> The Innovator's Solution (by Christensen, who wrote the Innovator's
> Dilemma) says that assembly can be profitable or non-profitable,
> depending on what qualities are currently in demand in the market.
> As an example, Dell made a lot of money being an assembler.
But Dell is also the support agent. They purchase components (that
they select) and place them into a chassis (that they designed) and
sell that product. Their second product is service and support, few
companies using Dell servers or workstations would buy them without
also having a service plan (for failed components, software/hardware
issues and the like). When a harddrive fails, you don't open the
computer see that's its Western Digital and give them a call. Instead,
you contact Dell and they send you an equivalent size drive, perhaps
Seagate this time. This service and support is an added value to the
customer. Dell becomes an intermediary between the company and the
coponent manufacturers. Since there are multiple producers of roughly
equivalent components Dell is also able to do this for relatively low
cost to themselves -- they can buy in bulk, they can select parts
based on quality metrics like MTBF to reduce service rates.
Boeing isn't setup in the same way for the 787. Nearly every component
has a sole-provider. When it fails or needs servicing airlines won't
be calling Boeing just so they can pay extra for services they can get
directly from the manufacturer of the component.
For an example, consider line-replaceable units (LRUs). These are
typically custom built for the aircraft to meet its particular
size/connector requirements. That means it's a one-off product though
internally it may be essentially the same as every other similarly
functioning LRU that manufacturer provides. The time and cost invested
to field an LRU is enormous. Not only does a company have to satisfy
its QA and Boeing's QA processes, it must also get past the FAA. The
controls that are required to get software through are a substantial
burden (especially when done in the typical last-minute fashion) that
no one else will likely try and reproduce a company's product either.
So now an airline has a failed or service-needing component. They
contact company X who offers them tech data to try and service it
themselves for tens or hundreds of thousands of dollars, or for
hundreds or thousands of dollars per part the airline can send the
part to company X for servicing. If Boeing owned the parts, then they
could make the profit off of this portion, but as it is they
(presently) offer no additional value (convenience, quality of
service) to prevent the airlines from bypassing them. Company X reaps
all the benefits of this relationship, and Boeing gets the profit only
on the initial sale, and on whatever components they happen to
control (there's more I'm sure, but a lot is also lost).
> As an example, Dell made a lot of money being an assembler.
But Dell is also the support agent. They purchase components (that they select) and place them into a chassis (that they designed) and sell that product. Their second product is service and support, few companies using Dell servers or workstations would buy them without also having a service plan (for failed components, software/hardware issues and the like). When a harddrive fails, you don't open the computer see that's its Western Digital and give them a call. Instead, you contact Dell and they send you an equivalent size drive, perhaps Seagate this time. This service and support is an added value to the customer. Dell becomes an intermediary between the company and the coponent manufacturers. Since there are multiple producers of roughly equivalent components Dell is also able to do this for relatively low cost to themselves -- they can buy in bulk, they can select parts based on quality metrics like MTBF to reduce service rates.
Boeing isn't setup in the same way for the 787. Nearly every component has a sole-provider. When it fails or needs servicing airlines won't be calling Boeing just so they can pay extra for services they can get directly from the manufacturer of the component.
For an example, consider line-replaceable units (LRUs). These are typically custom built for the aircraft to meet its particular size/connector requirements. That means it's a one-off product though internally it may be essentially the same as every other similarly functioning LRU that manufacturer provides. The time and cost invested to field an LRU is enormous. Not only does a company have to satisfy its QA and Boeing's QA processes, it must also get past the FAA. The controls that are required to get software through are a substantial burden (especially when done in the typical last-minute fashion) that no one else will likely try and reproduce a company's product either.
So now an airline has a failed or service-needing component. They contact company X who offers them tech data to try and service it themselves for tens or hundreds of thousands of dollars, or for hundreds or thousands of dollars per part the airline can send the part to company X for servicing. If Boeing owned the parts, then they could make the profit off of this portion, but as it is they (presently) offer no additional value (convenience, quality of service) to prevent the airlines from bypassing them. Company X reaps all the benefits of this relationship, and Boeing gets the profit only on the initial sale, and on whatever components they happen to control (there's more I'm sure, but a lot is also lost).