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Supply Chain Matters 2015 Predictions for Industry and Global Supply Chains- Part One

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Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide our annual ten predictions concerning industry and global supply chains for the coming year. We have maintained this tradition since the founding of this blog in 2008 and it continues to be quite popular with our readers and clients.

These predictions are provided in the spirit of advising supply chain organizations in setting management agenda for the year ahead, as well as helping our readers and clients to prepare their supply chain management teams in establishing programs, initiatives and educational agendas for the upcoming year. Predictions are sourced from synthesizing developments and trends that are occurring in supply chain business, process and technology dimensions, researching various economic, industry and other forecasting data, along with input from clients, thought leaders and global supply chain observers. We take predictions seriously and align our research and blog commentaries to focus on each specific prediction area throughout the coming year.

Supply Chain Matters will revisit each of our annual predictions at the end of the year to ascertain how close or how far each fared.  The report card regarding our 2014 Predictions can be re-visited at the below web links:

2014 Predictions Report Card- Part One

2014 Predictions Report Card- Part Two

2014 Predictions Report Card- Part Three

2014 Predictions Report Card- Part Four

2014 Predictions Report Card- Part Five

 

We continue to believe that industry analysts should openly state their insight and opinion of what to expect in the coming year without the need for a paid subscription.  Readers therefore have the opportunity to compare and contrast various sources of predictions.

As in the past, all ten of these 2015 predictions will be included in a more detailed research report which will be made available for no-cost downloads in our Research Center in January. Readers will be able to register to download a copy or can email us directly.  More details regarding that process will come later.

In this Part One posting, we outline our first five predictions for 2015.

Drum roll please …..

 

2015 Prediction One: More optimistic global economic growth with the usual caveats and uncertainties

Forecasts point to an optimistic global economic outlook for 2015 with continued cautions and unknowns for industry supply chains.  The bright spots will continue to be the United States and Mexico.

The October 2014 forecast from the International Monetary Fund (IMF) predicts 3.8 percent global growth vs. 3.3 percent in 2014. Advanced Economies are predicted to grow 2.3 percent vs. 1.8 percent in 2014. World trade growth is expected to expand 5 percent in dollar terms.

The most concern resides for the Eurozone, where tepid growth and deflation remains an identified and concerning risk.

China’s growth is predicted to be 7.1 percent vs projected 7.4 percent in 2014. China’s economic planners will be caught in a difficult balancing act to manage growth but deal with high levels of debt. We have read of more pessimistic forecasts foretelling of broader setbacks ahead for China’s economic growth, with concerns for a stumble.  Then again, China’s economic leaders were adroit in avoiding a stumble in 2014.

According to the IMF, developing economies are predicted to grow 5.0 percent vs. 4.4 percent in 2014.  A significant surprise will be India which is expected to grow 6.4 percent vs. 5.6 percent in 2014. Growth is expected to accelerate in Latin America with Brazil and Mexico leading the charge. Argentina remains an ongoing concern.

The IMF expects resurgence of U.S. economy to continue at 2.3 percent vs. projected 1.8 percent in 2014. However a poll of 50 economists conducted by The Wall Street Journal in September indicates closer to 3 percent U.S. GDP growth in 2015. For the United States, the ISM PMI Index in November was reported as 58.7, a significant 7.4 percentage points higher than the value recorded in January.

The J.P. Morgan Global Manufacturing PMI Index, a composite index and recognized benchmark of composite global supply chain and production activity provided mixed signals by November of 2014. An overall value of 51.8 was recorded in November reflecting expansion of manufacturing production for the 25th consecutive month, but the rate of expansion eased to its lowest level since August 2013. Growth in new orders was recorded as a 16-month low with the trend in international trade volumes stagnated. North America continues to be reported as a key growth region while concerns were expressed for stagnation in China and further subdued growth for the Eurozone sector.

Another area of concern is fluctuations or shifts in global currency, particularly Asian currencies and the Chinese yuan. As we pen these predictions, the currency of Russia has been impacted by significant de-valuation.

The takeaway for industry supply chains and their sales and operations (S&OP) processes is to anticipate another year of needs to be able to predict supply chain demand and supply needs on an individual geographic region or country basis. Generalized planning no longer suffices and industry supply chain teams will need the means to be able to respond to short-term market opportunities or sudden changing trends.

