Boeing’s "Elegantly" Screwed Up Supply Chain

I was waiting on Evolving Excellence to post on this, so read their post first, but I had to chime in (original WSJ article here).

Here’s another dumb quote the E.E. folks didn’t point out:

“Some people may say this plane is ugly, but I call it an elegant logistics solution,” says Mike Bunney, the Boeing executive in charge of managing the Dreamliner’s transportation system.

It might be “elegant” (really???) but the logistics problem is one of Boeing’s own creation. Boeing decided to build huge subcomponents in Kansas. Boeing chose to do final assembly in Washington. Boeing chose to not see how crazy that seems, especially when you have to build your own special plane to haul those parts around. Want to see what this distance looks like (via Google Maps)?

Back at MIT in 1998, I heard Jim Womack tell a story about getting “fired” by Boeing as a consultant, leading him to start the Lean Enterprise Institute. One of the things Womack pointed out to them was that you shouldn’t have such a huge, complex supply chain, that it wasn’t lean. Boeing never learned and now Alan Mulally is hailed as a lean genius who will save Ford. Really???

Earlier, we read about how Toyota put 21 supplier factories right on site. The difference between Boeing and Toyota is pretty striking, eh?

Here’s another article about Toyota’s new San Antonio plant, via Motor Trend magazine. From the article:

That’s right, there are 21 separate manufacturing plants on site along with the much bigger Tundra assembly plant. Beyond the cost savings (no additional packaging, storage, freight, or environmental cost), at the slightest hint of a product-fitment issue, line workers (called team members) can stop the line, pick up a phone, and contact the lead foreman at the supplier plant in the next building. Within two minutes, that foreman can return to his own plant to make the fix. This means most supplier issues are virtually cost-effective in-house fixes.

I wonder how that problem solving works at Boeing?

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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14 Comments on "Boeing’s "Elegantly" Screwed Up Supply Chain"

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  1. Anonymous says:

    I think I am missing something in the discussion here and in a previous posting on supply chain and co-location of feeder plants. All the material for an airplane, or a pickup truck, can’t come from right next door. Steel? Rubber? Glass? Doesn’t it all have to be transported to the site of subassembly, then final assembly? So focusing only Boeing’s funny looking airplane as non-lean may miss some other points. I agree that this seems an obvious waste to transport the huge assembly this way, but those pieces would have to be shipped to Boeing in the Seattle area one way or another anyway. I don’t beleive they dig aluminum out of the ground and smelt it in the Seattle area.

    We routinely source components from all over the world, because of the special nature and features of the items we seek to use in our products. It would be nice to have it all next door but that just moves the problem down the line. It’s great for Toyota to have 21 separate manufacturing plants near it’s Texas site. Where do their inputs come from? What’s their transportation situation? Is it possible that Toytoa has just moved the “pain” and “waste” one step further away from their purview?

    Food for thought.

  2. Anonymous says:

    Boeing has to buy assembled parts ie. parts with significant labor content from countries to which they want to sell planes. They don’t care how much it costs – it pays for itself.

  3. Mark Graban says:

    To the second comment, that doesn’t explain Kansas or South Carolina. Buying fuselage pieces from Japan is one thing, but sourcing parts from Kansas, that smells like pure inertia rather than a good supply chain sourcing decision.

    To the first comment, sure raw materials come from the place where nature or God sourced them. But, Boeing has a choice about where it does subassemblies. It seems silly to “cut costs” (probably meaning labor costs) then have to build a custom 747 — how much did THAT cost??

  4. Anonymous says:

    Is Kansas and South Carolina based on powerful Senators and some sort of political goodwill that comes from sourcing parts from there??

  5. Jamie Flinchbaugh says:

    I think it’s a reach that just because you don’t like their airfreight that somehow Mulally is a joke. Fact is, Boeing has improved dramatically, and out of crisis. They aren’t done, by any means, but the company is making wins. And so far at Ford, Mulally is doing many of the right things.

  6. Mark Graban says:

    I didn’t call Mulally a joke. I’m just asking if this is the best example of a “lean global production supply chain” to have on the front page of the WSJ. Mulally had some influence over this decision right?

    I’m afraid more manufacturers will want to copy this notion (which might get some orders for this huge plane for Boeing), but that might be bad for their supply chains, if a plane like this facilitates more outsourcing to far off places.

    I didn’t mean this as an attack on Mulally.

  7. Osvaldo Spadano says:

    There is worse than that.
    Have you seen the airbus’ super transporter called “Beluga”?
    Look at this:

    http://www.airchive.com/airline%20pics/Airbus/BELUGA%20FR%20PROFILE.JPG

    I watched a three series program on the A380 project on the Discovery Channel, and I was shocked. By the way, the “Beluga” cannot be used to transport all the components. The wings of the A380 for instance are too big, hence they use a barge that can travel only when the tide is low and it can go just 10cm under a bridge! Not to mention how difficult, disruptive and entertaining it is to get the fuselage through a village on the way to the assembly line (at some point 5cm gap from houses). In the process Airbus also managed to build the world’s biggest truck convoy!

