Outcome: Boeing suffered significant losses due to gaps in supply chain visibility and collaboration in its 787 Dreamliner project. This illustrates how a lack of integrated visibility and insufficient supplier collaboration can lead to serious financial and reputational repercussions.
Background
The Boeing 787 Dreamliner was an ambitious project to revolutionise the aviation industry with an energy-efficient, lightweight aircraft. To actualise this vision, Boeing decided to outsource the production of key components to suppliers worldwide, including major sections of the aircraft’s fuselage, wings, and avionics.Boeing aimed to leverage suppliers’ specialised expertise and reduce development costs by splitting production across a global supply chain.
However, this approach required tight visibility and seamless collaboration across a complex network of more than 50 suppliers in over a dozen countries. Unfortunately, Boeing lacked the necessary supply chain integration to monitor each part of the production effectively. This gap ultimately led to significant challenges.
The Crisis
Due to limited visibility and lack of real-time communication with suppliers, Boeing encountered several critical issues:
- Component Delays and Quality Control Issues: Suppliers struggled to meet Boeing’s production timelines, and some delivered components that were incompatible with other parts or did not meet quality standards. This lack of synchronised standards caused costly delays in assembly, as parts often had to be reworked or replaced.
- Assembly Bottlenecks: Without real-time insights into supplier schedules, Boeing’s main assembly plants frequently received components out of sequence or in incomplete sets. As a result, production bottlenecks emerged, leading to months-long delays in the assembly process. Boeing was forced to halt production multiple times awaiting missing or corrected parts.
- Supplier Communication Breakdown: Some suppliers were unable to manage their own supply chains effectively, which compounded the problem. Because Boeing had not established strong collaborative links with its suppliers, it often learned of these issues too late to make timely interventions or adjustments.
- Cost Overruns and Penalties: The cumulative effect of delays, rework, and production stoppages quickly escalated costs. Initially projected at $5 billion, the 787 Dreamliner development cost ballooned to over $20 billion due to these supply chain disruptions, excluding financial penalties for late deliveries to customers, further damaging its bottom line.
Financial and Reputational Impact
Boeing’s lack of visibility and collaboration cost the company years of lost revenue. The delays meant that many of its customers—airlines eager to reduce fuel costs with the energy-efficient Dreamliner — had to wait years beyond the promised delivery dates. Some airlines even canceled orders, forcing Boeing to pay significant compensation fees and damaging long-standing customer relationships.
The delays and problems tarnished Boeing’s reputation for reliability and innovation. This negative perception affected the Dreamliner project and future sales, as customers became wary of Boeing’s ability to deliver on time and manage complex projects effectively with long-lasting impacts on its market share and profitability. Airbus seized this opportunity to capture a significant portion of the wide-body aircraft market (A350 and A330), establishing itself as a strong alternative to Boeing. The Dreamliner’s setbacks ultimately shifted the competitive dynamics, allowing Airbus to gain ground in a market previously dominated by Boeing and leading to the defection of many key customers such as Emirates to Airbus.
Lessons Learned and Subsequent Actions
Following the 787 Dreamliner crisis, Boeing completely overhauled its supply chain processes to regain control over production and ensure better collaboration with suppliers by focusing on:
- Improved Supply ChainVisibility: Boeing invested in visibility tools and systems to monitor real- time status updates from suppliers, with a clearer view of production stages and potential bottlenecks.
- Enhanced Supplier Collaboration: Boeing also adopted a more hands-on approach with key suppliers, involving its engineers directly in the suppliers’ processes to ensure compatibility and quality. This closer collaboration allowed for proactive problem-solving before issues could escalate.
- Centralized Supply Chain Management: Boeing brought a greater portion of the supply chain under its direct control, reducing its reliance on third-party suppliers for critical components. This strategy gave Boeing more oversight and agility, decreasing dependency on external timelines.
Conclusion
The Boeing 787 Dreamliner crisis is a cautionary tale about the importance of supply chain visibility and collaboration in de-risking complex global supply chains. Without the ability to monitor and coordinate across its global network, Boeing suffered significant financial losses and reputational damage that took years to repair. This example highlights the critical need for visibility tools, real-time communication, and collaborative partnerships in any complex supply chain, especially as companies look to navigate an increasingly interconnected global marketplace.
Arinze Oduah FCIPS, fACSC, CMILT, M.CioD, MNIM, MISPON, MNIIA
Managing Consultant Multus Competentia Limited