Boeing: On Becoming 100% Dependent on Suppliers at 30,000 Feet

Kudos to Bob Ferrari for picking up on some recent commentary from Boeing CEO Jim McNerney, who recently voiced his opinion of how the aerospace and defense supply chain is becoming increasingly dependent on suppliers. The news got to Bob in a sort of roundabout social media way. He notes in this regard that "The Twitter #supplychain forum was actively re-tweeting articles summarizing the latest remarks from Boeing CEO Jim McNerney, who specifically cited concerns related to supply chain as potentially hampering Boeing's ability to meet increased new aircraft orders, and potentially hampering future business needs."

Bob further cites a recent Financial Times story suggesting that supplier dependence is an "industry-wide" concern "across the entire aerospace industry, including Airbus, [and] has constrained many of the key suppliers to this industry." Yet unmentioned in Bob's astute view is that suppliers aren't necessarily embracing the potential of additional, uncommitted volume, given capital requirements and risk. Consider the "setbacks and communication issues on Boeing's 787 Dreamliner program [which] have made aerospace suppliers rather wary and cautious. Key suppliers are now faced with important decisions on whether to invest in added capacity, or may demand more financial safeguards from Boeing and other aerospace OEM's."

The commercial A&D industry is the poster child for all of the challenges and opportunities of vesting a new level of trust and dependence on suppliers. Yet despite the increased revenue opportunities that the outsourcing of large parts of the 787 and A380 supply chains bring to suppliers, the potential risks -- from product liability to (more likely) delayed production and uncertain order volumes despite large foundational capital investment requirements -- are significant. Increasingly, it feels like A&D OEMs are flying somewhat blind at 30,000 feet with no instruments other than their rudimentary supply chain controls that tell them to signal changes in course. In the future, flying IFR in this world will require more than an entire new set of supply chain instruments -- it will also require the training and education on how to use them (both of which are sorely lacking today).

Jason Busch

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