The Boeing Company (NYSE: BA) has announced its fourth delay in delivering its first of nearly 900 unit order backlog of its 787 Dreamliner from the original May 2008 to the current first quarter 2010. After parts problems and an eight week machinists strike, this does not come as a surprise but many customers are probably wondering whether there will be more delays in the future. Unfortunately, it is unclear whether Boeing has learned enough from these delays to keep them from happening in the future.
If a study by Boeing competitor, Airbus, is to be believed, the 787 has been plagued by a wide range of management problems. The study suggests that when Boeing outsourced a significant portion of the 787's design and assembly integration, it failed in overseeing those partners. Airbus's study suggests that Boeing should have known about the following six problems:
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Its partners' factory workers lacked the skill to do their jobs - The study claims that these workers were "low-wage, trained-on-the-job workers that had no previous aerospace experience."
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Some of its partners lacked design staff - The study claims that one of its partners, Vought, "had no engineering department when selected" by Boeing.
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Some of its suppliers could not produce enough parts - The study claims there was "insufficient supply of frame, clips brackets and floor beams."
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Inability to control the 787 production schedule - The study says that Boeing could not control the timing or quality of delayed work, noting that "deferred work [was] found to be incomplete or lost in transfer" and that parts that did arrive complete to final assembly were "found to be completed incorrectly" requiring additional rework in Boeing's Everett, WA plant.
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Lack of quality assurance process - The study found that Boeing did not have enough quality testing to meet production demand -- noting a "lack of qualified non-destructive inspection/quality assurance personnel (NDI/QA) and equipment at Tier-2 and -3 suppliers." And it found that Boeing deferred this testing to make up for lost time.
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Delays in design schedule that led to a fastener shortage - The study suggests that the 787's well-publicized fastener shortage was due to the late redesign of a wing part called a "sleeved fastener for lightning strike protection that primarily impacted Mitsubishi's wing production." The 60 week delay led Alcoa (NYSE: AA), Boeing's fastener supplier, to under-produce the "tailored-length fasteners" that Boeing needed.
In researching my book, I found that Boeing has since taken steps to deal with these problems, employing a trust by verify approach to suppliers. Moreover, since Airbus has had its own problems with its jumbo A380 -- costing $12 billion -- it is clear that neither of these players has figured out how to bring off these new aircraft without a glitch.
But given the importance of the aircraft industry to the global economy, let's hope they both learn from each others' mistakes.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, will be published by Portfolio on December 26, 2008. He has no financial interest in the securities mentioned.
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Reader Comments (Page 1 of 1)
12-11-2008 @ 12:57PM
Iridium said...
I get worried when I fly in a new Boeing plane. It seems like the quality isn't even close to an Airbus made in Germany. Cabin air and pressure is far superior in the Airbus.
I'm worried that the cost cutting and outsourcing to vendors who use low wage "read illegals" workers will lead to planes falling out of the air.
12-11-2008 @ 1:34PM
Kent said...
I've visited Boeing's Wichita factory some years ago, which is hugh and impressive. They too were waiting on wings and tail fins from Japan and China for final assembly at Wichita. My cousin who just retired from Boeing says many engineers at Boeing are not happy about outsourcing on a job they know they can do better. But Boeing has to satsify their shareholders to show profit growth from strategies like this one.
12-12-2008 @ 5:45AM
Dave Harris said...
As a retired pilot with nearly forty years in the industry, it amazes me that people are ordering the Dreamliner so as to be number 900 in the production sequence and therefore maybe eight years from receiving their aircraft. There could be huge changes in the technology by then and as yet the aircraft is still untried. What will the industry do if further problems arise during the prototypde and preproduction phases of the program.
12-13-2008 @ 12:15AM
Alan said...
Vought is owned by The Carlyle Group. They charge a management fee to affiliates for their strategic management expertise.
Apparently they failed to deliver at Vought. CEO Doty noted the Global Aeronautica JV startup was delayed due to access to capital, Carlyle's strength.
A review of articles show Vought and the JV stumbling blocks in the process. Quality has been poor and an executive fired. If 98.7% of flights made their final destination, America wouldn't have an airline industry.
That's the percent of spec'ed items Vought now delivers to Boeing.
1-04-2009 @ 8:08PM
Mechanical Sky said...
Oops! it happened again......nut and bolt. yeah very little thing to hold two pieces together again slow down the production of deamliner. It gonna be dream again for Boeing.mechanicalsky.com
2-08-2009 @ 6:28PM
markus said...
Most points are minimally correct.
1> Boeing new as early June 2007 that the project would be delayed by at least 24 months, but yet only released information in small increments.
2> Aircraft #1 was and is loaded with critical repairs, especially in APB section. It was rolled out with tens of thousands of missing parts, infact, just a shell, with a paint job and the windows covered over.
3> Fastener shortages was wide in scope, it included not only types and engineering callouts but lengths required for proper installation.
4> Enginnering from Vought's side was supplied through Dallas, and was aided by floor qualities use of Boeings Catia / enovia programs.
5> Workmanship issues in South Carolina came from arrangements with the state to supply novice technicians (Trident Students) to the actual workforce. Most never worked on any aircraft prior to this, and in fact several were from the fast food industry, wal-mart, etc.. Planetech staffing of chicago was allowed to install personnel to the shop floor and to Quality that had No experience with Category II transports, or aircraft composites, and many had drug and alcohol issues arise after payday.
6> Foreign workers used in Charleston from Alenia were indeed unskilled, both the teenage technicians and the young assigned ME's that utilize outdated PDF files for engineering and manufacturing. Work order's that were duplicated and vague due to Italian / english conversion. No shipping and receiving controls, no MRB for the Alenia side, no in work part control nor work order review. Quality Assurance / Control was operated in the same manner, but with 2 to 3 teenage Italian inspectors to 4 center sections. At no point did I personally see quality compliance to work orders being performed. Planetech contractor supervisors actually run and direct the process. No involvement from the principal (Boeing).
7>Receiving departments did and do not exist. Parts are being received and issued to the floor based on "conformity statements" only. Most do not have the means or knowledge to verify assemblies by Catia.
8> True, niether facility in Charleston has a complete NDI organization that could pass FAA scrutiny.
Supply chain inefficiencies is correct, no clips etc.. and when they arrive there is no assurance that they will be correctly built. Boeing doesn't really exist in the Charleston facility. At any time you can observe the GA personnel on there personal laptops in the facility watching DVD movies or internet TV, oblivious to production that surrounds them.