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787 grounding puts Boeing’s outsourcing in focus

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Reposted from the South China Morning Post

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787 grounding puts Boeing’s outsourcing in focus

January 18, 2013 | South China Morning Post

Boeing’s woes with its new 787, grounded worldwide after a series of incidents, shine the spotlight on its bold but risky strategy to source parts for the innovative aircraft from scores of plants and contractors around the world.

Breaking with its former largely in-house production practice, the US aerospace giant decided to outsource a lot of what went into its 787 Dreamliner, with its pioneering electrical systems and heavy use of carbon-fibre composite materials.

Parts came into Boeing’s Seattle, Washington and Charleston, South Carolina assembly plants from 135 other sites and 50 suppliers.

Those include Japan’s GS Yuasa, which made the batteries linked to at least two of the problems that led to the grounding this week, and France’s Thales, which assembled the batteries for delivery to Boeing.

No other aircraft around the world is put together from so many disparately-sourced pieces.

Fifty per cent of the Dreamliner is made from composite materials, including much of the fuselage and wings, which come from manufacturers in Japan, Italy, South Korea, the United States and elsewhere.

Some 70 per cent of the plane is outsourced, said Richard Tortoriello, an analyst at Standard and Poor’s.

“That creates a potential for more problems to occur than if production is centralized, because quality control can be better managed” in a centralized process, he said.

Tortoriello said the outsourcing strategy was partly to blame for the delays in delivering the first planes, which entered service in October 2011.

But he emphasised that so far there was “no indication” that the approach was behind the problems that began to surface two weeks ago among Japanese operators of the 787.

These include a tarmac fuel leak in a 787 and battery fires in two others, which led the US Federal Aviation Administration to ground the plane Wednesday, effectively taking it out of business globally.

Hans Weber, an independent security and defence expert, said Boeing had been too optimistic about its strategy.

“Boeing has admitted that it underestimated the level of management oversight and engineering support it needed to provide to its suppliers to make the highly distributed supply chain work,” he told AFP.

“If Boeing had done a better job at that, it would not have experienced the technical problems it has, in my opinion.”

He added: “I think the technologies on the 787 are sound, but the execution of the program could have been better.”

Since the 787 program kicked off in 2004, it has been dogged by numerous problems that delayed its first delivery, to Japan’s ANA, by three and a half years.

Michael Boyd, an independent aeronautical industry analyst, said the production system was not the 787’s problem.

Rather, “it’s the batteries — the quality control would have been the same” whatever the production strategy, he said.

A Boeing spokesperson told AFP that, for the moment, there has been no slowdown of production.

One of the largest industrial groups in the United States, Boeing currently completes about five aircraft a month and aims to reach a pace of 10 a month by the end of this year.

Tortoriello said he thought the new problem would slow 787 turnout.

“Given the amount of thought that went into the current battery system, we think a fix may take some time to develop and implement, and expect this focus will likely slow production,” he said.

“We continue to have confidence in BA’s engineering staff, see other issues with the 787 as non-critical, and view its value proposition to customers as high.”

2 Responses to “787 grounding puts Boeing’s outsourcing in focus”

  1. Burl Finkelstein says:

    We have seen many issues with Boeings globally sourced Dreamliner. It is built under the concept that all technologies are portable and can be transplanted to the lowest cost producers. Under economic theory this yields finished products that are world beater on cost. Unfortunately, advanced technologies are not easily portable and high tech standards are not easily translated and understood. As Boeing also learned the “tribal” knowledge at their component suppliers is not always a tangible and moveable asset.

    Would the flying public rather travel in an airplane designed by engineers or by accountants?
    Right now they are grounded so they don’t have to make the choice.

  2. Dave Albano says:

    So much for six sigma-AS9100-ISO9008 & all the other paper work programs we are subjected to. Remember there is more then filling in forms to make components it takes craftsmenship.There may be a breakdown in Boeings Q.C. program.If you are going to source components around the world then must have a quality program in place that parts are inspected, subassemblies tested and test agian in final assembly. This is a must so they will function the way they were designed.

    Bring the jobs back to where they will be made correctly. The bean counters are not engineers and when they tell you that they cost to much do something to bring the cost down. With being 3 years behind schedule and now setting on the ground, how much money did Boeing save.

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