Dings and Gaps of Outsourcing

Over the past couple years I’ve been chronicling the development of Boeing’s 787 Dreamliner, especially the Dreamlifter supply chain convolution created to ferry subassemblies from suppliers around the world. I’ve been trying to reconcile that massive global design and manufacturing effort with Boeing’s claim to be a lean manufacturer. 

Last month I wrote a post titled 787 Dreamliner Built in 10 Minutes that continued to poke at some of our fundamental concerns.  To summarize:

• Boeing is lauding the fact that a 787 will eventually roll off the assembly line every 3 days, compared to the 14 weeks it takes for a 777.  However this is an apples to oranges comparison.  Most of the 777 is built in-house, while most of the 787 is built at outsourced subassembly suppliers and "simply" bolted together at Boeing.  As the title of the post reflects, if Boeing did an even better job of outsourcing, they could potentially "build" a 787 in 10 minutes.  But what is the true manufacturing cycle time, accounting for all subassembly activities, and especially transport to the final assembly location?
• A new design as complex as the 787 is extremely costly, and political realities incent companies to create partnerships in foreign countries in order to gain orders from those countries.  However significant intellectual property and design knowledge is also being transferred by those relationships.  As I pointed out, the same Chinese companies that Boeing and Airbus are partnering with for subassemblies and even complete aircraft are now beginning development of their own aircraft.  How will that affect the competitive landscape twenty years from now, if not sooner?
• Lean is about speed, and rapid response to problems.  How does moving subassembly manufacturing from the factory next door in Seattle to a different company on a different continent, operating in a different language, impact that?  All of the electronic communication systems in the world can’t compare to simply walking next door to analyze a problem.
• Lean is about leveraging the knowledge and creativity of workers.  Tens of thousands of Boeing workers in Seattle were laid off, with hundreds of thousands of years of knowledge and creativity lost from the company, in exchange to thousands of inexperienced workers being added at subassembly manufacturers in different countries.  It is not simply a cost equation.

Two people, Rebecca and Walt, wrote impassioned defenses of Boeing as comments to that post, and we thank them for adding their perspective.  They correctly noted that the stock price is high, investor confidence is high, and production is at an all-time record.  As some of us pointed out in response, that sounds similar to the situation GM was in a few decades ago.  I personally do believe that is an unfair comparison and that Boeing is a far better and more strategically-oriented company that GM ever was, but Boeing needs to look twenty or thirty years into the future.  I’d be worried.

A hat tip to Mark at the Lean Blog for pointing us to a couple articles describing how the initial 787 assembly is going.  For example, 

A 0.3-inch gap where the left side of the nose-and-cockpit section didn’t line up with the fuselage section behind it. Boeing has fixed the problem, which company spokeswoman Mary Hanson characterized as "a normal part of the production process."

Obviously that is to be expected with a project of this magnitude.  I’m sure each new Lexus model doesn’t go together perfectly the first time either.  Although the solution to the problem above makes me wonder a bit.

Fixing that is typically done, he said, by disconnecting interior fittings — such as floor struts and other supports — that put pressure on the fuselage’s outer shell. Then workers pull the section into alignment and reattach the fittings.

Presumably this would not be a routine occurence, as "deconstructing and reconstructing" a subassembly is a significant waste. 

But Weber warned that such problems could be more likely and more difficult to deal with when the 787 fuselage sections start arriving fully stuffed with all interior fittings.  Boeing has said the initial airplane sections are arriving from the major partners not fully completed. But when production is up to speed, those sections will come pre-installed with everything from wiring to hydraulics and insulation.  Such "stuffed" fuselage sections could be more distorted by all the pre-loaded interior fittings and systems, Weber said.

So not only is the long (at least geographically if not also in terms of cycle and feedback time) supply chain creating the need for Dreamlifters, it is also creating the potential for final assembly bottlenecks.  If a Dreamlifter arrives with a "stuffed" fuselage that has a problem, the entire final assembly line stops, at least until the next Dreamlifter arrives.  In a way this violates another fundamental concept of lean.

Long supply chains don’t just create longer overall assembly cycle times and longer feedback times, they also can lead to physical problems.

Boeing has also had to work with Italy’s Alenia Aeronautica after the horizontal stabilizer it made for the first 787 arrived with dings, an indication that it might have been improperly handled during shipment.

Once again such a problem would stall the final assembly line, unless some extra inventory was stored just in case such a problem occured.  And we all know what extra inventory means…

Knowing Boeing I’m confident most of these issues can be ironed out.  I also realize that design and manufacturing strategies for products of this cost and complexity are difficult and sometimes beholdened to political realities.  But Boeing’s strategy and experience provides outsourcing lessons for the more common manufacturers among us, especially those that profess to use lean manufacturing methods.  And I continue to be very concerned about the long-term effect of knowledge transfer.