Supply Chain Matters provides an updated news capsule follow-up relative to prior supply chain management developments that we have shared on this blog.

This particular update includes added developments related to a newly discovered production glitch involving Boeing’s 737 MAX output. We further update readers on last week’s multiple day shutdown of Toyota auto production across Japan due to a systems issue.


Boeing Indicates Significant Implications of Production Glitch

In a late August posting, we highlighted for Supply Chain Matters readers that commercial aircraft producer Boeing and its aircraft fuselage supplier SpiritAerosystems had indicated the discovery of improperly drilled holes related to the aft pressure bulkhead on certain Boeing 737 MAX 8 aircraft. This bulkhead is a structure that seals off the rear of the aircraft’s pressurized cabin and is a critical component for this aircraft. This is the second fuselage related production glitch impact for Boeing and prime supplier Spirit this year.

While the discovery of this non-conforming defect is noted as not providing an aircraft safety risk, there were initial concerns as to whether the issue would have an impact on existing monthly production levels. At the time of our posting, engineers were determining which specific aircraft were impacted by the fault discovery along with assessing the overall fix for the problem.

Yesterday highly noted Seattle Times aerospace industry reporter Domenic Gates reported that the manufacturing defect: “is likely to reduce the MAX delivery rate by about a third, leading to a negative cash flow and a financial loss for the third quarter, the company’s chief financial officer said on Thursday.”

The report cites comments provided by Boeing’s CFO Brian West indicating in-part that: “The rework hours will likely be higher and the cycle time longer than the vertical fin [defect] we had earlier in the summer. This is different … It’s more involved. There’s hundreds of holes that get inspected. There’s an X-ray inspection process step that’s required. And it’s a very critical part of the airplane.

The CFO further indicated that three-quarters of the 220 jets still parked in inventory must have this part repaired and the issue is the most important thing being worked on, company-wide. Boeing reportedly now expects to deliver upwards of 70 MAX aircraft in Q3 compared to the 111 delivered in Q1, another potential impact on cash flows.

Gate’s column reiterates that for the past three years, “Boeing has suffered a cascade of quality defects that reportedly have repeatedly disrupted production and deliveries of its two major airplane programs, the short-haul narrowbody 737 MAX and the long haul widebody 787 Dreamliner.”

Separately, to add to this industry’s ongoing challenges related to quality conformance and production execution, Bloomberg reported this week that a jet engine parts supplier for older model power plants has been cited by European aviation regulators for potentially falsifying or forging the certification of parts supplied to aircraft owners. Reportedly, falsification extended to the employment backgrounds of executives and the physical presence of the supplier’s production operations. Bloomberg reportedly made regulators aware of the falsifications and indicates: “The proliferation of undocumented parts has sent a shock waves through the industry where every component requires verification to ensure aircraft safety, leaving manufacturers, operators and authorities scrambling to determine the fallout.”

Once again, the litany continues amid unprecedented industry demand for new or refurbished aircraft.


Toyota Multi-Day Production Shutdown Across Japan

Last week we highlighted that global auto producer Toyota encountered a “systems related” shutdown of auto production operations across Japan according to multiple news reports. The systems issue, which prohibited operations teams to order auto assembly parts and components, reportedly occurred on a Monday and cascaded among multiple facilities because of the parts and materials shortages. This stoppage reportedly represented a third of the automaker’s production global capacity.

Those that have followed Toyota over the years know that the automaker’s just-in-time operations culture and support processes are driven to avoid production line stoppage at all costs.

Reportedly Toyota has now apologized to its partners regarding the stoppage of 14 factories and indicates the root cause was an information systems maintenance issue, indicating that “data that had accumulated in the database was deleted and organized, and an error occurred due to insufficient disk space, causing the system to stop. Since these servers were running on the same system, a similar failure occurred in the backup function, and a switchover could not be made.”

These reports related to the multi-plant stoppage have raised obvious questions such as why the IT production and backup servers were hosted in the same instance or whether warnings related to lowered disk space were somehow dismissed or even if backup testing routines were regularly tested.

Stepping back though, and judging from the many recent and ongoing IT failures involving global-wide airlines operational management and reservation systems of-late, raises the questions as to whether cost reductions have gone too far when it comes to ensuring that business critical software and operating systems garner required ongoing maintenance or renewal.

This is rather an expensive discovery process and tradeoff.



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