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Sweating the 'small details': Reevaluating the extended supply chain concept for manufacturing 787s and A350s

December 17, 2007--Every morning at Boeing's Everett plant, GM and VP-787 Program Pat Shanahan meets with top program managers "yards from the first" 787 under construction. Each night, he convenes 3-4-hr. meetings in Everett offices that he says are characterized by "focus and intensity." In between, he spends much of his time having conversations--often via video conference--with 787 program suppliers from around the world. The discussions with suppliers have the "same sense of urgency and intensity as the Everett meetings," he explains.

Such is the daily routine for the man who took over the 787 program in October after Boeing announced a six-month delay in first delivery to ANA and admitted to problems in its global supply chain. Shanahan is tasked with getting the program back on track and meeting an "aggressive" revised schedule that includes first flight by the end of the 2008 first quarter.

Eventually, he told reporters and analysts last week, he hopes to get to a "normal business process" in which his role is more akin to one traditionally associated with that of the GM of a major aircraft program: Broad oversight and strategy planning but little involvement in day-to-day (or hour-to-hour) details. But not now. His job currently "requires that level of attention. . .I get into very detailed reviews with sub-tier suppliers," he says. He feels he needs "a direct line of sight to the work being done."

The 787 was supposed to mark a radical transformation in commercial aircraft manufacturing. Instead of the centralized process previously associated with aircraft building, Boeing established a far-flung global supply chain that includes key sites in such disparate places as Japan, Italy and North Carolina and contracted out much of the work to "tier one" partners who are responsible for doing assembly work onsite before shipping parts and sections to Everett for final assembly. Theoretically, this allows the plane-builder to share development risk with its partners and enables specialists to build the components they know best. It all was supposed to come together smoothly in Everett last summer for final assembly of the first 787.

But over the summer, Boeing realized that much of the "traveled work" was coming to Everett "out of sequence," in the words of Commercial Airplanes President and CEO Scott Carson. Worse, much of the documentation accompanying the work done by suppliers had been filled out incorrectly, meaning that the manufacturer had to go over each part meticulously and often revise the paperwork. Throw in an unexpected global fastener shortage and the vaunted global supply chain ended up having a lot of "wrinkles" that need to be ironed out, Carson concedes.

"The small things we are chasing [are] really frustrating," Shanahan says. "We're focusing on the small details. . .Once we clean that up, this aircraft [manufacturing process] will flow." He adds that "the biggest constraint continues to be the traveled work."

Airbus likely is watching closely as Boeing toils through its supply chain issues. The European manufacturer has mapped out a similar plan for constructing the A350 XWB. It has said it will outsource 53% of A350 production, turning Airbus into an "extended enterprise." Large work packages will be assigned to "tier one suppliers" who will share in the "risks and opportunities" of building the aircraft.

But as it frets over the weakening value of the dollar, Airbus already is behind schedule in choosing those suppliers and in its plan to sell off six industrial plants to "risk-sharing partners." While Head of Communications and External Affairs Rainer Ohler told ATWOnline early last summer that the selection of tier one suppliers and the plant sales "will have to come together" in the second half of 2007, it now appears that such decisions are being pushed back to an undetermined time in 2008. Louis Gallois, CEO of parent EADS, said earlier this month that the weakening dollar has made potential partners cautious and warned that Airbus may even have to move a large portion of production outside Europe owing to the currency issue.

As for Boeing, Carson insists it still believes in the global business model it established for building the 787. Former program VP and GM Mike Bair recently complained about suppliers that had fallen short and suggested that in the future, "partners" would be forced to build production sites closer to Everett. Carson noted last week that "Mike was in a very difficult time"--shortly after being removed from the 787 program--when he made the comments and declined to endorse the sentiments.

For now, Shanahan is focused on "good old-fashioned eyeball to eyeball discussions" with suppliers during site visits and via video conferences. During such conversations, he and the suppliers "walk through step-by-step" in a "real open and frank" manner what changes should be made. He tells suppliers "what you need to do" and asks, "How can we help?" The purpose is to "ensure that we're all talking about the same schedule," he explains.

With first delivery to ANA slated for the end of 2008 and another 109 787 deliveries scheduled for 2009, Shanahan is expected to remain vigilant. "We have changed the daily routine" surrounding 787 production, he insists. The larger question is whether Boeing and/or Airbus will change the extended supply chain model for constructing next-generation aircraft.--Aaron Karp