The Supply Chain Matters blog provides another update on the rapidly evolving  global developments involving the worldwide grounding of the Boeing 737 MAX aircraft after two aircraft tragedies. In this update we explore two significant and ever-changing narratives that will prove to be crucial for moving past this crisis.  Boeing 737 MAX 8

Events continue to unfold since our last Supply Chain Matters update of ten days ago.

For this update, we will address specific themes and narratives that should be of specific interest to our readers including those in product design and management, which are integral parts of supply chain management strategy.  All of these factors will be crucial for Boeing and indeed the commercial aerospace industry in moving beyond this crisis.


Questions of Engineering and Product Design Decisions

A lot of information relative to suspected anti-stall MCAS system design is beginning to filter out among various media channels. Initial readouts of the Black Box data of the recent Ethiopian tragedy reportedly has very similar flight pattern similarities to the Lion Air tragedy in October. As noted in in our prior update, industry watchers expect extensive changes to the flight control system of this aircraft, more so than originally expected, and especially in the light of continuing new investigative information.

Essentially from what we have synthesized, the overall design approach of the MAX version of the 737 was to add more powerful fuel-efficient engines in addition to more lighter weight components. Aircraft designers had to compensate for the fact that the nose of the aircraft had to heightened because of the larger physical size of the new engines. That reportedly raised the concern that the aircraft could have more susceptibility to stall, hence the need for an augmented anti-stall system safeguard.

A software design change was apparently in the works as a response to the prior Lion Air tragedy of similar circumstances which sought to augment the stall-prevention features of the aircraft, but also allow pilots to more easily override MCAS if required. Boeing had indicated the software update would factor multiple sensor readings in the MCAS system as contrasted to a singular sensor reading in the existing flight control software. As noted in our prior update, there were reports of disagreement among FAA and Boeing teams as to what should be included in this initial software fix. There was also reports that the U.S. government shutdown had additional impact on overall progress.

The most obvious question on many minds is why the software was programmed to lock on to but one angle of attack sensor, violating a long-held aerospace design principle to always avoid single points of failure. New information from this week’s New York Times report (Paid subscription or metered view), which is citing informed sources, indicating that utilization of two angle-of-attack sensors (as opposed to one) was an add-on option requiring airlines to pay additionally for, and included a warning light indication of when the two sensor’s data were not in sync. A long industry pricing practice has been to charge airlines for added operational of aircraft design features, but in light of this new reported information, the debate has turned directly to Boeing’s decision to price dual angle-of-attack sensor readings as an added option. That has also raised questions as to why the FAA had not originally determined that such a feature would be mandatory for initial aircraft certification. We should not be at all surprised if Boeing is forced to re-visit its pricing decision associated with MCAS and all of its supporting components.

As has been noted, a good number of 737 MAX pilots voiced outright surprise in November and December after hearing that the Max version was actually equipped with an MCAS system. That crucial information was omitted from pilot training material in order to not alarm prospective airline buyers that pilots would need additional simulator training to learn how to interact or override the MCAS system. New reports of the Black Box voice recording readout of the flight crew interactions during the very last moments of the October 2018 Lion Air tragedy indicate that, the pilot turned over control of the aircraft to the co-pilot as he was desperately seeking to check the operations manual for how to override the MCAS system. That was reportedly the final communication before silence. That information has now led to the initiation of formal investigations as to the aircraft’s initial certification process and the information present at the time.

Then there is the question of why Boeing did not prioritize the release of the software upgrade as soon as feasible after the Lion Air tragedy. As noted, some reports pointed to a disagreement with the FAA on the overall scope of the software update.

For all of the above, the U.S. FAA and/or other global regulators are likely to reluctant to lift grounding directives until convinced that Boeing had examined and addressed all likely software and hardware related areas of aircraft control.

Finally, and certainly not of less significance are the formal investigations now underway from U.S. regulators, Congressional oversight bodies and now criminal investigators, to determine whether Boeing exhibited too much influence or control over the FAA to gain aircraft certification.  These actions could compound delays in determining what needs to address to ensure that this aircraft receives a collective vote of trust.


Brand Reputation and Ownership of the Narrative

It is becoming ever more apparent that Boeing is in midst of brand and reputational crisis that continues to spiral in many dimensions.

