Boeing recently delivered the first of its long-awaited new airliner, the 787 “Dreamliner” to much fanfare and anticipation. Billed as “the future of commercial travel” and as the plane that sets the benchmark for comfort and an “unrivaled passenger experience”, the 787 boasts a laundry list of improvements. Bigger windows that can be tinted electronically by the passengers or crew are there, as are fatigue-preventing pressure and humidity controls and complex control electronics that lessen the effects of turbulence.   There is enough carbon composite materials replacing traditional metal ones that it uses less jet fuel, and creature comforts abound with modern LED lighting, more leg room, and more overhead storage. If you have ever flown in a passenger jet, well, ever… you can see what the fuss is about.

If you have kept an ear on the news recently, you are probably familiar with all the fuss the Dreamliner is actually attracting, and it is far more dour and having less to do with “plane of the future” and more to do with “battery fires” and “malfunctions”. After two such fires, one of which occurred while the plane was mid-air, and a slew of other incidents since its release, the FAA issued an emergency airworthiness directive on January 16, grounding all U.S.-operated Dreamliner flights . While there is no definitive answer yet as to what is wrong with the 787, all signs are pointing to a problem that may have been plaguing the plane before the first one ever left its hangar: inconsistency within the supply chain.

For the first time in the company’s history, more than 30% of the plane’s components were outsourced for manufacture overseas before being delivered for assembly at its plant in Everett, Wash (compare that to 5% for its previous flagship, the 747). Because of this, supply issues inundated the project early and often. Large components, constructed in eight countries across three continents, arrived unfinished due to sub-component supply shortages from overseas suppliers that could not meet output demands, creating additional work and delays that wreaked havoc on the company’s streamlined, just-in-time assembly line. Boeing’s attempts to resolve these issues saw it alternate between delaying the plane’s release (it went from 2008 to 2011 in a series of pushbacks) and buying back some of the suppliers in order to regain production control. While outsourcing production was perceived by many as a cost-cutting maneuver, it is estimated that doing so cost the company in excess of $2 billion.

As the investigation into the planes malfunctions continues down the extensive list of possible culprits from its supply chain, it’s becoming ever so apparent that the lack of supplier management is causing some very serious repercussions for Boeing. While they have not disclosed exactly whose responsible for choosing the suppliers that created the initial delays, they did replace the 787’s program manager after the first two delays in 2008, however telling that may be. Furthermore, several executives have now admitted that the heavy reliance on subcontractors might have led to partnerships with suppliers that were unsuitable for the workload and that an increase in outsourcing should have warranted a significant escalation in the oversight of their sourcing initiative. Boeing’s difficulties with overseas suppliers may prove to be a humbling lesson in the limits of successful outsourcing and a warning bell to the importance of keeping control of every aspect of a project.
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Alexa Guidone

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  1. What other steps have the sought to mitigate their sourcing problem. I know in my prior life in Pharma, they setup a strategic sourcing chain that would be able to fill raw material needs, should one supplier become unavailable. I believe the key to this approach working is setting up QA/QC standards that will ensure the same quality deliverable irrespective of the supplier.

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  2. The most recent news says that since recognizing the problem during the last few years of production, Boeing attemped to alleviate the issue by significantly increasing their supplier oversight and visibility through the supply chain. It'll be interesting to see how this plays out in the future though seeing that have recently announced plans to increase production of the 787.

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