May 17, 2020

The Boeing 787 Dreamliner: A tale of TERRIBLE supply chain management

industry-focus/outsourcing/boeing-787-dreamliner-tale-terrib
Freddie Pierce
4 min
Boeing 787 Dreamliner. Elaine Thompson/AP
Boeings production of the 787 Dreamliner is almost laughable. It has become such a mess, such a supply chain disaster, that it almost makes you think B...

Boeing’s production of the 787 Dreamliner is almost laughable. It has become such a mess, such a supply chain disaster, that it almost makes you think Boeing execs made Dreamliner decisions in some sort of strange alternative universe, like the Twilight Zone or something. Now I understand that hindsight is always 20/20 so it’s easy to say that things should have been different, but I would have loved to have been in the production meeting where the Boeing execs decided that outsourcing nearly every aspect of the Dreamliner’s production was a savvy business move.

This is the same aircraft that Boeing said was one of the most important in its history. It’s the same one that will deploy the latest technology and most revolutionary design in the history of passenger air travel. This is the aircraft that will supposedly set the standard for all aircraft manufacturers to follow in the future. The Boeing 787 Dreamliner is the first of its kind use carbon-composites in its structure. Considerably lighter than its aluminum counterparts, the 787 Dreamliner will operate on 20 percent less fuel, which can mean millions upon millions in savings each year for the major airliners.

Naturally, Boeing also thought this was also an ideal time to say, “F*ck it. Let’s throw out everything we’ve ever known or used in airplane production and use this new, unproven method.”

Pretty smart play, right?

How did that conversation even start? If it was about costs, it didn’t work. Boeing will tell you that Dreamliner production has been about as cost effective as driving a Hummer. They are paying late-delivery fees out of their butts. More than likely the reason for the outsourcing move came simply because Boeing execs just got cocky. They thought they could use over 50 suppliers from multiple countries across the world and get away with it. They thought they had a tight enough grip on their supply chain that it wouldn’t matter. They thought that outsourcing things like engineering and manufacturing would be as seamless as outsourcing a call center.

But there’s a tricky thing about outsourcing. It’s supposed to be used for a company’s non-core areas of business. It’s supposed to be for things like IT, graphic design and website building. I didn’t think it was ever about your core areas of business. So when Boeing outsourced things like engineering and manufacturing, one had to wonder, “If they are outsourcing that, then what are Boeing’s core areas of business?” You just don’t outsource your the areas where you are most competent. If you do, you run the risk of becoming fully reliant on your suppliers. That’s what Boeing did, and now they are paying for it dearly.

Boeing even touted the fact by openly saying it was getting a “world of help” (pun intended) on the 787 Dreamliner. It's not that big of a shock to receive parts from global vendors, but Boeing was using so many that you had to wonder if they were still part of Team America. Sources from South Korea, Italy, Japan, Australia, China, Sweden, France and Canada all have significant roles in the production of the 787 Dreamliner. The cogs in receiving supplies from such a vast network of global vendors have taken its toll on Boeing.

Boeing was supposed to debut the 787 Dreamliner in a test flight in August 2007 and then achieve first delivery in May 2008. Boeing, however, has been pushing the date back ever since, much to the chagrin of Dreamliner buyers. They finally got the Dreamliner in the air for a test flight in November 2010, but it had to do an emergency landing after an unexpected fire on board. (Go figure) Boeing recently said that they hope to have the plane operational by the 3Q of 2011, but really they should have just said, “It will be ready, when it’s ready.”

Boeing has cited everything from a shortage of bolts (seriously) to inadequacies in flight control software for delayed production. What did they expect with their expansive vendor list? Boeing effectively outran the ability to effectively manage the supply chain and in doing so they lost control of the 787 Dreamliner. In fact, I’m not sure Boeing ever had control of it in the first place. The company’s fate with regards to the Dreamliner was always in the hands of its suppliers.

Didn't someone present this supply chain danger in a risk management presentation to upper management? They had to have. That’s what large corporations do. So the fact remains that either Boeing execs simply disregarded the warnings, or they were cocky enough to think they were bigger than supply chain management; that they could slip by using a new, cost-effective approach that had never been seen before in Boeing’s 90-plus year history.

And we are all seeing how that's working out. Good work, guys. 

Want more? Of course you do. You made it this far, so check out how Apple manages it's Supply Chain or Caterpillar Logistics Supply Chain Rule of Thumb.

As always, don’t forget to check us out on Facebook, and if you want to get in touch with me personally, hit me up with a message on my personal page: Brett Supply Chain


 

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.

The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.

A Multi-Vendor Sourcing Approach

“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.

“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.

But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?

“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.

Wielding Big Tech for Better Outcomes

So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry

“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality. 

“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”

Evolving Procurement Models 

From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view. 

“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.

“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”

“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”

But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?

“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.

The Challenges

These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.

On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.

Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”

He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”

As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”

 

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