The media are abuzz with stories today about how Boeing’s 787 is ready to take flight. Consider how the BBC goes as far as to suggest that "Boeing has pegged its hopes for the future on the plane." But what are the top procurement and supply-chain lessons we can take away from the entire 787 design and production process? After more than half a dozen delays, I'd argue there are a bunch, many of which we've covered in Spend Matters over the years. But none stands out more than the supply risk inherent in any business-model transformation that focuses on buying more and making less, driving up supply-chain complexity and supplier dependency. With the 787, Boeing set out to do something revolutionary by tapping suppliers not only for materials, parts, and components, but also innovation. And in doing so, it set out not only to bring a new platform to market as quickly as possible, but also, ironically, to reduce business risk by reducing its dependence on its own operations (and organized labor in the production process, specifically).
For this angle on the 787, I'd suggest reading a recent Spend Matters piece that examines how Boeing is using its supply chain as both a form of revenge and redundancy when it comes to labor flexibility. But building in new labor flexibility is not the only reason that Boeing has run into delays -- there have also been a number of engineering challenges, which the use of advanced materials and production processes brought about, at least in part. But perhaps one of the most important lessons we can take away from Boeing's 787 challenges center on how we qualify and work with suppliers. Sherry Gordon had a number of fascinating things to say on the subject earlier this year, drawing comparisons between McDonnell Douglas’s superior supplier-certification program and that of Boeing.
According to Sherry, “When Boeing acquired McDonnell Douglas, MD was counter culture -- a bean counter culture. Their former CEO, Harry Stonecipher, was always looking at reducing costs, some say at the cost of innovation. Another characteristic of MD was its core competency in supplier management. It had a world-class supplier certification program -- the Preferred Supplier Certification (PSC) process, whose details are a topic for another time. The PSC required suppliers to undergo a very rigorous evaluation process to become certified and maintain certification. And, by the way, how suppliers managed their suppliers and handled risk management were part of that evaluation. The BCA supplier evaluation processes were not as rigorous as the legacy MD's processes, and BCA resisted adopting the PSC, partly due to a NIH mentality. Each division had its own supplier evaluation processes. Many suppliers had to host Boeing visits from the two different divisions. In the end, BCA won and the excellent PSC process from MD was shelved … Boeing is always working on new, improved supplier management processes and was working on a less intensive process to replace the PSC. But when it came to the Dreamliner, I believe that not using the more rigorous PSC process hurt Boeing and was a contributing factor to the outsourcing process getting out of control.”
Of course there's a back-up to supplier development as well. This approach presents the last major lesson we can take away from Boeing's 787 supply-chain fiascos: if your suppliers aren't working out, you can always buy them.