Some good and not so good news on the Boeing front.  First is the good news. Boeing and its engineers announced on Friday that they have reached a tentative agreement to a new four year labor contract, the final hurdle in resolving the ongoing labor stoppage at Boeing.  Boeing can now move forward in resuming its production operations which have been idled since September.  As noted in my last update on this topic, among typical wage and benefit issues, this labor stoppage had stumbling blocks related to supply chain outsourcing and work practice implications,.

In the not so good news category, an article by James Wallace featured on the Seattle Post-Intelligencer site on Friday now reveals that other supply chain problems have now compounded themselves over this strike period.  This article points out that:

The first new 747-8 Intercontinental will be up to a year late in delivery. Boeing cited several factors including “supply chain delays driven primarily by design changes to the airplane, limited availability of engineering resources inside Boeing, and recent Machinists strike”. The S-PI article points out that since there is an industry-wide shortage of qualified aerospace engineers that Boeing had been attempting to utilize engineers from its design bureau in Russia for the 747-8 program, resulting in needs for design rework.

Boeing’s 737, the most popular aircraft for volume production is now experiencing an unrelated problem related to fasteners that secure the numerous nutplates on the fuselage and engines of that aircraft.  Sub-contractor Spirit AeroSystems that was shipping assembled 737 fuselages discovered that one of its suppliers had for some time, not been applying a required cadmium coating on the nutplates in question.

On Boeing’s highly visible 787 Dreamliner aircraft, another potentially serious issue has been uncovered related to an estimated 3 percent of the fasteners being incorrectly installed by one of Boeing’s global partners.

We have previously noted in this blog column that many challenges remain for Boeing and its suppliers to be able to return to normal levels of output and delivery after this almost 10 week disruption.  Boeing will have little choice but to practice higher levels of supplier, sub-contractor as well as union collaboration and innovation to overcome these continual supply chain hurdles.

Bob Ferrari

I recommend my Supply Chain Matters readers to take-in a long but very insightful blog posting related to Chinese supplier business practices, penned by consultant David Dayton on his Silk Road International Blog.  This gutsy post is written primarily to Mr. Dayton’s China and Asia-based readers, and the theme is “don’t lie to foreigners, it’s just not worth it”. He goes out of his way to point out that to his audience to not view  his observations or quotes as racist, but rather as an insight into business in China provided by Chinese business people.  David points out the major differences in doing business in the West vs. the East, and that China’s business culture points to very identifiable ethical differences in doing business with Westerners. He astutely points out that “telling the truth has been historically dangerous in China, and with recent intense competition, its seen as economically dangerous as well”. Here is the link to this posting.

You will note that this blog posting points to six deep ethical differences between Chinese suppliers and western buyers:

1. The Chinese supplier wants to know first and foremost who you are to determine first and foremost if they are going to be paid on a timely basis.

2. Westerners forget that the West has, in general, been pretty nasty to the Chinese for hundreds of years. The Chinese do not forget

3. Business is about getting you, the buyer, to sign agreements and pay deposits. Promising the moon and figuring out how to get it to you comes later.

4. Chinese suppliers have their own interest in mind first and foremost, and noone knows what’s around the corner 3, 6, or 12 months from now.  The resultant attitude is “get it now while the getting is good”.

5. The current world economic crisis implies a growing sense of desperation in China.

6. There is a completely different sense of what is right and what is wrong. While Western culture is guilt-based, driven by a spirit of laws and doing the right thing, China is shame-based, meaning that getting caught and the resultant public humiliation is the definition of what can be considered wrong.

Whether you agree or take issue with these observations, I found them quite insightful, especially in the light of the increased incidents of  product contamination related to China’s numerous supply chains.  David’s final two takeaways are worthy of consideration:

Train and invest in your Chinese suppliers and lift them to the level that you and other international suppliers really expect

Do your due-diligence in China, and don’t abandon all standards and safeguards. If there really is more risk in doing business in China, than increase your due-diligence and quality audits.

An interesting and insightful read to say the least.

Bob Ferrari