It has finally happened!

The Boeing 787 Dreamliner completed its first flight yesterday after almost two years of delays.  You can view a neat video of the actual flight at Boeing’s official First Flight web site.  Click on the 787 flight icon at the top of the page. 

First flight lasted over three hours and has already been officially declared a success.  I suppose getting this aircraft flying was the primary criteria for such success.

Supply Chain Matters has penned numerous commentary regarding the supply chain challenges and setbacks that have led up to this milestone.  Yesterday was a day of celebration for Boeing employees and suppliers, and we extend our congratulations to all for the hard work leading up to this event.

The next phase for the 787 Dreamliner is that of supply chain execution and delivery.  Once the Federal Aviation Administration (FAA) completes its certification of the aircraft, it will be up to Boeing’s internal and external supply chain teams to execute a consistent ramp-up of production, and deliver the 865 aircraft that have been ordered by airline customers.  Suppliers will not be able to completely recoup their resource investments until these planes are delivered in quantity, and Boeing needs to recharge its delivery and export engine to recoup its own financial setbacks related to delays thus far.

The events related to 787 Dreamliner remain as the supply chain story of the 2009, and perhaps the months to come.   They have provided testimonial to the title of this blog, namely that supply chain capability does indeed matter.

Again, best wishes to the extended Boeing 787 supply chain team.  Enjoy the upcoming holiday season and come back renewed to be able to shine in the next and most critical phase, getting these magnificent planes delivered to customers.

Bob Ferrari

While some companies take flattery from having their corporate name continually cited by articles in trade and financial media, there are other times when more bad news does not flatter. 

Such is the continuing case at Boeing, when on Wednesday, the Wall Street Journal reported that on the heels of troubles with its 787 Dreamliner program, the company will now record an additional $1 billion charge reflecting delays experienced on the 747-8 program.  The article, Boeing Settles In for a Bumpy Ride, (subscription may be required) notes that a similar difficult situation seems to be at play with the 747-8, even though the plane utilizes more traditional components, and employs more orthodox manufacturing processes.

In a single quarter, Boeing will take a combined charge related to both programs of about $3.5 billion, the most recorded in any single quarter. Boeing indicates that $640 million of the latest charge relates to both higher production and supplier costs.  The remaining $360 million was attributed to the company’s decision to cutback production to a mere 1.5 aircraft a month until 2013, no doubt a response to anemic demand of the air carriers for 747-8 plane deliveries right now.

Now that Boeing has revealed that its value chain problems extend in multiple program areas, the obvious questions are how systemic are these problems?

There has already been an applauded  change at the executive level of the commercial airplanes unit, with James Albaugh, who previously headed the defense division, now in charge, and attempting to address multiple ongoing issues.

Some speculate that Boeing’s engineering expertise has been stretched too thin.  Other commentary in the blogsphere points to Boeing’s outsourcing efforts as attempts to rid itself of labor union influence.  I recently penned a posting of what I feel were lessons learned thus far, that relate to transferring too much product and production risk to its suppliers, lack of hands-on management focus, as well as lack of timely two-way communications flow.  I also recently provided background commentary for the article, Boeing’s Delays Show Supplier Perils, appearing in TheStreet.com.

Senior executives sometimes have this innate ability to diagnose harmful events in hindsight, after these events have occurred.  An accompanying WSJ article, Dreamliner Production Gets Closer Monitoring, quotes Boeing’s Chief Executive Jim McNerney as indicating: “The initial plan outran our ability to execute it.  I think we got the balance wrong at the beginning of this program” 

As my kids would sometimes lament: “Dad, your command of the obvious is overwhelming.”

Boeing has obviously been awakened to the fact that the rewards of its innovation cannot come without due-diligence up and down its value-chain.  The pressures are building and initiatives are obviously underway to address the numerous operational problems, but suppliers remain at risk.  Not all suppliers can absorb multi-billion dollar charges.

We need a robust Boeing, a vibrant aerospace industry, and a post-recession recovery driven by breakthrough product innovation..

I continue to wish Boeing the best in its supply chain efforts, and I sincerely hope that my next blog posting related to Boeing is not about more failure within its value-chain

Bob Ferrari

The Seattle Post Intelligencer blog had a recent posting by Aubrey Cohen, titled Problems won’t reverse (Boeing) outsourcing.  This posting comments on the ongoing outsourcing challenges that Boeing has been encountering on its 787 Dreamliner program.  Readers of this blog are quite familiar with this topic, since we have featured various commentary of our own.  The latest two postings came be found here, and here.

The Seattle PI posting quotes the practice leader of PricewaterhouseCoopers LLP aerospace and defense practice as indicating that this new experiment of large scale outsourcing within the aerospace industry was bound to have some growing pains. This same consultant further states that he doesn’t see any major reversal in the trend toward large-scale outsourcing.

What really surprised me regarding this commentary was a lack of acknowledgement as to “what has the industry, and specifically Boeing learned as a result of this chapter?”  Obviously, that information will be an internal learning and guidepost for Boeing and other industry players for managing major outsourcing initiatives.

As a supply chain industry observer,  I can offer some pointers as to what should be included in such learning.

