What Can We Learn from Boeing's Lean Supply Chain Stumbles?

Not much more than a decade ago, Boeing went through a hiring binge to ramp up production, fell flat on deliveries and shed many jobs as a result. Gemba’s office is quite near Boeing’s Everett, Washington factory and the full-then-empty highways around Puget Sound were the best indicator of this impact. Their approach at ramping up to higher volume production was, in a word, muri. It was not reasonable or sustainable.
This time around it’s their supply chain that’s causing them to stumble in delivering their hit product, the new 787 Dreamliner. Many others including Kevin Meyer at the Evolving Excellence blog have capably covered the woes at Boeing and the damage to Boeing’s credibility and today that Beoing should learn from their supplier Vought.
On January 16, 2008 a Nikkei BP article (Japanese) titled Waves of “787 Shock” Hit Japan suggest that Boeing’s attempt to implement a kanban system in their supply chain on a large scale is what has tripped them up. Although Boeing tier 1 suppliers such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries have not announced reductions in the production plan due to Boeing’s delays, the article reports that Boeing orders at the smaller Japanese suppliers of these tier 1 heavy industries have slowed down. The lower tier suppliers are “appalled” at Boeing’s “reckless” plan to recover their 6 months of delay by the end of 2009, according to the article.
There is a lot that Boeing is doing right in the area of their lean efforts, not least of which is sticking to it for over a decade now and continuing to learn and adjust their approach. The lean thinking habit is to reflect and ask “what did we learn?” So what can we learn from Beoing’s lean supply chain stumbles of recent days? Was it poor planning, poor execution of a good plan or a combination of both? Any plan that does not consider risks and allow for contingencies is not a good plan, but that may be an oversimplification.
Perhaps a more important line of inquiry is to understand the why – the intent or philosophy behind Boeing’s approach. Before we ask “why did it go wrong?” we should know “What was their mission?” That’s for the people at Boeing to mull. The mission statement of the purchasing group of any company aiming to become a world class lean manufacturer should be a variation on the theme of:
Buy the best products at the lowest price, on-time in a way that ensures long-term stability by building strong supply base.
In other words the work of a sourcing or purchasing organization should create value. Obviously this means not running out of parts, being on-time with good quality, and buying at a low price. But it is more than that. Purchasing activity needs to create profit in a real and concrete way by going to the supplier’s gemba and streamlining the entire process. Build a strong supply base, hands-on. Toyota are masters at this. Instead when purchasing value creation is done through financial or contractual means based on the assumption that multiple parties will reliably fulfill commitments over long periods of time, bad things can happen, as we are seeing at Boeing.
One thing we can learn from Boeing’s lean supply chain stumbles is this: don’t copy Boeing’s 787 supply chain strategy. But that’s not very helpful since that still leaves us an infinite variety of bad strategies to stumble onto. Instead, here are 3 concrete actions to a better lean supply chain strategy:
Develop a mindset of mutual trust and responsibility. Build good and strong cooperative relationships as equal partners with your suppliers. Fair and reasonable commitments that both sides can live up to and fulfill are simply good business. Cut-throat supply chains that erode trust or relationships based on one-way responsibility work for a short while, and can fail flagrantly. Based on what I have seen and heard the Boeing purchasing organization deserves credit for changing their philosophy in this way, but the old thinking is still strong at the higher levels, and much trust needs to be regained from suppliers.
Organize your SPTT. Toyota has their Supplier Parts Tracking Team to make sure there is a smooth start up of production and delivery from suppliers. I think it’s safe to say that if you manage to run yourself out of fasteners, Boeing wasn’t paying attention to things at the detail and intensity that the SPTT does. Spend half of the energy you spend in fighting fires in your supply chain by putting a SPTT together to prevent those same fires.
Practice the skill of genchi genbutsu. Go on-site and being hands-on with the suppliers, not as a reactionary or problem solving exercise but as a way of life even in the best of times. Genchi genbutsu is much easier to do when your prime suppliers are in Everett than if they are in Kawasaki.
In an interview with a Boeing supply chain executive last year he commented that they thought the future was in having suppliers across the street from Boeing. I would cite it but I can’t seem to find this article. It may have been a wishful fantasy on my part.
This post is a contribution to the Sourcing Innovation series on Sustainability.