…on its supply chain, according to a Wall Street Journal article from July 2nd, 2009. Boeing is in talks to buy Vought and possibly other suppliers in an attempt to gain control over the supply of parts. It’s about time leaders at this company remembered that they are a manufacturing company first and foremost, not a design, marketing and global logistics boutique like so many durable goods multinationals have convinced themselves they are.
Someday this will be a textbook case for what not to do in extending your supply chain to the edges of the globe in the pursuit of low piece prices or offsets against sales of airplanes to the countries supplying parts. The 787 aircraft is many months behind schedule and in no small part due to supply chain woes. The piece price cost savings may still put them ahead in traditional accounting, but not for long if they continue losing orders to airlines who haven’t taken delivery, have been hit hard by the economic crisis, and are forced to cancel orders. It’s hard to put a price on orders lost because you couldn’t ship them on time. You can’t make that up on volume.
A bit of million dollar consulting advice I will offer up as a public service; here is where a company like Toyota would put as much of their lean supply chain for the 787 as technically possible:
From the WSJ article:
When Boeing first rolled out plans for its Dreamliner, it said that it was reinventing the way it builds commercial airplanes. Instead of manufacturing most of the plane at its Everett, Wash., facility, many parts would be made by suppliers around the world. The parts then would be shipped to Boeing’s plant for final assembly.
Boeing, however, quickly discovered that keeping track of the different suppliers — and keeping the whole project on schedule — was more difficult than it had anticipated. Delays accumulated, and the plane is now two years behind schedule.
It was not the first time such a supply chain reinvention turned out to be a blunder. And by definition it was not a reinvention (unless we mean “making something that’s already been made, again”). I fear this won’t be the last time this blunder is “reinvented”.
This was what Deming would call tampering: not kaizen – improvement based on a standard – nor innovation. It was an idea dreamed up as a result of consultant briefings and number-crunching, far, far removed from the gemba. In fact, this sort of thing has been tried before, long ago by a far more advanced lean thinker: Henry Ford. There is an abandoned industrial city in the middle of the Amazon jungle called Fordlandia. The Ford Motor Company built a city in the middle of the Brazilian Amazon in an attempt to supply their own rubber for tires, circumventing the established source of British Malayan rubber. How did that work out? Not so well. It’s an interesting story, I recommend reading about it.
Fordlandia photos courtesy of Guilherme Carvalho’s collection on Panoramio.
Henry Ford was a lean manufacturing visionary. He vertically integrated his supply chain and made great advances in industrial productivity. How did he go so wrong in this Amazon venture? One word: gemba. He didn’t get enough of it. Like Boeing executives who made the decision to fly airplane parts from all over the world to Washington State, Henry Ford never went to see the Fordlandia site in Amazon for himself. One of the tenets of lean thought is genchi genbutsu or “go see the real thing” with your own eyes. Ford’s rubber plantation gemba was totally unsuited for rubber production, the local workforce culture completely not adapted to Ford’s method of labor management, and they failed to notice that the midday heat did not make the most motivating working conditions. Henry Ford never visited Brazil. He never went to gemba, and he paid the price.
Boeing can still pull their supply chain together. The world is not such a big place and no supply chain is so complex that it can’t be simplified. But first, they need to get a firm grip – on their heads – and get their feet to the gemba with all speed.