787 Grounding Puts Boeing’s Outsourcing in Focus

January 18, 2013

Boeing’s woes with its new 787, grounded worldwide after a series of incidents, shine the spotlight on its bold but risky strategy to source parts for the innovative aircraft from scores of plants and contractors around the world.

Breaking with its former largely in-house production practice, the US aerospace giant decided to outsource a lot of what went into its 787 Dreamliner, with its pioneering electrical systems and heavy use of carbon-fibre composite materials.

Parts came into Boeing’s Seattle, Washington and Charleston, South Carolina assembly plants from 135 other sites and 50 suppliers.

Those include Japan’s GS Yuasa, which made the batteries linked to at least two of the problems that led to the grounding this week, and France’s Thales, which assembled the batteries for delivery to Boeing.

No other aircraft around the world is put together from so many disparately-sourced pieces.

Fifty per cent of the Dreamliner is made from composite materials, including much of the fuselage and wings, which come from manufacturers in Japan, Italy, South Korea, the United States and elsewhere.

Some 70 per cent of the plane is outsourced, said Richard Tortoriello, an analyst at Standard and Poor’s.

“That creates a potential for more problems to occur than if production is centralized, because quality control can be better managed” in a centralized process, he said.

Tortoriello said the outsourcing strategy was partly to blame for the delays in delivering the first planes, which entered service in October 2011.

But he emphasised that so far there was “no indication” that the approach was behind the problems that began to surface two weeks ago among Japanese operators of the 787.

These include a tarmac fuel leak in a 787 and battery fires in two others, which led the US Federal Aviation Administration to ground the plane Wednesday, effectively taking it out of business globally.

Hans Weber, an independent security and defence expert, said Boeing had been too optimistic about its strategy.

“Boeing has admitted that it underestimated the level of management oversight and engineering support it needed to provide to its suppliers to make the highly distributed supply chain work,” he told AFP.

“If Boeing had done a better job at that, it would not have experienced the technical problems it has, in my opinion.”

He added: “I think the technologies on the 787 are sound, but the execution of the program could have been better.”

Since the 787 program kicked off in 2004, it has been dogged by numerous problems that delayed its first delivery, to Japan’s ANA, by three and a half years.

Michael Boyd, an independent aeronautical industry analyst, said the production system was not the 787’s problem.

Rather, “it’s the batteries — the quality control would have been the same” whatever the production strategy, he said.

A Boeing spokesperson told AFP that, for the moment, there has been no slowdown of production.

One of the largest industrial groups in the United States, Boeing currently completes about five aircraft a month and aims to reach a pace of 10 a month by the end of this year.

Tortoriello said he thought the new problem would slow 787 turnout.

“Given the amount of thought that went into the current battery system, we think a fix may take some time to develop and implement, and expect this focus will likely slow production,” he said.

“We continue to have confidence in BA’s engineering staff, see other issues with the 787 as non-critical, and view its value proposition to customers as high.”