Business - Written by Dan Herman on Tuesday, April 8, 2008 10:06 - 7 Comments
787 Dreamliner – a retrospective look at collaboration
Ahead of tomorrow’s update on Boeing’s progress with the 787 Dreamliner, an update many expect to include more bad news regarding delays and completion time, I thought it appropriate to start a retrospective look at what was once the poster child for design and manufacturing collaboration. I was part of the fan base writing about the project. About two years ago I penned a case study on Boeing, noting how the collaborative process used in the development of the 787 Dreamliner had trimmed design costs, promised to speed final delivery, and significantly dampened the financial risk associated with new aircraft development. Initially it seemed that we were right on – Boeing took a significant lead in sales vis-a-vis Airbus’ new A350 and its’ gigantesque A380, orders wouldn’t stop flowing in, and all seemed rosy.
But then it came time to deliver and suddenly the story changed. What had seemed to be the perfect case study on the benefits of collaboration (with nearly 700 planes sold to 50 different airlines) ground to a halt with a continuous stream of bad news. First promised to customers for May 2008, delivery has been pushed back to early 2009 and many expect even later.
So as we look back at this case study in collaboration, what do these delays tell us about this collaborative process, and in particular, where, if anywhere, does the process fall short?
We’re not the only ones asking these questions. Boeing’s greatest competitor, Airbus, is watching the process as well. The European company had planned to outsource more than 50% of its A350 production (Boeing outsourced over 70%) but has taken note of Boeing’s struggles and is ” studying carefully the lessons we should take on the 787 (as) obviously the supply chain is a concern. . . “
Let’s look at the reasons given for the delays:
- Early in 2007 Boeing warned that a worldwide shortage of fasteners that hold the plane’s fuselage, wing and tail sections together was slowing down assembly of the first test aircraft.
- Then in September 2007, the company announced that it, and its production partners, had run into difficulty acquiring other specialized components as well as in the integration of software and flight-systems control software.
- Moreover, the company was forced to rework parts of the plane produced by suppliers/partners after discovering that the initial partner work didn’t fit with what Boeing needed – much of which seems to be a case of misunderstanding requirements. This specific issue led to the reacquisition of parts of the project that had been outsourced, notably a major share of fuselage production initially done by Vought Aircraft Industries.
(New) 787 General Manager Pat Shanahan notes, “We thought we could modify that production system and accommodate the travelled work from our suppliers, and we were wrong.”
So what exactly does this mean for the collaborative process? I’ll preface this by saying this is just some early thoughts and that my hope is that by opening up this conversation we can flesh out where exactly the pain points are.
A) Something. A global supply chain will always create consequences if parts are in short supply. But the mega-distributed supply chain that Boeing instituted saw it lose substantial control over second and third-tier suppliers. Subsequently, materials shortages or others production-related problems experienced by supply partners have a more significant impact on final assembly as they delay not one, but two stages of production.
B) Nothing. Ultimately the measure of Boeing’s collaborative processes should be measured not only by final delivery but on the processes that led to the development of the new plane. Without a shared risk and financial model, Boeing would never have been able to get the 787 off the ground. Moreover, Boeing’s latest assembly reports highlight the fact that while parts and integration may still present issues, the second time around has proven a much smoother process than the first.
I’m putting my money on the latter. So long as the plane doesn’t fall out of the sky (or in this case, fails to takeoff), delays alone don’t undo the fact that Boeing has built a state-of-the-art composite aircraft while absorbing only a portion of the risk. If anything, the case proves that collaboration acts to increase what’s possible (though this isn’t to say that’s ground-breaking. A decade ago in business school we talked about cooperation and synergies, this just takes it to a technology-enabled other level.) What it reinforces, however, is that the real challenge isn’t so much design or idea-related collaboration but rather production-related coordination, and that as the number of nodes in the network expands, keeping each in synch grows ever more difficult.
