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OM in the News: Outsourcing Leads to Delays For The Airbus 350

July 16, 2012

Just as aggressive outsourcing  a decade ago on its 787 Dreamliner caused Boeing to stumble, Airbus now faces exactly the same issues as it prepares its direct competitor, the A350. The Wall Street Journal (July 11, 2012)  writes that both companies have lurched through a string of expensive and embarrassing crises while developing their new airplanes. To recover, the competitors are rethinking how they build jetliners. What is emerging is a middle path between outsourcing, which has reshaped the aeronautical industry over recent years, and the highly centralized production systems that preceded it.  In a major retreat, Boeing  has since bought up suppliers, brought work back in-house and integrated more closely with its remaining contractors. Manufacturing problems on the 787 have left Boeing with more than 40 almost-completed Dreamliners awaiting fixes. Customers are getting their planes 4 years late.  For a second, larger version of the Dreamliner, Boeing opted to design many outsourced components itself.

Airbus found internal coordination was equally daunting. The A350 team pressed  plants  to agree on common standards and buy identical equipment. Some  “partners”  balked at spending hundreds of thousands of dollars for the digital “tool set” of software to access A350 blueprints. By 2010, A350 blueprints were running late and the project was delayed 6 months. Last spring, bad news again surfaced. Lower-tier contractors were struggling to deliver parts on time.  Preparations to manufacture composite parts took longer than the setup for metal parts had. As parts arrived late, delays rippled upstream. Large sections of the first test airplanes weren’t ready for assembly. Airbus could rush the unfinished fuselage parts together and appear on schedule (as Boeing had done), even though it would be harder to complete tasks later, out of sequence. It chose to delay yet another 6 months.

Airbus now monitors 450 suppliers  world-wide. “We don’t know everything, but we know all about the risky ones,” says the A350 VP.

Discussion questions:

1. What are the advantages and disadvantages of outsourcing in this industry?

2. What is the impact of a plane delayed by 2-3 years?

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