Lessons from the 787

That Boeing will eventually deliver the 787 Dreamliner to its exasperated customers is still a safe bet.

But when the plane is finally handed over, customers may in turn hand Boeing a check (discounted for late fees) and an admonition that mothers have been dispensing to wayward offspring as long as theres been language in which to express it: Let that be a lesson to you.

What those customersnot to mention employees, shareholders, suppliers, vendors, everyone with an interest in the companys future in Washingtonare curious about is what Boeing has learned from the 787 project.

The 787, you will recall, was not just a new airplane with new materials and technologies; it represented a new way of building those planes. Boeing would handle the design, sales and final assembly of the jet. Its various partners would assume major responsibility for building and assembling huge sections of the plane.

True, Boeing hasnt built planes from scratch for decades, instead relying on others to build components and subassemblies. But the scale to which others would take over much of the work was unprecedented.

And what has Boeing gotten out of this new approach? Delays counted in years rather than mere weeks or months. Damaged credibility. Hundreds of millions spent to take over former partners operations. Millions more in compensation to customers who didnt get their planes on time. Hits to the stock price. Management upheaval. A deeper souring of labor relations that were hardly sweetness and light to begin with.

Boeing has argued that its not the model thats flawed; the delays were the fault of the partners, its own executives in charge of the 787 program, the machinists strike or just inexperience with a new operating mode. Next time will be different.

Will it? The whole concept of outsourcing was subject to well-grounded skepticism, and not only from workers whose jobs were threatened by the trend. It was one thing to outsource lawn care as a non-core and distracting function. It was much more serious and suspect to outsource critical steps in the design and construction of your core product.

David Giuliani, the co-founder of Optiva Corp. (inventor of the Sonicare toothbrush) and now the co-founder and chief executive of Bellevue-based Pacific Bioscience Laboratories (the Clarisonic skin-care brush), recently made the case for keeping manufacturing in-house, which his company does.

In a recent interview with Washington Manufacturing Alert (a newsletter this columnist edits), Giuliani says doing its own manufacturing gives his company greater flexibility in production, more control over quality and enhanced ability to develop new products. It also cuts down the exposure to knock-off products, a constant threat in the consumer products sector.

Thats fine for a small company that makes handheld products, outsourcing proponents might say. Its an entirely different situation for a global company building hugely complex products costing millions of dollars each.

To that, we offer the perspective of another global company, one with which Boeing has considerable familiarityGeneral Electric.

In some areas, we have outsourced too much, GE chief executive Jeffrey Immelt said recently. We plan to insource capabilities like aviation component manufacturing and software development. These are the things we will be working on in Michigan. This will make us faster and more competitive over the long term.

What should interest Boeing about this approach is not just GEs status as an aircraft-engine manufacturer but that its own CEO, James McNerney, is a General Electric veteran himself.

More insourcing by Boeing wont resolve the worries of local workers; Boeing can choose to do more work under its direct control but do it in such foreign locales as South Carolina.

But Boeing, by buying Voughts South Carolina 787 component plant, may have already tacitly retreated from its enthusiasm for outsourcing. And insourcing might address one other concern: sending technology and expertise to countries with aerospace sectors that may one day compete with Boeing.

Hope youve learned your lesson, mothers tell their children and many Boeing watchers are now telling the company. Indeed. But did Boeing learn the right lesson?