This Supply Chain Matters blog commentary provides a further reader update relative to the ongoing challenges related to the Boeing 737 MAX aircraft global-wide grounding, and efforts and challenges undertaken by Boeing from supply and customer demand network dimensions.

In our most recent update regarding the ongoing Boeing 737 MAX global groundings, we shared our observation that with each passing month, the risks increase, and so are the pressures for even faster output and productivity across the both the 737 and the 787 Dreamliner aircraft end-to-end supply chains. Boeing 737 MAX 8


Newest Development

Yesterday, in what was tagged as an exclusive report, Reuters reported that Boeing is now grappling with orchestrating a significant ramp-up of monthly 737 production levels, to be timed shortly after the MAX is cleared by global regulators for return to operational service.

Citing informed sources, this report indicates that at the end of July, Boeing informed more than 100 suppliers that a new monthly production ramp-up schedule will go into effect dependent upon regulators approval of the MAX return to service. In terms of specifics, the report indicates that with a baseline assumption of a Q4 timeline for  737 MAX return to service, monthly production should be prepared for ramp to the prior grounding level of 52 aircraft per-month in February 2020, and then step-up to a record 57 monthly rate, four months later, in June. Noted was one participant expressing skepticism regarding the timing, given the ongoing intense scrutiny among various global-wide regulators.

The one sentence in this Reuters report that caught our attention was:

Boeing and its suppliers are now caught between two conflicting pressures: preparing to get back on the upward path as soon as the plane is flying but also ratcheting downwards if regulators stall and the grounding continues for longer than expected.”

As noted in our last update, that indeed reflects Boeing’s playing of the MAX production suspension card as a threat to suppliers and a major concern for the Boeing investor community.

Responding to this Reuters report, a Boeing spokesperson indicated that the company updated its master production schedule to reflect timing assumptions for the aircraft’s return to service.


Supply Chain Matters Perspectives

In our prior July 30th update and the  referenced last Boeing focused blog commentary, we have speculated that the 737 MAX ongoing grounding as ratcheted up manufacturing and supply network pressures for higher monthly production levels for the 787 Dreamliner program as a means to generate some form of added cash flow and profitability needs. That has led to concerning 787 customer feedback as to noticeable quality issues with newly delivered aircraft.

We further speculated that Boeing’s threat to temporarily suspend 737 MAX production if the aircraft is not returned to service in Q4, places enormous risk on the supply network’s ability to eventually respond and make-up for lost production, cash-flow, and needed supplier payments.

Our reading of the Reuters report, is a reinforcement that Boeing’s plans are indeed to place emphasis on aggressive needs for stepped-up productivity and production will little tolerance of disruptions, setbacks or laggard suppliers. Such an effort will require extraordinary synchronization of supply network material flows, scheduling and delivery needs for both the 737 and 787 programs. It definitely brings visions of multiple war room coordination activities and an extraordinarily coupling of Boeing and supplier sales and operations planning (S&OP) processes.

That is not to state that such an effort cannot be collectively accomplished by all supplier, customer and service network participants collectively marching to a synchronized execution plan.

The sheer effort relative to the logistics and coordinated activities required for returning the over 400 737 MAX aircraft parked all over the globe back to operational service is challenge enough, and that added with a master production schedule that aggressively ramps higher production levels to make-up for lost time, just adds to magnitude of the challenge at-hand. Combined, they are a enormity of just-in-time event synchronization.

Also, this week, multiple reports indicate that Boeing has cast a net for added temporary workers to assist in various activities needed to return grounded 737 MAX aircraft to operational service. Such activities are extensive and involve not only the installation of updated software or hardware fixes but required inspection and maintenance activities normally outlined for returning aircraft to service that have been idled for a long time period.

Such ongoing set of events will surely provide the content for future business case study discussion and for iterations of how advanced technology was able to assist in the overcoming the challenges. Such challenges will likely lead to other developments involving supply and customer demand network participants.

Stay tuned.

Bob Ferrari

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