1. The notion of large-scale outsourcing involving multiple global players brings its own inherent risks.  When you add revolutionary new technology of composite materials or innovation of new supply chain processes, it just adds more to the overall aspects of risk.     Outsourcing processes need to include balanced risk.
2. Supply chain wide visibility and transparent communications are essential.  Too often, information that must traverse multiple organizational structures, program offices, functional stovepipes or teams causes that information to become pigeon holed.  Outsourcing of major components often requires cross-functionally integrated teams, empowered to make required decisions on a timely basis. Late last week, Boeing seemed surprised over leaked news that in June, an Italian supplier, Alenia Aeronautica, had to stop work on 46 of the 787 carbon fiber barrel assemblies because of wrinkles in the carbon fiber skin.  Boeing characterized the problem as “not serious” and of no impact. But the financial community reacting quite differently drove down Boeing’s stock.  Trust and consistency in information is a very big deal.
3. Suppliers who are empowered with the right collaborative tools and information streams. A supplier should be an extension of both your product management and production teams, and goaled on the same performance measures as the entire program management team. Similar to what Toyota has successfully taught, the success or failure of any individual supplier, is that of the team.  
4. A senior management structure that is highly engaged in the details, as opposed to insulated by organizational filters. When Airbus experienced its third major delay in expected deliveries of to its A380 customers, President and CEO Christian Streiff became actively involved in program leadership and stewardship.  It astounds me that with all of the current delays and setbacks around the 787 program, that there has been no visible stewardship from the very top ranks of Boeing.
5. Clear communication flow to all value-chain participants regarding delivery dates.  Global based air carriers have much at stake in the scheduling and delivery of  new aircraft.  There are implications of significant financial, route scheduling, or customer service implications.  The fact that in mid-August, Boeing has yet to definitively commit to 787 first test flight or revised delivery schedules does not

Yes, the problems encountered by the aerospace industry won’t reverse outsourcing, but those companies that excel will have addressed many of the lessons learned from current programs, especially Boeing.

Bob Ferrari

There has been some significant supply chain news and blogsphere commentary relative to Boeing’s ongoing challenges to get its 787 Dreamliner plane into full production. 

Yesterday, Jon Ostrower’s FlightBlogger broke the news that Boeing is set to announce its intention to acquire the North Charleston South Carolina based 787 fuselage manufacturing operations currently operated by Vought Aircraft Industries.  Cudos to Jon on an informative and well written posting. The story was also reported in today’s Wall Street Journal (subscription required).

According to FlightBlogger, as well as the WSJ article, this move is an acknowledgement that Boeing needs to take a more direct role in both the current supply chain and manufacturing operations of the 787 program.  Both point to speculation that Boeing may well be considering opening a second final assembly manufacturing operation at this Charleston facility.

Supply Chain Matters has had multiple commentaries related to the ongoing supply chain challenges of Boeing, the latest being Yet Another Setback at Boeing. In that post, my observation was that Boeing management should learn from its outsourcing snafus related to the 787, and it was time to move on and correct the problem.  This pending announcement seems to be a step in the right direction.

Similar to Airbus and other complex manufacturers, the notion that a company can simultaneously outsource major materials and structural design, as well as production operations to suppliers without comprehensive coordination and program management is a misnomer.  Jason Busch on SpendMatters notes that:  .. “Boeing has learned the hard way that being a guinea pig for incorporating unprecedented amounts of new materials (e.g. titanium) into certain supplier-produced parts/components (e.g. fasteners) introduces significant new supply chain risk into the sourcing equation.”  Lisa Reisman noted on her MetalMiner blog that the latest structural problem found during static testing will now require even closer collaboration among supply partners Mitsubishi and Fuji Industries with Boeing engineering.

I myself feel that Boeing needs to dramatically step-up efforts in the transparent flow of two-way communications among its senior management and program teams.  It seems to be that old adage of “tell them what they want to hear” rather than “tell them what they need to hear” is again at play.  Then again, perhaps senior management had too many filters in place.

This new development is a more positive step for Boeing in fixing its supply chain outsourcing issues. While some of Boeing’s backlogged customers remain disappointed in multiple delivery setbacks, it is far better to have a technologically advanced as well as a structurally safe aircraft that future flyers can admire.

 Bob Ferrari

Well it has happened again at Boeing, another setback.  The company announced this week that the long awaited maiden test flight of the 787 Dreamliner jet will be delayed, which is certain to be disappointment to all of Boeings supply network partners. Here is a link to both the Business Week and Wall Street Journal articles.

This blog has provided many specific commentaries regarding Boeing setbacks, the latest being in February, Time to Move On at Boeing.  In that post, my observation was that while Boeing was in a highly enviable position to have over 800 planes on order backlog, recent setbacks reflected in a 10 week labor disruption, along with other incidents of supply chain outsourcing snafus, had placed the company in a negative light.  Essentially, it was time to move on, learn from the past, and get these planes delivered.

This latest delay brought on by what was reported as a need to reinforce certain sections of the aircraft is yet another disappointment for all involved.  Boeing’s supply chain partners will continue to be hurt with increasing production delays, and this is unfortunate for the entire industry.

Bob Ferrari