Boeing's troubles draw attention to 787 outsourcing

boeing3.jpgStill no word on what caused the battery fires that grounded the next-generation plane - and no indication when it might start flying again. But did you know that more than 30 percent of the components came from overseas suppliers, compared with 5 percent with the Boeing 747? LAT columnist Mike Hiltzik nailed it in 2011:

Boeing's goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits. The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn't fit together. Some subcontractors couldn't meet their output quotas, creating huge production logjams when critical parts weren't available in the necessary sequence. Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints. Some then farmed out their engineering to their own subcontractors, Mike Bair, the former head of the 787 program, said at a meeting of business leaders in Washington state in 2007. That further reduced Boeing's ability to supervise design and manufacture.


Boeing executives now admit that the company's aggressive outsourcing put it in partnership with suppliers that weren't up to the job. They say Boeing didn't recognize that sending so much work abroad would demand more intensive management from the home plant, not less. "We gave work to people that had never really done this kind of technology before, and then we didn't provide the oversight that was necessary," Jim Albaugh, the company's commercial aviation chief, told business students at Seattle University last month. "In hindsight, we spent a lot more money in trying to recover than we ever would have spent if we tried to keep many of the key technologies closer to Boeing. The pendulum swung too far."

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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