The Boeing 787 Dreamliner: A tale of TERRIBLE supply chain management
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.
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5 Minutes With: Jim Bureau, CEO Jaggaer
What is data analytics, and why is it important for organisations to utilise?
Data analytics is the process of collecting, cleansing, transforming and analysing an organisation’s information to identify trends and extract meaningful insights to solve problems.
The main benefit for procurement teams that adopt analytics is that they’re equipped to make faster, more proactive and effective decisions. Spend analysis and other advanced statistical analyses eliminate the guesswork and reactivity common with spreadsheets and other manual approaches and drive greater efficiency and value.
As procurement continues to play a central role in organisational success, adopting analytics is critical for improving operations, meeting and achieving key performance indicators, reducing staff burnout, gaining valuable market intelligence and protecting the bottom line.
How can organisations use procurement analytics to benefit their operations?
Teams can leverage data analytics to tangibly improve performance across all procurement activities - identifying new savings opportunities, getting a consolidated view of spend, understanding the right time for contract re-negotiations, and which suppliers to tap when prioritising and segmenting suppliers, assessing and addressing supply chain risk and more.
Procurement can ultimately create a more comprehensive sourcing process that invites more suppliers to the table and gets even more granular about cost drivers and other criteria.
"The main benefit for procurement teams that adopt analytics is that they’re equipped to make faster, more proactive and effective decisions"
Procurement analytics can provide critical insight for spend management, category management, supplier contracts and negotiations, strategic sourcing, spend forecasting and more. Unilever, for example, used actionable insight from spend analysis to optimise spending, sourcing, and contract negotiations for an especially unpredictable industry such as transport and logistics.
Whether a team needs to figure out ways to retain cash, further diversify its supply base, or deliver value on sustainability, innovation or diversity initiatives, analytics can help procurement deliver on organisational needs.
How is data analytics used in supply chain and procurement?
Data analytics encompasses descriptive, diagnostic, predictive and prescriptive data.
Descriptive shows what’s happened in the past, while diagnostic analytics surface answers to ‘why’ those previous events happened.
This clear view into procurement operations and trends lays the groundwork for predictive analytics, which forecasts future events, and prescriptive analytics, which recommends the best actions for teams to take based on those predictions.
Teams can leverage all four types of analytics to gain visibility across the supply chain and identify optimisation and value generating opportunities.
Take on-time delivery (OTD) as an example. Predictive analytics are identifying the probability of whether an order will be delivered on time even before its placed, based on previous events. Combined with recommendation engines that suggest improvement actions, the analytics enable teams to proactively mitigate risk of late deliveries, such as through spreading an order over a second or third source of supply.
Advanced analytics is a research and development focus for JAGGAER, and we expect procurement’s ability to leverage AI to become even stronger and more impactful.