11 October 2007

Boeing - Delay on 787 - More indepth analysis

So the smoke has cleared and as we predicted as far back as May (well spotted Addison) Boeing did not make its overly ambitious schedule for the 787. Lets dive a little into the Boeing situation.

The 777 program - much less complex and very little integration issues arrived exactly on time promised delivery with a suitable gestation period occurred to United on the day promised.

The 787 is several orders of magnitude more complex. For example 4x the lines of code in the software. Vendors from all over the world with not just components but major subassemblies (like Wings and Fuselage barrels etc etc).

An overly aggressive delivery schedule

Supply chain issues that range from raw materials to specific parts such as fasteners.

However perhaps the biggest challenge remains just learning how to run a business such as Boeing has set themselves up for. It is clear by the amount of "travel work" that there have been and will continue to be significant issues in the integration of this just in time production capability. Boeing is probably guilty of believing it’s on Bullshit. The 787 is not the Smart Car type production they thought it was. No manner of Toyota engineers is going to make an inherently complex process any easier.

So from our vantage point, the following issues remain with the aircraft:

1. The learning curve is steeper than the Company ever imagined.
2. The amount of time for learning while now extended is still not going to be enough.
3. The amount of "travel work" indicates it requires an overhaul of the assumptions that were created in the design of the production schedule - particularly where the Italians are concerned. Building the schedule on the basis of the relationship to Spirit was somewhat optimistic.
4. Single sourcing has long term ramifications that need to be revisited. Boeing needs to consider how to ensure long term supply of its critical finished and raw supply chain. In this case they cannot blame the procurement process of the Government (a la C17) as a root cause.
5. Raw materials access beyond the direct provision of the supply chain interface is a cause for concern. The significant rise in the price of raw materials (whether plastics for the composite sections or Titanium) is going to cost Boeing dearly in future years.

We believe that the early customers such as ANA, JAL and Qantas are going to see significant in service issues particularly at some airports where Ramp Rash is well known. Those and other 787 customers would be well advised to learn from Boeing's issues in doing a gentler ramp up of the new aircraft. It should be remembered that it has been a long time since we saw a generational change in aircraft introduction.

And finally - let’s not forget Airbus. They better learn also. AND given the long term contract lock down of certain components that Boeing has already made - they better get their supply chain right for the A350XWB.

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