OM in the News: Boeing’s Supply Chain Nightmare

You may have read 2 weeks ago about the latest setback for Boeing’s long-awaited 787 Dreamliner (I may start to call it the “Nightmareliner”) when a fire forced a test plane to land in Texas. But the problems with the biggest advance sales (over 850 on order) plane in history started with its supply chain two years ago. The delays have cost the firm billions in penalties for breaking contract obligations to airlines.

The 787, promised for delivery in 2008, illustrates the complexity of a global supply chain—one that has broken many times on the most complex new plane in decades. The New York Times (Nov.30,2010) now reports “Boeing has had to rebuild crucial parts from foreign suppliers….Boeing executives have acknowledged that they outsourced too much of the design work, and production of the first 20 or 30 planes has been slowed by the need to rework many parts”. Not only did the company face flawed components being delivered, but plane sections made in Japan did not always fit together on the final assembly line in Everett, Washington.

At one point, Boeing was even forced to buy one its its suppliers who simply could not deliver a quality part on time. Over 70% of the plane is built by other companies, including 20 international suppliers in 12 countries. The risk sharing plan originally envisioned is detailed in the Global Company Profile highlighting Boeing at the opening of Chapter 2.

The effect of the delays will cascade for years and make it hard for Boeing to reach its planned production rate of 20 planes a month by late 2013. The latest delay appears to set the 1st delivery back another 6 months.

Discussion questions:

1. What are the advantages and disadvantages of Boeing’s global outsourcing program for the 787?

2. Did Airbus face any similar problems with its A380 superjumbo?

3. What is the impact on customers?