In our
course reading, "Learning from Tata's Nano," the authors herald
Modular Design as a "Revolution."
They remark that the Nano is "constructed of
components that can be built and shipped separately to be assembled in a
variety of locations. In effect, the Nano is being sold in kits that are
distributed, assembled, and serviced by local entrepreneurs." (Hagel and
Brown).
However, the story of Boeing's 787 Dreamliner provides as a
cautionary tale regarding overenthusiastic embrace of the principle of
modularity. The Dreamliner constitutes an attempt by Boeing to create a
extremely fuel efficient and long range jet.
Outsourcing of parts and modularity of design was a key
feature in the design of the Dreamliner. According to Michael Hiltzik at the LA
Times, " The 787 has more foreign-made
content — 30% — than any other Boeing plane, according to the Society of
Professional Engineering Employees in Aerospace, the union representing Boeing
engineers. That compares with just over 5% in the company's workhorse 747 airliner.
Boeing's goal, it seems, was to convert its storied
aircraft factory near Seattle to a mere assembly plant, bolting together
modules designed and produced elsewhere as though from kits."
However, the Dreamliner finally arrived over three years late
and cost billions of dollars more than estimated. According to the Seattle Times,
"Boeing was forced to compensate, support
or buy out the partners it brought in to share the cost of the new jet's
development, and now bears the brunt of additional costs due to the
delays. Some Wall Street analysts estimate those added costs at between
$12 billion and $18 billion, on top of the $5 billion Boeing originally planned
to invest."
Moreover, when it finally did arrive, it
suffered from problems such as lithium ion batteries that would overheat and
catch fire.
What's the story here?
According to Steve Denning at Forbes, there were a few main
problems. First, Boeing did not adequately coordinate with suppliers to ensure
that the modular pieces would integrate properly. He quotes a 2001 report from
Boeing Aerospace Engineer Dr. L. J. Hart-Smith, who wrote, "it is
necessary for the prime contractor to provide on-site quality,
supplier-management, and sometimes technical support. If this is not done, the
performance of the prime manufacturer can never exceed the capabilities of the least proficient of the
suppliers. These costs do not vanish merely because the work itself is
out-of-sight." (Hart-Smith)
Denning also notes that the Dreamliner involved so
many innovations that Boeing should have been more involved in the production,
rather than less. Essentially, he argues, the interactions between new technologies
cannot be totally predicted. This teaches us that these kinds of aggressive offshore
supply network designs might be more appropriate for more mature products where
the interactions between components are more well-understood.
Denning
details many other failures of the Dreamliner, ranging from C-suite leadership
to haphazard adoption of Toyota manufacturing policies.
Thus far
in the class, we have encountered companies like Ikea that use a complex and
far-flung supply network to aggressively reduce costs while keeping quality
high. In fact, as I type I am sitting at an Ikea table, with my feet up on an
Ikea ottoman, reclined in an Ikea office chair (Not to mention that my living
room is home to two of the iconic Poang chairs). However, the Dreamliner case
teaches us that what works for chairs may not necessarily work the same way for
next-generation cutting edge aeronautics.
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