse race.”
The Other Triple Convergence
I once heard Bill Bradley tell a story about a high-society woman from Boston who goes to San Francisco for the first time. When she comes home and is asked by a friend how she liked it, she says, “Not very much-it's too far from the ocean.”