Next week, the federal government is expected to announce whether it will accept Boeing's plan to fix the troubled 787 Dreamliner, which has suffered from lithium-ion battery problems. (See Blame the Supply Chain for Boeing Dreamliner Problems?)
At some point, the battery issue will be resolved, Boeing will resume production, and an unpleasant chapter in Boeing history will enter business-school text books.
But what's the big lesson here?
To hear one key academic tell it — one who co-wrote a 2009 paper on Boeing's Dreamliner supply chain — it's all about management. Not management with a capital “M” but operational management.
Christopher Tang, who UCLA colleague Joshua Zimmerman wrote the case study of the risks in Boeing's 787 Dreamliner multitiered supply chain, said Boeing took on a radical process change with the wrong managers.
Lack of experience In a podcast interview with IEEE Spectrum this week, Tang said he believes Boeing had no one with much experience managing a multitiered supply chain:
In this particular case, based on what I observed, I have doubts about their capability. You look at the original team that was leading their efforts to deal with the 787 program, most of the folks on the team, they were focusing on marketing and finance. So there were no really key members who truly had the expertise in supply-chain management.
To build the Dreamliner, Boeing (Nasdaq: BA) instituted a radically new chain, moving from a system of 1,000 suppliers building Boeing-spec'd parts that Boeing assembled into subsystems and then planes, to a multitiered structure.
supply-chain experts overseeing the Dreamliner 787 program.
In that structure, Tier 3 suppliers fed Tier 2 systems and structure partners, which fed into a Tier 1 pre-integration step which fed into Boeing's final assembly. In two cases, Boeing ended up having to buy two suppliers for $2.4 billion because the units were underperforming in the chain.
In the interview (here’s the transcription), Tang also said the multitiered approach differed from Toyota's in that Toyota has proven supplier relationships from Tier 1 to Tier 3 suppliers and relies on face-to-face meetings among them.
In Boeing's case, “they delegate to the tier 1 strategic partners, they really don't know who the tier 2 or the tier 3 suppliers were,” Tang said.
Maybe the lesson here is even in a sophisticated, highly automated supply chain, the human factor matters immensely, and experience is worth every penny.
What do you think?