In May 2007, an airplane named “Dreamliner”, which Boeing came up with as the secret weapon to react to the growing marketing share of Airbus, was supposed to have its first test flight, but who could ever imagine the test flight was pushed back to November 2010.

Let’s start with the origin of 787Dreamliner. At that time(1990s), Airbus was taking market shares from Boeing, to prevent the further loss against Airbus, Boeing decided to design a brand-new product to create more values rather than cutting the cost of current products. There 787Dreamliner goes, unlike any previous airplanes made by aluminum, 787Dreamliner was the first airplane manufactured with carbon-composites, with the lighter weight of carbon-composites compared to aluminum, 20% of fuel can be saved during each flight. Also, an electronic system with aluminum battery was designed part of the airplane to increase the purchasing satisfaction of its immediate customers(airlines). To better cut the cost of 787Dreamliner manufacturing while speeding up the manufacturing process, the strategy they implemented was outsourcing which was the root cause of the supply chain nightmare later.

(redesigned Boeing supply for 787Dreamliner)

The following are some potential risks from the Boeing 787Dreamliner supply chain model:

• Poor supply chain visibility due to insufficient communication method. In order to better coordinate the outsourcing plan, Boeing created an online communication tool called Exostar. The goal was to shrink the costs generated from physical visiting or examination among each supplier. However, airplane manufacturing is a broad project with high precision, without the face to face communication in some degree, it happened a lot that several components from multiple suppliers can’t be integrated or fit together, which is the outcome of being highly dependent on research data and online communication.
• Lack of strong relationship with suppliers. Boeing is definitely not the first company implementing outsourcing strategies for higher profits, actually, part of Boeing’s outsourcing strategy was inspired by Japanese motor giant, Toyota. However, what made Toyota a successful supply chain brought Boeing a nightmare, the relationship with suppliers. The companies Toyota was willing to distribute the outsourcing tasks are those who already worked with Toyota for years and had developed a bond professional trust in each other. Their quality assurance and on-time delivery were proved by previous collaboration experience, and in return, Toyota considered these partners as the core power to develop a solid supplier base. However, Boeing didn’t have enough knowledge about their new partners and assumed the smooth flow of the entire process. Without a bond relationship, their partners were not willing to share the risks from internal failures.
• Less supply chain control and more supply risks due to a tremendous portion of outsourcing. As showed in the graph below, the outsourcing part of total manufacturing was around 35% to 50% for 737,747, but for 787Dreamliner, it raised up to 70%. Outsourcing was considered by Boeing a perfect tool to spread the investment pressure on research & development, while keeping the manufacturing cost in a low level. Well, the reality was outsourcing such a huge portion of airplane manufacturing left Boeing a very limited control over the whole supply chain, which means there is no solid quality assurance for the product from each tier of suppliers. And once delay or quality issues happen, who is responsible for that, of course the mother company, Boeing.
• The insufficient management of core technologies & competency. Another giant who is famous for its outsourcing strategy is Apple, as you may notice from the graph below, Apple’s core responsibility or competencies in its whole value chain are brand, design and supply chain. Apple always create products that consumers never think about and that’s the power of innovative design, therefore, Apple only outsource the part of assembling and manufacturing. For Boeing, the part of product development was outsourced as well, which led to the graduate loss of their core technologies and competences.

Nowadays, Boeing has learnt a lot from the nightmare and is developing a mature supply chain system by discovering potential improvements on following areas.

• The transformation in Digital supply chain transformation. The pace of order is never slowing down in aerospace industry, even though a large number of delivery dates are missed. With the growing orders, Boeing had to make the transformation from traditional supply chain to Digital Supply Network (DSN). And digitization is no easy task for a company with operations in 50 states and 140 countries, while receiving three million parts at facilities every day from 5,400 suppliers. The cutting point started with a 6-month process outlined by Roxanne Shinn, supply chain senior director leading inventory management and ordering for Boeing. A single trip by 787Dreamliner creates up to a terabyte of data, if multiply that by hundreds of planes and tens of thousands of trips per year… The 6-month process is to see, analyze and integrate this tremendous data. See means clean and organize these data to a structured dataset where the correlation of supplies, customer satisfaction and performance. Then followed by identifying potential analytics which will help increasing supply chain efficiency and decision making. Last but not the least, integrate this model for further continues developments.
• The reorganization of internal work force. With the implementation of digital supply chain, some teams need to learn and perform a different function under the new structure. And it’s obvious young team players are more incapable of absorbing new knowledge and play their new roles. With that happens, Boeing had to hire some other expertise to ensure the smooth development of their digital supply chain.

With the aspects covered above, we can tell Boeing is actively looking for solutions to develop their supply chain, but it always takes time to make the progress visible. From my point of view, Boeing is heading to the right direction and I believe this giant who has stand for over 100 years could stand another 100 years or even more.

Work cited:

Cosgrove, E. (2018, October 02). Inside Boeing’s digital supply chain turnaround. Retrieved from https://www.supplychaindive.com/news/Boeing-digital-supply-chain-transformation/538630/

Denning, S. (2013, January 21). What Went Wrong At Boeing? Retrieved from https://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/#a4772197b1b7

Freddie Pierce. (2014, June 26). The Boeing 787 Dreamliner: A tale of TERRIBLE supply chain management. Retrieved from https://www.supplychaindigital.com/scm/boeing-787-dreamliner-tale-terrible-supply-chain-management

Kelly, J. (2018, March 26). Boeing and the Three Es of Digital Transformation – Built to Adapt. Retrieved from https://builttoadapt.io/boeing-and-the-three-es-of-digital-transformation-cc730490fff0

Sodhi, M. S., & Tang, C. S. (2012). Application: Mitigating New Product Development Risks—The Case of the Boeing 787 Dreamliner. Managing Supply Chain Risk International Series in Operations Research & Management Science, 161-179. doi:10.1007/978-1-4614-3238-8_11