2015 Prediction Two: General Moderation and Reduction of Commodity Costs with Industry Exceptions

Expect a continued overall moderation trend for the cost of commodities with certain industry specific exceptions.  Dramatically lower oil prices in 2015 will be the biggest headline driving commodity and pricing trends in 2015.

As of mid-December, the Standard & Poors GSCI Index of broad based commodities is projecting a 27 percent decrease in overall commodity prices over the next twelve months.

As we pen our 2015 predictions, the prices of crude oil have plunged to their lowest levels in five years after the International Energy Agency (IEA) cut its forecast for global oil demand on the fifth occasion in six months. The news has added volatility among global equity markets as investors become increasingly concerned about the implications. Global oil prices have consequently plunged from the peak of $110 per barrel to a range of $60-$70. Some forecasts now peg 2015 oil prices as low as $50 per barrel.

Global and industry supply chain strategies are driven by the forces related to oil prices and the cost of energy and thus this commodity trend looms large for broader implications in 2015. The open question is whether the trend is permanent or short-lived.

Purchasing and commodity teams can therefore anticipate inbound cost savings in the coming year with the usual exceptions related to unforeseen weather or risk events.

 

2015 Prediction Three: Momentum for U.S. and North America Based Manufacturing Sourcing Continues but Motivates Broader Needs

We predict that the momentum for U.S. and North America based manufacturing will continue in 2015 with discernable benefits for certain industries. The need to broaden investments in certain industry supply ecosystems and U.S. logistics and transportation infrastructure will continue to dominate business headlines and industry agenda.

Throughout 2014, U.S. and North America based supply chain related activity continued at a steady state.  As of October, 16 of the total 18 tracked industries within ISM’s PMI indices were reporting growth momentum.

The continued growth of U.S. and North America manufacturing comes from a number of factors not the least of which have been the ongoing double-digit increases of labor costs in China, increased positive momentum of the U.S. economy and more attractive energy costs throughout North America. Specific efforts by Wal-Mart, other retailers and manufacturers concerning significant long-term commitments for sourcing products in the region have helped immensely.

In August of 2014, the Boston Consulting Group noted in its report, Shifting Economics of Global Manufacturing, that in some cases, the shifts in relative costs of manufacturing among China and North America have placed Mexico as the cheaper low-cost manufacturing alternative.

However, the sourcing of U.S. and North America based manufacturing continues to uncover gaps in globally competitive component supply chain networks, many of which still reside in Asia or China. This is especially the case in high tech and consumer electronics, footwear, apparel and other industries. Continued momentum is thus increasingly dependent on further re-building of global cost competitive North America based supply ecosystems among multi-industry supply chains.

A caveat for 2015 stems from the plunging price of oil and energy outlined in Prediction Two which could influence some manufacturers to remain concentrated in an Asia or Eastern Europe based sourcing strategy.

 

2015 Prediction Four: Internet of Things (IoT) Continues to Attract Wide Multi-Industry Interest But Certain Challenges Need to be Purposely Addressed

Cross-industry interest levels and momentum surrounding B2B products and services leveraging Internet of Things (IoT) coupling sensor-based based technologies will continue to attract wide multi-industry interest. IoT provides a new era of interconnected and intelligent physical devices and/or machines that will revolutionize supply chain processes related to production, transportation, logistics and service management. We expect more technology vendors to jump into this area along with heightened M&A activity as these vendors position for industry needs and requirements.

IoT will further drive a convergence among product and service focused supply chain planning and execution processes as well as certain product lifecycle management information integration needs. PLM and SLM provider PTC is a current example of this dimension but other vendors will be attracted to this business model.

The realities in the lack of consistent or conflicting global-wide standards, overcoming data security concerns and scalability of networks will provide more visible challenges for broader industry deployments.  We have recently indicated a feeling of de-ja -vu for the replay of early RFID efforts, as vendors tended to ignore certain realities of the technology. Vendors will need to step-up efforts to address current challenges and individual industry needs.

