When I started Supply Chain Matters, my goal was to produce a blog that would bring to light the critical importance of overall supply chain process and business strategy in enhancing or detracting from overall corporate strategy. To that end, I will highlight specific posts that can provide learning for the supply chain community as a whole. The current developments at Boeing are yet another example of learning in the area of supply chain risk management within the aerospace industry that can be applied within other industries.Last week, Wall Street and the airline industry again reacted to the Boeing’s announcement of the third delay in the much anticipated deliveries of the 787 Dreamliner airplane. For Boeing’s customers, this delay pushes back original delivery schedules by at least a year, and initial customers such as All Nippon Airways will seek financial compensation from Boeing.
A series of posts on Whisteblower Support from the Seattle Post-Intelligencer site cites that the bulk of the current delays stem from multiple snags involving the 787 outsourced global partners. Pat Shanahan, Vice President in charge of the 787 program, pointed to two major supply chain issues that drove this latest delay. One is focused on the center wing strengthening box, a structure that supports the attachment of the fuselage to the aircraft wings, which will require more fasteners and clips for strength. The other more concerning issue involves Boeing’s network of global suppliers that manufacture the composite wings and fuselage, along with wiring and supporting systems. Specific focus has been with Vought Aircraft Industries and its consortium of internal partners.
Shanahan mulls, “Where do I think the inherent risk is? I think it’s in the capabilities of the supply chain to do the things that we need to have done. That’s the untested part of this production model.”
I find this to be an interesting statement in light of all that has been observed from a similar scenario played out with the Airbus 380 program. In a post on Aerospace Technology, Robin Jackson, chief executive of ADR International is quoted: “Boeing may be guilty of overconfidence with risk management on this project. ” This author tends to agree, and would add that Boeing senior management needs to continue to be focused on supply chain program management and process capabilities.
Customer orders for the Boeing 780 Dreamliner have been driven primarily from the breakthrough technology and fuel efficiency incorporated in the design of this aircraft, but other challenges were also introduced. As pointed out in the Aerospace Technology article, the 787 supply chain is rather complex, with a array of major suppliers to share the risks as well as the profits. In an automotive type assemble-to-order strategy, major pre-assembled sections of the aircraft are to be flown in to Boeing’s Everett Washington final assembly plant from Japan, Italy, South Carolina and Kansas. Component suppliers stretch to China and India and beyond. This implies that financial burdens will shift up and down the supply chain, and overall program management and governance of supply chain risk is critical. George T. Haley, director of the Centre for International Industry Competiveness at the University of New Haven is quoted: “The primary thing that Boeing is learning, I think, is that it should not innovate in all areas at once. It has innovated in product, process, and supply chain all at once, and innovation is messy.”
For Boeing, industry lessons in aerospace-related supply chain risk management were already visible in 2006. Airbus, Boeing’s prime competitor, suffered costly delays of up to two years in initial deliveries of the rival A380 aircraft to its customers. An article in the Seattle Post Intelligencer in September 2006 outlines events after the program experienced a third major delay in expected deliveries to A380 customers. Airbus President and CEO Christian Streiff became actively involved in leadership and stewardship of the program. Airbus’s problems were identified to be the wiring harnesses used in the forward and aft fuselage, a mismatch between the routings that were designed, vs. what appeared on the physical aircraft. Finding this problem at such a critical juncture of the program was costly.
Important steps were taken:
- Blame was not cast on one facility or one group- the CEO described the problem as an Airbus team problem that would be resolved by Airbus and its supplier partners.
- One management and accountability structure was initiated to insure resolution of current as well as any future challenges, with stewardship and visibility driven from the office of the CEO
- Cross-functional and cross-site project management was emphasized, and support was emphasized, as opposed to blame.
- A corporate-wide emphasis was made on required training and technology support tools. Investments were made in electronic design, product management, and other required supply chain tools.
- Finally, a commitment was made for transparent and open communications to customers.
It was unfortunate that the teams surrounding the 780 program did not have the opportunity to transfer the learning of Airbus in 2006 into a framework of overall supply chain risk mitigation strategies. A supply chain colleague of mine, Jason Busch, in a July 2006 post on his blog Spend Matters indicated: “Even with the deep pockets of the European governments to bail out Airbus, one wonders if the world would be better off letting the current incarnation of Boeing’s chief competitor go the way of the steam engine. If it does, it would probably go down as the single greatest — and most costly — supply chain failure in history. But in the meantime, it’s still a lesson we can all learn from.”
Supply chain failures continue to be costly, and the Airbus and Boeing experiences are continuing commentaries to the importance of balancing risk. As a community, we need to continue to educate senior management on the important considerations and risk tradeoffs of supply chain strategy.
For Boeing, the obvious statement that there is little room for continued supply chain snags goes without saying, and this author trusts that Boeing and its supplier teams will address its supply chain process challenges in a future positive manner.
I look forward to traveling in a new 787 Dreamliner before the next decade.