Many consistent themes occur in our continuous commentary on Supply Chain Matters and one of the most consistent over these past months has been the supply chain setbacks within Boeing’s infamous 787 Dreamliner manufacturing program. One of the most innovative aircraft in terms of bold design was burdened by a supply chain sourcing strategy that has provided multiple setbacks and frustrations.

In August 2010, Supply Chain Matters revisited the admission by Boeing’s CEO of the key importance that Boeing had on its supply chain capability, which was a statement of the obvious. August also provided yet another setback, the admission that important issues with engine supplier Rolls Royce and workmanship problems at Alenia Aeronautica led to a decision to postpone delivery to first initial customer All Nippon Airways (ANA) to the end of 2010.  ANA has 55 Dreamliners on-order. In November, an in-flight incident of an electrical fire and power failure on one of the 787 test aircraft caused another unanticipated and potentially serious delay that pushed back first customer delivery to Q3 of this year.

In May and June of this year, a political eruption occurred when the U.S. National Labor Relations Board (NLRB) filed an unfair labor charge against Boeing in April, related to the company’s intent to open and operate a second final-assembly production line in South Carolina. The decision was based on comments allegedly made by Boeing’s senior management that indicated that the second production line was payback for past labor strikes by Boeing’s union members in Seattle.  The NLRB claimed that Boeing illegally punished its labor union by building the 787 facility in a non-union state, and proposed that the second facility be opened in Washington state. A political firestorm then developed as Boeing motivated national; Republican legislators to shout government intervention. The Boeing PR machine cranked into overtime on developing a Wall Street Journal editorial, authored by CEO Jim McNerney, claiming that Boeing is pro-growth and not anti-union. Mr. McNerney stated in the commentary, “The NLRB is wrong and has far overreached its authority. Its action is a fundamental assault on the capitalist principles that have sustained America’s competitiveness since it became the world’s largest economy nearly 140 years ago.” Mr. McNerney continued with the argument that government overreach could accelerate the flight of middle-class American jobs. Boeing has further stated that it will fight the forced relocation all the way to the Supreme Court, if necessary.

In spite of the PR, the issue of operating the second final assembly line in South Carolina is still in doubt, and the judicial and appeals process adds the potential for more delays.

For the past two weeks, Boeing has been in the process of conducting final certification and acceptance testing of the initial 787 in conjunction with ANA.  The testing process is being conducted in Japan and on Asia air routes, allowing pilots and engineers to mimic ground and air operations. Reports indicate that ANA will begin operation of the 787 initially on domestic routes before moving to international routing.  Reports have been that both Boeing and ANA teams are excited about the testing and pending certification. We checked Jon Ostrower’s Flightblogger and noted a posting that indicates that the timeline of Boeing’s announcements have been very carefully worded, and according to Ostrower, “Either Boeing has decided to add a bit of variety to its wording for 787 first delivery or there is ground work being laid for a delivery after September.”

An article in the Wall Street Journal on July 14 notes more disappointing supply chain news.  Boeing acknowledged that it was halting final assembly of 787’s at the factory in Everett Washington for about a month, to address termed supply chain issues. Ostrower penned another entry quoting Boeing wording that indicates “supplier spot shortages’ and “remaining engineering changes” were the motivator for this newest delay.  Boeing additionally stated that it will comment on any impacts to all downstream deliveries during its July 27 Q2 earnings report.  There has also been speculation as to whether some of Boeing’s suppliers were seriously impacted by the devastating earthquake that occurred in Japan in March.

Boeing faces tough supply chain challenges regarding the 787.  The program is over three years late in deliveries, and the operation of a second final assembly facility to help catch-up on production remains unresolved.  Suppliers have been patient and so have 787 customers, but patience is often fleeting. There is a limit to financial incentives or penalties.

While supply and other visible issues continue, Boeing’s attention is drawn away from other programs.  A previous Supply Chain Matters commentary noted speculation that decision delays on the long-term design of the popular 737 workhorse has led to explosive order rates for the Airbus 320neo aircraft.

We all want and need Boeing to succeed, but events are not lending themselves toward supply chain or customer excellence. Any sustained manufacturing resurgence for the U.S. needs to have Boeing as a key contributor.

As a final note, we continue to reach-out to Boeing to perhaps gain another perspective, but our efforts have not yielded any response.

Bob Ferrari