Global Supply Chain, Supplier Management, Quality and Safety: A Tale of Toyota and Boeing

The Japanese carmaker Toyota said Wednesday (1/29/2013) it was recalling more than 1 million vehicles sold in the United States due to faulty airbags and windshield wipers.  On Jan 16, 2013, Boeing’s 787 Dreamliner was grounded by the US Federal Aviation Administration and other foreign regulators due to a faulty Li-Ion battery that had caused an aft cargo hold fire at Boston, and an electronics bay smoke/smell during flight in Japan that resulted in an emergency landing. When you look at both of these manufacturers, the problems are caused by relatively inexpensive components sourced from suppliers that also employed suppliers at lower tiers as part of the sub-assemblies, or just simple error during manufacturing. In the case of Toyota’s windshield wiper issue, the root cause seems to be over-tightening during manufacturing, which is a simple enough corrective action to remedy the situation. The airbag issue seems to have design or manufacturing cause, however, it is also simple enough to fix by replacement of the subassembly. These recalls and fixes provide the consumer with confidence that there is no panic and it is safe to operate these vehicles. Automobiles are one thing and a complex aircraft is whole different animal!

When you look at the Boeing 787, a simple battery pack, double the size of your typical automobile battery, is the cause of the worldwide grounding of the $208M aircraft. This is causing public panic related to safety towards this revolutionary aircraft, and havoc for fleet planners at the air carriers. Boeing is not alone in this because of the web of supply chain leading to the battery itself, multiple regulatory bodies and operating jurisdictions. To grasp the complexity and regulatory genealogy, you need to understand history 101 of the Dreamliner program.

In 2003, Boeing was facing a daunting task of catching up to Airbus and needed to respond to the marketplace looking for an efficient product. The answer was an aircraft with superior operating costs, light weight carbon fiber reinforced plastic (CFRP), greater efficiencies, passenger comfort and a truly revolutionary design. The only way the board of directors would sign off on the Dreamliner program was to spread the risk among a global chain of suppliers and partners. In December 2003, these risk sharing partners agreed to take on half of the estimated $10 billion development cost.  The global supply chain and partners were responsible from design to manufacturing - The plan backfired as production problems quickly surfaced with supplier quality management issues.

By giving up control of its supply chain, Boeing had lost the ability to oversee each step of production. Problems sometimes weren't discovered until the parts came together at its final assembly in the Everett, WA plant causing complex rework, paperwork for certification and simple task tracking. The program got delayed by 3.5 years, costing an additional $4B plus and Boeing ended up buying out several partners and facilities to bring control to chaos. Finally, the first delivery was made to the launch customer, All Nippon Airways of Japan, in 2011.

Then, this month, all the progress came to a sudden stop. First, a battery ignited on a Japan Airlines B787 shortly after it landed at Boston's Logan International Airport. Passengers had already left the plane, but it took firefighters 40 minutes to put out the fire. Problems also popped up on other planes. There were fuel and oil leaks, a cracked cockpit window and a computer glitch erroneously indicating a brake problem. Then a Dreamliner flown by All Nippon Airways made an emergency landing after pilots learned of battery anomalies and detected a burning smell. Both Japanese airlines grounded their Dreamliner fleets. The FAA, which just days earlier insisted that the plane was safe, followed suit by grounding the US based 787s which is operated solely by United. This was followed by the grounding of the 787 by all other worldwide regulators.

Just look at the battery issue alone: Lithium-Cobalt chemistry based batteries are manufactured by GS Yuasa of Japan; Kanto Aircraft Instrument of Japan provides battery health monitoring circuitry; this is integrated with a battery charging system provided by Securaplane Technologies of Tucson, AZ (which is a subsidiary of Meggitt plc of UK); this is integrated by the power system solution provided by Thales of France; this goes into the aircraft auxiliary power unit by UTC Aero Systems of the US (which is part of United Technologies) which is finally integrated into the aircraft electric grid architecture by Boeing at Everett, WA and Charleston, SC final assembly lines. This is just one aspect of supply chain management and these integrate and interact with many other systems in the aircraft.

US and Japanese investigators have yet to determine the root cause of the problems, and the longer the B787 stays grounded, the more cost Boeing will incur in penalties to airlines.  Figuring out the root cause goes through many layers and with the multitude of suppliers and partners spanning continents and several regulatory jurisdictions, it becomes a daunting task to manage and find resolution. As investigators try to figure out the cause of the plane's latest problems the world again is in a familiar position with the Dreamliner: waiting.

What these two scenarios illustrate are also faced by companies in all sectors on a daily basis, albeit, in smaller scale. There are an average of 6 recalls per day in the consumer sector. When you have multiple levels deep of a supplier network, you need to have mechanisms in place to monitor, track and progress issues as they arise. You need to have processes in place to close-the-loop; you need to be able to manage investigations, root cause analysis, risk assessment and management, corrective action management and verification to state a few. Supplier evaluation and supplier quality is not just essential during manufacturing, but are required from the beginning to end: product definition, sourcing, manufacturing, post-market. Complex supplier networks like the one at Toyota and Boeing require best-practices based solutions that are part of the product life cycle. Visit us to learn more on supplier management, supplier quality and extended enterprise at www.spartasystems.com.

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