 

2015 Prediction Five: Noted Industry Specific Supply Chain Challenges

Noted industry specific supply chain challenges will remain in B2C-Retail, Aerospace and Consumer Product Goods (CPG) sectors.  Automotive manufacturers will have to address continued shifting trends in global market demand and a renewed imperative for corporate-wide product and vehicle platform quality conformance measures.

B2C and Retail

Global retailers continue to be challenged in emerging and traditional markets and in permanent shifts in consumer shopping behaviors. In 2014, retailers encountered the realities of lower margins for online fulfillment, the needs to invest in enhanced inventory management, distrusted fulfillment and order management capabilities, and the perfect-storm presence of developments that resulted in dysfunctional west coast ports.

Retail sales in China, Asia and Australia are expected to surpass that in North America, but China’s efforts in greater scrutiny of foreign-based retailers and service firms will likely continue to impact growth expectations in the coming year. According to industry and business media, retailers are expected to instead target the other so-termed MINI countries (Mexico, Indonesia, Nigeria, Turkey) for growth prospects in 2015.

The accelerating trends and implications of Omni-channel and online fulfillment will impact traditional retailers with more casualties recorded in 2015. Amazon, Google and Alibaba will continue to be industry disruptors, movers and shakers in 2015 and Wal-Mart.com may join that list. We would not be surprised if Alibaba concentrates acquisition efforts toward more U.S. and North America online properties to prepare for a presence.

Consumer Product Goods

CPG companies continued to view emerging markets such as China and India as important regions for future growth but experienced the effects a far more complex and risk-laden supply and regulatory networks. The heightened influence and actions of short-term focused activist equity investors, applying dimensions of financial engineering to one or more CPG companies will continue to have special impacts on consumer goods industry supply chains with added, more troublesome cost reduction and consolidation efforts dominating organizational energy and performance objectives. The new winners in CPG will continue to be smaller, more nimble producers who lead in product, supply chain business process and technology innovation.

Aerospace

Industry dominants Airbus and Boeing and their respective supply ecosystems will continue to be challenged with the needs for dramatically stepping-up to make a dent in multi-year order backlogs and in increasing the delivery pace for completed aircraft.  Dramatically lower costs of jet fuel in 2015 will likely present the unique challenges of airline customers easing off on delivery scheduling, but at the same time insuring their competitors do not garner strategic cost advantages in deployment of newer, more fuel efficient and technology laden aircraft. Middle East and Asian based airlines and leasing operators will continue to influence market dynamics and aircraft design needs.

Renewed hostilities involving Ukraine or severe economic or currency crisis within Russia could impact strategic supply of titanium and other metals.  The economic malaise that is expected to continue across the Eurozone region along with expected contraction in China will present 2015 challenges for Airbus and Boeing’s supply ecosystems. Boeing will especially be focused on continuing to influence more cost reduction and productivity efforts among its global suppliers while continuing to address identified issues from regulatory investigations in practicing added supplier oversight for design and production process quality.

 Automotive

In the U.S., an unprecedented and overwhelming level of product recall activity spurred by heightened regulatory compliance pressures will drive product quality and compliance as the overarching corporate-wide imperative. Cascading incidents in 2014 pointed to issues of quality lapses among global suppliers and early-warning of potential component defects. Existing product recall campaigns will most likely extend through the first-half of 2015, placing added strains on aftermarket service dealerships.  Japan based air bag inflator supplier Takada will continue to deal with its creditability crisis and could lose significant new business if it does not step-up and get-ahead of the airbag quality crisis. OEM General Motors will especially be under the looking glass in 2015.

 

This concludes Part One of Supply Chain Matters 2015 Predictions for Industry and Global Supply Chains.  Part Two in this series will unveil our next five predictions.

We encourage readers to share in the Comments section their own predictions on what to expect in 2015.

In the meantime, we extend best wishes for the holiday season and the New year.

Bob Ferrari

©2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved


How a Single Expensive Component Can Inhibit End-of-Year and Customer Fulfillment Goals

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Over the remaining few days of December various supply chain teams will be hard at work supporting end-of-year shipment and revenue milestones. Most supply chain teams are aware that completing key milestones, whether financial, business or management focused, are critically important for compensation and career considerations.

In many cases, singular parts or component assemblies can likely be a cause for multiple end-item shipment delays. We are fairly confident that many of our readers residing in manufacturing, retail or service supply chains can well relate to this situation.