In the midst of nearly all global based regulators, with the sole exception of the United States, initiating grounding directives out of an abundance of caution, Boeing CEO Dennis Muilenburg was reportedly in direct contact with President Trump to reassure the President that the aircraft was safe. Nonetheless, the majority of global regulators were not willing to go along with that narrative until more definitive information came forward from accident investigators.

It was not unnoticed that the FAA lost its reputation of global credibility in aircraft safety by these events. In the end the US FAA stood alone as the only government regulator that did not order a grounding out of an abundance of caution. Up until Wednesday, March 13th, the FAA had maintained that the agency had no new information that would warrant a grounding order. Yet, the FAA was aware that Boeing was working on a software fix as early as November, a fix that essentially implied that there was but one sensor, one single point of failure that triggered the MCAS system.

President Trump was not shy in publicly voicing his own views relative to the MAX aircraft indicating it was too complex and in-essence, required an MIT PhD to be able to fly the aircraft. It was President Trump who made the U.S. grounding announcement, the first time in the history of the industry when the FAA was not center stage. All of this did not help the narrative.

It has only been this week that Boeing’s CEO has begun to provide a more visible presence on actions that the company is taking and on the company’s unwavering focus on safety of all of its aircraft. Sadly, the visible voice of the CEO narrative had too late a start in this rapidly unfolding set of developments fueled by an around-the-clock news cycle. This was the same pattern that occurred in the 787 Dreamliner lithium battery fire incidents.

Among U.S. based media, the news stream is that the manufacturer may have gotten favorable treatment because of its close ties with Congress and the Trump Administration.

Once again we turn to Captain Sully Sullenberger, hero of the Miracle on the Hudson, whom we greatly respect, who penned an editorial this week essentially in defense of the FAA and its mission to assure flying safety. Regarding Boeing, the narrative was directed to the word trust:

Boeing  has focused on trying to protect its product and defend its stance, but the best way, indeed the only way, to really protect one’s brand or product is to protect the people who use it. We must not forget that the basis of business, what makes business possible, is trust.

Least we remind our readers of the similar ultimate mission statements of various industry supply chains, to serve and satisfy the needs of respective customers.

Today, there are media reports that airline Garuda Indonesia is seeking to cancel its outstanding order for 49 MAX aircraft. The airline’s CEO indicated to The Wall Street Journal that this decision: “is in line with the desires of consumers who have lost confidence in the Boeing 737 MAX 8.” We believe that more of such announcements and tone will follow until global-based airlines and their customers gain added trust. The operative word in the that sentence is global-based, airlines and consumers who have different context and forms of reference.

Two Essential Narratives to Address

From our lens, two narratives are now in conflict, both of which need to be addressed.

The first is Boeing wanting to move quickly on installing the MCAS software fixes, restore global certifications and move forward with correcting the global-wide safety reputation of the 737 MAX family while at the same time Boeing’s eroding reputation.  That effort has to include an admission in shortcomings or missteps, and a commitment that such actions will be avoided in the future. There additionally needs to be demonstrated intent to cooperate and transparently engage with all ongoing investigations regarding the MAX design and broader aircraft certification practices.

The company needs to show resolve and action, along with transparency.

The second is a reflection on today’s global financial equity markets and a geo-political environment of differing views of global competitiveness, domestic protectionism and self-interest.

Boeing risks being caught-up in the web of these conflicting forces. One is investor-driven, that seeks to maintain short- and longer-term financial returns of attractive stock dividends and buybacks, currently viewing the current crisis as an interim stumble.

The other are the longer-term implications to the U.S. aerospace industry as a whole and its longer-term competitiveness in producing technology-advanced and safe airplanes. Commercial aerospace supply networks and ecosystems have a significant stakeholder interest in Boeing’s future actions.

Most important of all and common across both are global-based airline customers who will have the final voice as to whether they feel and believe that an aircraft is indeed safe to fly.

Industry supply networks are indeed vested stakeholders in such developments and add a collective voice that the industry has to return to its primary mission of designing and producing technological advanced aircraft components and systems, with redundancy of safety and airworthiness as the primary mission. Investor benefits will stem from a continued vibrant industry with a laser focus on the safety and comfort of passengers.


Bob Ferrari

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