How long should a supply chain be? Can it ever be overly extended or just too complex? What’s that Goldilocks principle that makes a supply chain just right?
After three years of delays to the 787 Dreamliner, Boeing’s chief executive officer Jim McNerney reportedly told CNBC in the US: “The 787 was a bridge too far on a horizontal supply chain across too many time zones with too much engineering delegated to others.
“We need to get our feet underneath us as we go forward on that airplane and on subsequent developments.”
The revolutionary concept of the Dreamliner, with its composite-bodied construction, was billed as a design that would dramatically change the economics of air travel. The engineering challenges were great enough, but then Boeing took the radical decision to outsource 60 per cent of the design and production of the aircraft. What could possibly go wrong?
Over half of the 50 major suppliers to the project were outside of the US and major sections of the aircraft were being transported thousands of miles between Japan and the US, Italy and the US and between plants within the US.
The risks associated with the initiative were large enough, with new technologies and processes being developed for the innovative composite fuselage, but then the risks were further increased by the complexities of managing each stage of the process across multiple tiers of suppliers, in different time zones and over huge distances.
The challenge for such projects is in balancing the risks introduced by the increased complexity of an outsourced and extended, multi-tiered supply chain and the expected rewards from a speedy new product introduction.
Unfortunately, it has become all to clear that on this project the balance of risk and reward were not correctly balanced.
It only goes to show that Goldilocks had it right – not too hot, and not too cold. Having the right processes and IT in place may offset some of the risks that come with increased complexity, but ultimately, sober risk management techniques must be employed to determine the right temperature for outsourcing.
In the case of the Dreamliner, let’s hope it all ends happily ever after.
