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The Dreamliner Debacle Continues….the Death of Outsourcing?

Tim Cummins, CEO of the International Association of Commercial and Contract Management (IACCM), notes in his blog Commitment Matters that Dreamliner’s battery problems are perhaps due to the lack of procurement competencies that exist in the organization.  This is an interesting observation, and as he predicts, hardly marks the end of outsourcing.  In fact, many organizations continue to outsource, and our logistics survey result shows that outsourcing is still alive and well…

But managing outsourcing agreements requires strong relationship management skills.  Tim suggests that:

This was probably a classic case of failed ‘commercial assurance’, driven by over-reliance on technical and financial skills, coupled with contract managers trained in standard administration procedures.

He raises an interesting point.  Boeing is the only major aerospace company that is not involved in IACCM – an organization that spans multiple industries and includes almost all of the Fortune 500 companies…..and why isn’t Boeing a member?  Because management feels that they are doing very well on their own, thank you very much.

My own observations is that aerospace tends to be a very relationship-based industry, based on the fact that major projects like the Dreamliner take years and years of development work, with close ties between technical people at both suppliers and Boeing working hand in hand to develop the products.  It is not clear what was done differently in this case, but there is also the fact that using new technology, layered by increasingly outsourced design, and compounding this on a completely new jet design, created layers of complexity with unknown interaction effects.  This “triple threat” of new technology, outsourced design, and new product design was perhaps not as well executed as the blueprint showed  Tim does have a point – strong relationships, complete transparency, openness, and regular dialogue are critical in all outsourced relationships.  This project is one that could have benefited from perhaps a new supply chain management philosophy.

Is Boeing taking this to heart?  Perhaps.  Katherine Kawamoto from IACCM alerted me to a new development at Boeing, in the form of an interesting description for the Supply Chain Specialist 1 position advertised on Boeing website… note the emphasis on General competencies versus technical. Perhaps Boeing is starting to recognize that technical specifications aren’t the only thing that make relationships hum….