Friday, December 07, 2007

Boeing learns hard lessons about partner management

(UPDATE: 11 Dec 07 - Boeing confirms it's on schedule for first 787 flight in 1Q2008)

I wrote a couple of weeks ago that the trend toward collaborative product development would create a premium for partner-management skills rather than pure technical skills for innovators. Nowhere is this in bolder relief than in the Boeing 787 project, some of the travails of which are profiled in a front-page Wall Street Journal article today (link - $$).

What surprised me the most were the issues resulting from inadequate supplier management; specifically this:

"In addition to oversight, you need insight into what's actually going on in those factories," says Scott Carson, the president of Boeing's Commercial Airplanes unit. "Had we had adequate insight, we could have helped our suppliers understand the challenges."

And this:

But many [Boeing partners], instead of using their own engineers to do the design work, farmed out this key task to even-smaller companies. Some of those ended up overloading themselves with work from multiple 787 suppliers, Boeing says.

The company says it never intended for its suppliers to outsource key tasks such as engineering, but that the situation seemed manageable at the time. "We tended to say, 'They know how to run their businesses,'" says a Boeing executive familiar with the company's thinking.

As Boeing knows now, selecting a strategic partner and entrusting it with designing, building and delivering a critical subsystem is far different from sourcing a standard part from a supplier. The prime contractor has the right and obligation to critique, probe and view its partner's activities from the inside (you need Doubting Thomases).

In the short term, these delays hurt Boeing. There is PR impact. And financial hits, in the form of penalty payments and cash-flow delays. But it is important to remember that the 787 product will have a 30-year life cycle. By that count, a 6-month or even 1-year delay in deliveries will have a negligible long-term effect.

It's also good that Boeing is not trying to mask its mistakes and instead to discuss and learn from them. Not everyone agrees: the Journal article states, "Lessons that Boeing is learning the hard way could end up helping rival Airbus." This will be true to some extent--but the highly complex lessons Boeing is learning will be hard to glean from the outside. If Airbus gets too confident in its follower role, it will overlook its own inevitable mistakes and let Boeing get out even farther ahead.

(Photo: the 787 Dreamliner. Courtesy of Boeing)

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wayne316 said...

Boeing is a prime example of a large corporation exploiting cheap labor in the name of globalization. While they impose strict regulations on domestic suppliers(NADCAP) they waive these requirements for foreign low cost supliers- serves Boeing right-lesson not learned.