Thus, we were not at all surprised to have run across a Bloomberg published article indicating that Boeing and Airbus production and supply chain teams are working to ensure that 2014 end-of-year and program production and shipment milestone targets are fulfilled.  The December challenge stems from France based Zodiac Aerospace, a supplier of upscale lie-flat airline seats.  Certain deliveries for both the new Airbus A350 and Boeing 787 Dreamliner have requirements for the luxury seats which according to Bloomberg, can cost upwards of $200,000 each because of expensive finishes and complex mechanics. They are described as the “Ferrari” of airline seats.  This author appreciates that analogy.

For Zodiac Aerospace, a month-long labor stoppage within a Texas production facility that ended in late October coupled with backlogged engineering teams working with airlines for final seat design approvals have led up to the current challenges. The supplier is attempting to resolve all late deliveries and return to a normal schedule by mid-2015, but as is often the case, planning teams have been working to move deliveries of other new aircraft that can be completed to December customer delivery.  The article cites American Airlines as an example, who now expects to take delivery of its initial 787 during Q1-2015 rather than this month. American also needs to secure FAA approval to utilize these innovative seats within its new 787 fleet.

The 2014 shipment milestone for the Boeing 787 is 110 aircraft. Airbus encountered a sudden and unexpected delay in delivery of the first A350 to launch customer Qatar Airways because of an unexplained reason. Commercial aerospace supply chain and S&OP teams are thus behind the scenes and hard at work resolving last-minute snafus while working with various customers to move-up or re-schedule deliveries.

When the stakes are high, the individuals and teams that maneuver the various moving parts of the supply chain do matter. While technology can provide helpful tools, in the end, it’s the brainpower, creativity and tenacity of individuals that deliver the bacon.

No doubt all will done to insure December milestones are accomplished.

We share a wise holiday and New Year’s resolution- express your thanks to the planning, execution, procurement and product management professionals that are often called upon to be the last-minute enablers of customer fulfillment.

Bob Ferrari


New EBook: The Case for Tightly Integrating New Product Introduction and Supply Chain Management

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The business-to-business (B2B) network has become the new opportunity for fostering stronger supply chain and product business relationships with suppliers. More often today, this includes integrating new product management and introduction (NPI) with product design, collaborative manufacturing design and supply chain fulfillment.

Recently, Supply Chain Matters has highlighted a number of current day examples of the critical importance of these relationships. We highlighted recent accident investigation findings from previous Boeing 787 Dreamliner lithium ion battery fires along with findings from a joint FAA and Boeing study published in March which reviewed the broader 787 build program.  Among report findings was added credence to the reality that globally extended aerospace and complex equipment supply chains need to consider more timely two-way integration of product lifecycle management (PLM) and manufacturing process test information across B2B supply chain networks.

In the high tech and consumer electronics sector, product lifecycles are far shorter and NPI cycles occur more frequently. The recent unexpected bankruptcy of a prototype Apple supplier of sapphire glass provided yet another example. Apple’s peak and valley tendencies for extraordinary new product ramp-up and corresponding large-scale production volume surges that correlate with condensed product release cycles place enormous pressures on suppliers and any last-minute product design changes can be a disaster without timely two-way information integration and change assessment. Within automotive supply chains, recent unprecedented levels of product recalls are a reflection of the exposure of common product platform strategies, where common component design is leveraged across multiple models or brands. Many if not all of these multi-industry examples point to the product and production information alignment disconnect.

Under sponsorship of E2open Inc., our research parent The Ferrari Consulting and Research Group recently published an E-Book, The Case for Tightly Integrating New Product Introduction and Supply Chain Management. This document identifies the new opportunity for leveraging the end-to-end supply chain business networks not only for synchronizing planning and fulfillment execution but the new opportunities for incorporating two-way NPI process information as well. Certain B2B networks provide the ability to support a hub-and-spoke, federated data model that spans these broader process areas and bridge the gap in existing PLM and ERP systems for integrating broader forms of process information across extended supply and demand networks.

The E-book is available for complimentary downloading with registration at the following E2open web link. Later this month, we will also feature this E-book in the complimentary section of the Research Center associated with this site.

