This posting is a follow-up to our previous two commentaries, Aerospace Supply Chains Are Now Stressed, and Another Supply Chain Related Delay in Boeing’s 787 Program.
This week, during its fiscal earnings briefing, Boeing cut projected deliveries of its new 787 and 747-8 aircraft to 25-30 aircraft this year. According to an article in the Wall Street Journal, Boeing chairman and CEO Jim McNerney indicated that the company’s recent decision to initiate a one month halt of 787 production final assembly lines gives its network of global suppliers a chance to catch-up. His quote: “I view (the pause) as good news. The facts are we have broad visibility across our supply chain now and when we need to make a pause to rebalance it… we do it early.”
Our Supply Chain Matters reaction- it’s about time! After being three years late, and after a series of outsourced supply chain related setbacks, Boeing now assures that it has broad supply chain visibility.
During the month of July, Boeing has been conducting final certification and acceptance testing of the first 787, which will be delivered to All Nippon Airways. In our last commentary, Supply Chain Matters made reference to a posting on Flighblogger which noted Boeing’s careful use of wording regarding customer deliveries of the 787. That vague wording appears to continue, now being lumped together with the 747-8 program status which adds even more speculation as to stress points in Boeing’s supply chain. Another open question points to any supply disruptions a result of the March earthquake that struck Japan.
To give readers a perspective of aerospace supply chains in general, consider the following. In its latest earnings briefing, Boeing reported a total order backlog of $323 billion, $262 billion of which was attributed to commercial aircraft. Boeing also announced that it was increasing the rate of 737 production to 42 per month in Q1-2014. Rival EADS, manufacturer of Airbus aircraft, reported its total order backlog as €453.8 billion (($649 billion), most of which involves commercial. That amounts to close to one trillion dollars in combined backlog, and does not count other smaller aircraft OEM’s. Delivery schedules extend out at least seven years, and are growing in time windows.
Boeing’s supply chain has been under the looking glass for many months. Airbus’s supply chain, after some initial snafus and setbacks with its massive A380 program, seems to be humming, but it also faces more challenges as order rates continue to climb. EADS booked €58 billion ($83.3 million) of new orders in the first six months of this year alone, the majority being the newly announced A320neo. In response to the explosive popularity of the new A320neo, Boeing is scrambling to re-engine its popular 737.
Yes indeed, aerospace supply chains are being stressed. If participants are not feeling it now, they will soon.
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