“So much goes into the development of a commercial aircraft—billions of dollars, millions of work hours, rivers of sweat,” writes Businessweek (Feb. 19, 2018). At Boeing’s rollout of the 777 in 1994, the phrase “working together” was an organizing principle because, said Boeing, “we realized that only by working together as a team—with our customers and suppliers, would we build a truly great airplane.” Boeing extended its embrace of globalism with its next airplane, the 787, introduced in 2011, relying on a far-flung network of suppliers that not only built but also designed many of the parts.
But togetherness goes only so far under new CEO Dennis Muilenburg. Boeing has turned hard-nosed amid the greatest sales boom in aviation history, and he’s insisting suppliers cut prices. This cost initiative is called Partnering for Success; some of its targets call it Pilfering from Suppliers. The initiative demands additional price cuts of about 10%. Says Muilenburg, “it is making our supply chain better, and 90% of our supply chain sees that.”
The company just spent $1 billion to erect the Composite Wing Center. But the first time Boeing developed a composite wing, it hired Mitsubishi to do the engineering and manufacturing in Japan, part of an effort to spread the enormous development costs of the 787 to multiple partners. Work on the fuselage went to Italy and the passenger doors to France.
Boeing had never handed off responsibility to its suppliers on this scale—and it was a disaster. The first plane out of the factory in 2007 was an empty shell, lacking plumbing, wiring, and electronics. Early models were built and rebuilt. An engine exploded, the carbon fiber frame had to be reinforced to support the wings, and an electrical blaze knocked out pilot control panels during a flight test. Battery fires grounded the global fleet soon after the plane was finally delivered, 3 years late. Boeing lost money on the first 500 787s it delivered and vowed to control its suppliers much more closely.
Classroom discussion questions:
- Is the supplier cost cutting strategy a good one?
- Why is Boeing insourcing more parts?