7 Comments
Zarcom
If the problem is a supply problem, it would not have mattered which system you used. Suppliers will not inform their customer’s that they cannot deliver until it is to late. It is human nature.
I would think that using a more collaborative method of manufacturing is the better model.
With more stakeholders, you have a better quality control.
To what extent do the 787 partners practice transparency and joint modelling?
Are they explicitly sharing of information, where the process of sharing information is an explicit step that parties have to make, and each sharing is preceded by a decision or commitment or culture to share that information? It can take huge effort to throw information, especially bad news, over the wall. And it is human nature to share only the good news and hide bad news, especially when the reasons for a problem are poorly understood.
Do they have joined-up processes that span organizations and permit transparent viewing of process-level information?
I know the saying goes, if you want to be naked you better be buff, so I’m wondering to what extent they practice transparency, and just how automated is the linkage of their planning models.
Martin Cleaver.
MoominPapa
In light of the recent news that Boeing will actually make major changes to their supply chain and reverse their design & production model and bring much of the work in-house, what are your thoughts on this topic now?
Business Week article, Jan 16th 2009:
http://bit.ly/t2ZC
I am still a supporter of the mass collaboration principle but I can also see that as you increase the extent of your supply chain and outsource more and more of the design and production, that will naturally lead to a greater risk of miscommunication and misunderstanding, mistakes and hence delays. Delay in such a industry is no doubt costly and does not look good on the balance sheet. No one can say with any cetainty that a different model would have been better or more effective.
I think that there is a definite opportunity from the Dreamliner project to learn from mistakes, enhance and tighten up processes and procedures and apply those lessons in future variants of the aircraft.
Boeing is not an ordinary company. It was funded by R&D that was essentially a gift and part of industrial policy, or corporate welfare — depending upon how you want to look at it. They received a steady supply of defense related subsidies from WW2 and up to the present time. Through engaging in this collaboration and global outsourcing, it also gave away previous taxpayer money so that it could bring the price down and “lower risk.” In terms of “lowering risk” building airplanes is what Boeing does. If it does not want to do that, which it is done for decades, then I am confused as to its value add. Designing and building airplanes was its core competency. If it wants to screw together and paint airplane components made in other countries in order to increase its profits, that is simple lazyness. Furthermore, this reduces US employment and I question its motives. Is this entire gamit so that Boeing executives can have more money, extra yatchs and summer homes in Europe while the manufacturing worker gets laid off? It seems that “collaboration” or “outsourcing” is now an ideology that people support, no matter how bad the outcome.
Tony
This is just a simple case of management stupidity trusting outsourcing “gurus” from McKinsey about great benefits of outsourcing. McKinsey has been known to advocate outsourcing (mainly to India) while the firm itself knows nothing about operations. First rule – NEVER outsource the core competency was conveniently ignored. It is almost as someone decided to minimize the cost of manufacturing by running hige production lots without realizing that this will double a total supply chain cost. Boeing management was happy to get their bonuses for reducing their overhead and labor cost (by laying off thousands of workers) and now eats the results of its action (the decision makers ought to be fired at once). This is a typical example of an idea taken to the extreme without understanding what this would entail (another example is idea of KIT in the 90th when everyone ran out of stock). I wonder what these outsourcing “gurus” are saying now:)
They are probably not saying anything Toly. These trends come and go in consulting and there is very little accountability. When their advice flames out, they just jump to the next trend. Right now one trend is “lean,” which is also horribly misapplied, and is sort of like JIT 2.0. When that as failed, they will try something else.
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I’m putting my money on option B as well.
Obviously the project is a failure from a project management standpoint (success being defined as on scope, on time, and on budget).
It will be extremely difficult -if not impossible- to compare with what would have been a less collaborative approach.
Actually, even if it was determined that failure is partially to be blamed on collaboration, that wouldn’t mean much as it relates to the value of collaboration.
Who ever got it right at the first shot?