Latest / The Operations Podcast with Fexingo: Process, People, and Profit in Modern Business / How Boeing’s 787 Dreamliner Broke Its Own Supply Chain
Transcript
- Lucas: So in 2007, Boeing announced the 787 Dreamliner with a plan that sounded brilliant on paper: outsource about 70 percent of the aircraft to partners around the world, and then basically snap it together in Everett like a giant Lego set. Luna: And it was supposed to take four years from launch to first delivery. Lucas: Right. First flight was 2008, deliveries 2009. Instead, the first delivery happened in 2011, over three years late, and Boeing took eight billion dollars in overruns. The supply chain basically imploded. Luna: What went wrong? I mean, outsourcing isn’t new. Even Boeing had done it before. Lucas: It’s not just that they outsourced. It’s how they structured the risk. They pushed design responsibility to tier-one suppliers who had never done that level of integration before. For example, Mitsubishi Heavy Industries was responsible for the entire wing box — a structural core of the plane. They’d only ever built smaller subassemblies. Luna: So they were asking partners to take on both design and manufacturing at a level they hadn’t proven. Lucas: Exactly. And the communication wasn’t there. Boeing’s own engineers were thin on the ground at supplier sites. They assumed that if a supplier missed a deadline, they’d flag it early. Instead, problems festered for months. Luna: And there’s the classic coordination cost. The more nodes in your network, the harder it is to synchronize. Lucas: Right. And Boeing had over 50 major suppliers across the world — Japan, Italy, the US, South Carolina. Each with their own production systems, their own quality standards, their own software. Integrating all that was a nightmare. Luna: Give me a concrete example of where it broke down. Lucas: The fastener shortage. So, the 787 uses thousands of specialized fasteners — bolts and rivets — that hold the composite fuselage together. Boeing didn’t track the fastener supply chain closely. They assumed their tier-one partners would manage it. But the partners didn’t communicate their needs to the fastener suppliers early enough. So when assembly started, workers in Everett found they had only a fraction of the fasteners they needed. Work stopped for weeks. Luna: A fastener shortage. It’s almost — it’s like a ten thousand dollar problem on a two-hundred-million-dollar airplane. But it grounds everything. Lucas: It’s the whole point. The most fragile parts of a complex system are often the small, low-cost items. Bulk commodities no one thinks about. But if you run out, the entire production line freezes. Luna: And that kind of risk — it’s exactly what operations people mean when they say ‘coordination failure.’ It’s not that any one supplier was incompetent. It’s that the information and incentives weren’t aligned across the network. Lucas: That’s it. And it’s worth saying — a small number of listeners actually help us keep having these conversations. If the show has made you think differently about how companies run, you can support it through buy me a coffee dot com slash fexingo. That’s what keeps it ad-free and independent. No pressure, but it does make a difference. Luna: Yeah, it’s a simple way to keep the podcast running. And we really appreciate it. Lucas: Anyway, back to the Dreamliner. So around 2008, Boeing realized they had a mess. They started buying back some of the supply chain. They acquired a plant in South Carolina that was struggling, and they brought more engineering oversight in-house. Luna: But they didn’t fully reverse the outsourcing. They kept the partner network — just with much tighter controls. Lucas: Right. They created a central team that tracked every supplier’s progress weekly. They embedded Boeing engineers at partner sites. They standardized software platforms. And they started stockpiling critical components like fasteners — the opposite of just-in-time. Luna: So the lesson is, you can outsource production, but you can’t outsource responsibility for integration. Lucas: Exactly. And for any company managing a complex supply chain, the 787 story is a case study in what happens when you decentralize too much without building the coordination muscle. Luna: It’s also a reminder that the ‘Lego set’ analogy is a myth. Parts don’t click together neatly. They have tolerances, they have dependencies, they have interfaces that need to be managed. Lucas: And Boeing did eventually get it right. The 787 today is a reliable aircraft with a decent dispatch rate. But the pain they went through to get there — it’s a warning for any company that thinks they can just hand off complexity and walk away. Luna: So what’s the one thing a listener should take away from this? Lucas: Map your bottlenecks. Not just the high-dollar, high-visibility parts. Look at the fasteners of your supply chain — the small, low-cost items that could stop everything. And make sure you have visibility into them, not just your tier-one suppliers. Luna: And don’t assume your partners will tell you when they’re in trouble. Lucas: Right. Build the systems to detect problems early. Boeing learned that the hard way. Hopefully, others don’t have to.