Systematic Risk Management Blog

Boeing’s Global Supply Chain Created Subtle Risks for 787 Dreamliner

Posted by Vernon Grose on Mon, Jan 28, 2013 @ 09:01 AM




Beoing 787 Dreamliner in production

These 787 Dreamliners were in Boeing's final assembly facility in Everett, Washington, but 70 percent of the 787's parts -- including the lithium-ion batteries -- were reportedly manufactured outside the U.S., introducing subtle but significant risks into the supply chain. Photo: Boeing.

Having started my career at Boeing – where I witnessed the initial flight of the 707 prototype that propelled the company into world leadership of jet travel -- I am saddened. The spectacle of Boeing’s Dreamliner being grounded as it started scheduled service seems more like a nightmare, not a dream.

America’s long-standing world leadership in commercial aviation seems threatened – not by competition but lithium-ion batteries.

So how could such little batteries ruin the launch of the world’s most advanced airliner?

Every opportunity involves risk. And Boeing’s Dreamliner opportunity to gain a lead over its arch-competitor Airbus introduced not only major technical advances like a lightweight frame using mostly carbon-fiber composites but an enhanced electrical system to power more functions and use less fuel than earlier jets -- thereby flying higher and at greater speeds.  

But those advances carried new, obvious risks. And Boeing recognized many of them, I’m sure. But those obvious risks also mask other far more consequential but subtle risks – ones that Boeing introduced unknowingly and may have overlooked.

The Dreamliner’s unique risk landscape began at the very beginning when Boeing, responding to pressure to reduce costs and risks, spread out Dreamliner design and construction over a far larger network of global suppliers than previously used. This required sharing costs and using supplier’s own capital for factories and equipment.

But therein likely laid a vast minefield of unforeseen risks. 

Boeing 787 DreamlinerSafety concerns grounded Boeing’s 787 Dreamliner just as it started scheduled service. Photo: Boeing.

When Boeing designed and built earlier aircraft, a principle of wholeness governed. It controlled all or most aspects of production. The global supplier idea, however, caused Boeing to stumble as a string of supply-chain and design delays pushed back delivery of the Dreamliner by nearly four years.

In hindsight, Boeing admittedly went too far in spreading out the Dreamliner supply chain. "We got a little bit seduced that it would all come together seamlessly and the same design rules would be applied everywhere in the world and corners wouldn't be cut and financial realities wouldn't hit certain folks,” Boeing chairman and CEO Jim McNerney told an audience at an event last September.

Imagine having to schedule, receive and assemble in Everett, Washington, wings from Mitsubishi in Japan, horizontal stabilizers from Alenia Aeronautica in Italy, passenger doors from Latecoere in France, fuselage sections from Global Aeronautica in Italy, cargo, access and crew escape doors from Saab in Sweden, floor beams from TAL in India, wiring from Labinal in France, wing-tips, flap support fairings, wheel well bulkhead and longerons from South Korea, and landing gear from Messier-Dowty in France.

And those pesky 787 lithium-ion batteries?  They are made and shipped by GS Yuasa Corporation in Kyoto, Japan.

Boeing logo

James B. Stewart of The New York Times recently reported that "Japanese partners designed and developed 35 percent of the 787 airframe structure, including the main wing box, which is the first time Boeing has ever entrusted such a critical design component to another company."

Eamonn Fingleton of Forbes points out that, "All in all, 70 percent of the 787 is being manufactured outside the United States, up from less than 2 percent for the 747 in the late 1960s."

As a former Member of the National Transportation Safety Board, I fully concur with my colleagues in their call for a thorough investigation of the Dreamliner – certainly well beyond the battery problem. 

But let’s return to the principle of wholeness that Boeing abandoned in producing the Dreamliner.   

Figure 1 illustrates wholeness. In this diagram, the whole, juicy orange represents Dreamliner management in toto. Everyone would readily acknowledge that Dreamliner is far too complex to be adequately managed by a single party.

 Figure 1

orange graphic

So Boeing decided to divide that whole orange – with its inherent risks -- into smaller segments that could be effectively managed. However, and of great significance, that division resulted in the creation of a myriad of new Dreamliner risks to add to the original ones!  

What is the source of those new risks? The boundaries, intersections, contracts, decisions, and jurisdictions between or even outside those original constituent elements.

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More than likely, those Dreamliner risks were not fully recognized, identified, evaluated, ranked, and mitigated by Boeing.

The orange juice on the cutting blade and table in Figure 1 represent those risks. The lithium-ion battery risk is only one drop of orange juice.  An orange can never again be whole once sliced! 

What may lie ahead for Boeing as more risks are exposed?

This simple illustration of abandoned wholeness could suggest that the Boeing decision to elect the global supplier scheme is a fatal one – irreversible and without recourse.  We’ve all heard that you can’t put Humpty-Dumpty back together again.

However, and fortunately, it is not necessary for Boeing to passively wait for the next shoe to drop. Traditional risk management assumes and focuses only on the whole orange in Figure 1 – failing to recognize the vast proliferation of risks that result from slicing up the orange to create the dilemma Boeing now faces.

The way out -- even for Boeing at this late stage -- is to implement systematic, global, all-encompassing risk methodology that will bring order out of the current chaos.

It has been done before, and it can be done again.

Topics: risk management, NTSB, airlines, aircraft risk, Boeing, supply chain