Boeing Finalizes Strategic Supply Agreement with Key Japan Based Aerospace Providers

Thirteen months ago, Supply Chain Matters called reader attention to the news that Boeing had reached a preliminary agreement to extend partnerships with a group of key Japan based suppliers to provide major structural components of the newly planned 777x aircraft.  These suppliers provide major structural components such as fuselage sections, wings, and other components, and they involve parent companies Japan Aircraft Industries (JAI) and Japan Aircraft Development Corporation (JADC). Individual suppliers include:

Mitsubishi Heavy Industries Ltd.

Kawasaki Heavy Industries Ltd.

Fuji Heavy Industries Ltd.

ShinMaywa Industries Ltd.

NIPPI Corp.

Boeing has now announced that it has signed a formal agreement with these key strategic suppliers , which in aggregate will supply upwards of 21 percent of the major aircraft structure components for the planned new 777x model.  The contract includes fuselage sections; center wing sections; pressure bulkhead; main landing gear wells; passenger, cargo and main landing gear doors; wing components and wing-body fairings.

In the Boeing press release, Boeing’s Vice President and GM of Supplier Management praises these Japanese partners for their commitment for working on the affordability goals associated to the 777X program. Judging on the interval of an entire year being required to finalize the supply agreement, we can all speculate on the back and forth negotiations. The JADC Chairmen and KHI President indicates in the release that the agreement involves investing in new facilities and introducing robotic and other automated systems.  That may be the source of the negotiations and evolving production strategy.

Boeing notes that it has partnered with Japan based aerospace providers for nearly five decades, and that in 2014 alone, the company purchased more than $5 billion in goods and services. With the new supply agreement in-place, Boeing indicates it expects to purchase $36 billion of goods and services from Japan between 2014 and the end of the decade. From our lens, such a relationship is a testament to joint product design, component and production process innovation.

Teams have different definitions and context as to what may be termed strategic supplier. An overall spend of $5-$6 billion per year certainly qualifies for such a context.