The Bair truth: Boeing's extended 787 supply chain is risky

Yesterday, I dutifully wrote up Boeing’s bi-monthly call about the progress of the now twice-delayed first flight of the 787 Dreamliner. The first commerical deliveries have been pushed back from May to December, 2008.

While new 787 GM Pat Shanahan, who has a reputation as a tough taskmaster, said progress has been made ironing out parts shortages, unfinished software and kinks in its global supply chain, it’s clear that huge risks to full production ramp-up remain along with the probability of more delays. Shanahan, who replaced former GM Mike Bair in October, is sticking to the goal of delivering 109 planes by the end of 2009 and 40 by the end of next year.

But skeptics think Boeing’s novel global plan to outsource 70% of the planes subsystems holds the company’s hostage to farflung third party suppliers. The ambitious plan is fraught with potential breaks in the supply chain. Indeed, Bair spokes about this in early November, charging that because some suppliers have stumbled so badly, Boeing would not use them again. Many think Boeing should substantially pare back initial production. The most succinct account of Bair’s unusual speech is in the Seattle Post Intelligencer.

That was an extraordinary moment of candor for the usually seceretive Boeing, which has taken an uncharacteristically high profile with the 787. Word was that Boeing executives and partners were furious over Bair’s comments. Asked about Bair’s comment in yesterday’s call, Scott Carson, president and CEO of Boeing’s commercial planes division, zinged Bair by saying he had "been backed into a corner" presumably by suppliers. For the most part, the revised schedule is on track and problems are being straightened out, Shanahan said matter of factly. And Shanahan took his swipe when he said Bair applied "brute force" to fix supply problems instead of disciplined processes.      

But now we know the Bair truth and that is Boeing’s complex supply chain puts it at the mercy of its suppliers. And if one fails, 787 production could come to a screeching halt.