Long before the harrowing Alaska Airlines blowout this month, there were concerns within Boeing about the way it was building its planes. Like so many other manufacturers, Boeing was outsourcing more and more of the components.
Much modern manufacturing, of course, includes outsourcing, our topic in Chapter 2. From hot tubs to iPhones, machines are built in small pieces by different companies, then delivered to another factory for final assembly. The system has sliced costs from the process by letting production lines maximize output and eliminate waste. But the strategy also stretches oversight and adds risks, since the final product is only as good as the least-good supplier, writes The Wall Street Journal (Jan. 13-14, 2024).
A Boeing engineer distributed a controversial report in 2001 warning of the risks of its subcontracting strategy, especially if Boeing didn’t provide sufficient on-site quality and technical support to its suppliers. “The performance of the prime manufacturer can never exceed the capabilities of the least proficient of the suppliers. These costs do not vanish merely because the work itself is out-of-sight,” he wrote.
But Boeing doubled down on outsourcing in the 2000s with its 787, which was the first jet that was heavily designed by suppliers. To lower costs and risks of a new design, Boeing authorized dozens of suppliers to design and build major sections of the 787 (see text page 30), including mostly completed fuselage sections.
Now, Boeing is reckoning with the fallout from this strategy. Dozens of factories build key pieces of 737 and 787 models to be assembled by Boeing. One of the major subcontractors is Spirit Aerosystems, the sole supplier of the fuselages used in 737s and 787s. Spirit is heavily dependent on Boeing for revenue, and the two companies have often battled over costs and quality issues. The earlier 737 MAX grounding and pandemic sapped Spirit’s finances, and the company slashed thousands of jobs, leaving it short-handed and with inexperienced workers when demand recently bounced back.
Spirit employees said production problems are common and internal complaints about quality are ignored. In a given month, at a production rate of 2 fuselages a day, there are 10 million holes that need to be filled with some combination of bolts, fasteners and rivets. The result: a factory under pressure where workers rush to meet unrealistic quotas and where pointing out problems is discouraged if not punished. Increasingly, Spirit workers say, planes have been leaving the factory with “undetected defects.”
Classroom discussion questions:
- What are the advantages and disadvantages of outsourcing?
- What are Boeing’s options vis a vis Spirit?