Boeing’s Supply Chain Ramp-up — When You Can't Beat 'em, Buy 'em

Boeing's Dreamliner development and supply chain challenges have presented an unusually fascinating procurement reality show. The details of most new product-development projects remain sequestered within the corporation until launch. But largely due –- I suspect --  to Boeing's need to advance market its new bird along with ongoing labor union  issues and  start/stop supply chain engineering, the Dreamliner saga will be taught in B-schools for decades to come.

The latest chapter is unfolding in the (reduced emission) exhaust of the Dreamliner's maiden flight last week. This morning's WSJ reports that "Boeing [has] acquired the remaining 50% of the Global Aeronautica fuselage factory from Alenia North America, a unit of Italy’s Finmeccanica SpA [though] terms weren’t disclosed." The article postulates that "The deal to buy out Alenia North America also signals that Boeing may be willing to renegotiate with suppliers burdened by Dreamliner delays." Which is further supported by reports that "While suppliers haven't filed public claims against Boeing, many are negotiating with the Chicago-based aerospace giant over who should pay for delays and redesigns. To tighten supply chain oversight and speed production, Boeing has spent more than $1 billion in South Carolina alone to buy out struggling suppliers … [and] this summer bought a separate Vought factory in North Charleston, S.C., that makes the rear fuselage sections for the Dreamliner."

It would seem that in order to meet its WSJ-reported ambitious goal "to deliver seven Dreamliners a month by 2011 … and 10 a month by 2013" Boeing will also need to staunch the order cancellations that have rolled in from a more than two-year delay in delivery to finance further possible buy outs of its "more than 300 [remaining] global suppliers."

William Busch

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