    Most of the TV program was about how to overcome logistic and transport issues, because the components are built in different European countries, so to be politically correct…

    Osvaldo

  8. Andrew says:

    I don’t know why I keep defending Boeing, because I am very concerned with their decisions to outsource what I consider core competencies, that said:

    The decision to “revenue share” with Japanese and Italian aerospace firms, I believe, has a lot to do with raising the capital needed to develop the 787. Wall Street knows you can’t make money by manufacturing, and therefore won’t fund it. The government of Japan, however, thinks developing composite materials manufacturing techniques is a great investment, and is willing to subsidize it.
    Japan is hardly a ‘low-labor cost’ country, so that isn’t a motivation.

    It’s interesting that the Italian partner, Alenia, choose to open a plant in the US. The choice of South Carolina probably has a lot to do with the incentives put together by the government of that state.

    As for Kansas, it’s far from reach of Japanese and German bombers–or it was during WWII when Boeing started making planes there. Lean blogs have been quick to criticize Whirlpool for relocating production between sites and laying off valuable experienced employees. Are you now suggesting Boeing should do the same in Kansas?
    It would make more sense from a lean perspective to build one whole product line in Wichita and one whole product line in Seatle, but that’s not where their particular expertise is. It would take time and a considerable investment to do so.
    When key 787 production decisions were being made Boeing’s main customers were all going bankrupt and the company was desparate for short-term solutions.
    Continuous improvement often means incremental improvement.
    Unfortunately, in aerospace, the next opportunity is probably 20 years away.

  9. Andrew says:

    Oh yeah, and as Osvaldo pointed out, Airbus sets the standard for bad aerospace supply chains.

    -Andy

  10. Mark Graban says:

    Andrew — you make some very good points. Blogs love easy answers and there are no easy answers for this one. There are definitely tradeoffs between the supply chain efficiency and the investment Boeing has in its people in Kansas. I’m opposed to the idea of Boeing trashing their investment in the Kansas folks in the name of low-labor outsourcing/offshoring. Now if there’s a legit supply chain reason for moving production to a single site, that’s different. What if Boeing took all the cost invested in the Dreamlifter (haven’t seen a public number, but sure it’s expensive) and paid moving costs plus a $50k bonus for each worker they wanted to relocate to Seattle. Maybe that would be cheaper? Is that “respect for people?” Sure, if you treat people fairly. Some people wouldn’t want to move, but that’s life.

    No easy answers. I’m not expecting Boeing to change, nor do I have all the answers, but what can we all learn from the discussion to apply to our own jobs??

    I bet it was much easier to justify the cost of the Dreamlifter than it would have been to justify the cost of moving a bunch of people to Seattle. It would probably be cheaper than what it cost to move HQ from Seattle to Chicago?

  11. Anonymous says:

    Mark, your lack of due diligence on this topic is killing your arguments.

    The cost of Boeing moving HQ from Seattle to Chicago was cheap, b/c of tax incentives from Chicago, and the fact that they moved only corporate staff – folks independent of commercial/defense. Commercial leadership (Mullaly et al) stayed in Seattle. That move was very also necessary for morale in St Louis/Los Angeles for Boeing to stay balanced between commercial/defense after the merger with McDonnell-Douglas.

    Second, the other commenters bring up important aspects of the opportunity costs.

    Also remember that just b/c Boeing has no plans to sell those planes now wont mean they wont in the future. Boeing is in the freighter business, so this is like a software company developing a large software product in-house to help sell their final product. It helps refine core competencies, and shows off Boeing Freighter capability. If they demonstrate low-cost there, they can use that as marketing for the Airfreight market, which helps improve their freighter sales.

    Finally, Airbus. Airbus goofed with horrible engineering integration on the A380. In the aerospace industry, Lean isn’t the most important discriminator. In aerospace, the most important discriminator is engineering excellence. Thats not true in Automotive – sales is much much more cost sensitive, thus the need for Lean to control costs/maintain quality.

    What can we learn for our own jobs? Lean doesn’t scale from large to huge with the exact same answers that it scales from small-to-medium, like small manufacturing shops. Lean is a set of philosophies, which will not always lead you to the same answer. It requires getting back to original philosophies of Ohno et al and re-deriving the solutions.

  12. Mark Graban says:

    I’m going to quit writing about Aero, I think. Is there a volunteer willing to be a Lean Blog participant from an Aero background???

    Email me using the link on the left hand side of the blog page.

  13. Mark Graban says:

    I don’t use this as an excuse to make gross errors, but keep this post in mind:

    http://kanban.blogspot.com/2006/12/im-not-always-right.html

    I’m better at raising questions and learning from others sometimes rather than having all the answers myself. I figure if I think the Dreamlifter project seems weird, someone else will to.

    I’m glad to get “setting me straight” responses.

  14. Anonymous says:

    Mark did raise a valid point that nobody has addressed yet — the quality feedback cycle. A key point of the Toyota supplier co-location is the fast quality feedback cycle, preventing the buildup of defects or scrap. With Boeing’s longer, slower supply chain, does Boeing then have an inherently weaker/slower/less effective supplier quality improvement process?

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