Bob Ferrari

Disclosure: E2open, Inc. is both a Named Sponsor of Supply Chain Matters and a client of the Ferrari Consulting and Research Group.


More on a Not So Good Week for Airbus- Open Debate on Product Strategy

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In our previous posting yesterday, Supply Chain Matters highlighted the sudden delay in first customer ship of the brand new Airbus A350. Launch customer Qatar Airways announced that it was delaying delivery of the launch A350 XWB aircraft without citing a specific reason for the postponement. Reports seem to indicate that rather than a major setback, Qatar, an influential and highly demanding airline customer is exercising its negotiating powers.

We further echoed reports that a new era of air travel has facilitated a shifting of influence among global airlines in favor of deep-pocketed Middle East based carriers such as Qatar and Emirates.

News of this week’s sudden announcement caused Airbus stock to drop over 10 percent on the Paris exchange immediately after the announcement.  It would appear however, that there was other related news that might have prompted the selloff, namely the Airbus investor conference in London where other announcements were made.

At the investor conference, Airbus indicated that it was cutting the production of the long-range A330 model to nine aircraft a month from the current level of ten, and a subsequent further cut in 2016, prompted by a weakening of demand for that model. Instead Airbus executives indicated that they will explore plans to develop and introduce a new A3330 neo model.

At the same conference, Airbus’s CFO reportedly indicated that the aerospace company would break even on its super jumbo A380 long-range aircraft though 2018 “if we do something on the product, or Airbus A380even if we would discontinue the product.” He also cautioned that inventory levels would rise in 2016 amid ramp-up of the new A350 program and that cash flow could be negative.

The largest existing customer for the A380 is Emirates Airways.

Earlier today, both Reuters  and The Telegraph reported that Tim Clark, the head of Emirates, was one very unhappy customer upon hearing the Airbus news concerning the A380 program. Clark indicated to Reuters that Airbus could double its investment on this aircraft if it agreed to upgrade the model.  In a telephone interview to Reuters, the Emirates CEO indicated:I am not particularly happy as you can imagine.” The article further states: “Clark said he was worried about the effect Airbus’s sombre message would have on future A380 purchases by other airlines, as well as the supply chain and the European aerospace industry which has been a darling of politicians by creating jobs.”  Clark further raised broader questions about Airbus’s product strategy for wide-bodied jets, threatening to hold Airbus’s feet to the fire to deliver all of its contracted aircraft to Emirates.

The Telegraph indicates in its reporting that on the second day of the London conference, Fabrice Bregier, head of the commercial aircraft segment sought to ease the row, indicating: “We will one day launch a 380neo, we will one day launch a stretch. This is so obvious, there is extra potential. Where is the problem with the A380?”

In our previous posting we referenced the stunning June announcement by Emirates to walk away from a 2007 deal to purchase 70 A350 aircraft. In today’s Reuters report, the Emirates CEO indicated that he wanted to look at in-service performance data on the A350 before deciding whether to place a new order.

The takeaway at this point is that in one week, Airbus has managed to get embroiled in openly communicated unhappiness among its top two most influential long-range, wide body customers. Once more, in the case of Emirates, product strategy for the expensive A380 program has become a public debate, and, at least for the moment, the Airbus supply chain ecosystem is caught in the middle.

And you might have thought that you had a bad week.

Bob Ferrari

 


A Sudden Delay in First Customer Delivery of the Airbus A350

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In our ongoing Supply Chain Matters coverage of aerospace supply chains, we have provided commentaries related to the unique and often demanding challenges of this industry, particularly when it Qatar Airways A350WBinvolves the intersection of new aircraft program launch and supply chain management.

Thus, we along with others in the business and aerospace community were somewhat taken by surprise with today’s news regarding the new Airbus A350 program, and the planned first customer delivery of this aircraft which was scheduled in just a few days.

Launch customer Qatar Airways announced today that it was delaying delivery of its new A350 XWB aircraft without citing a specific reason for the postponement. News of this announcement caused Airbus stock to drop over 10 percent on the Paris exchange.

Just last week, Qatar issued a press release setting the date for the exchange of title as December 13. The airline has ordered 80 A350 in total. The first operational flight for the launch aircraft is scheduled for January 2015 on the Doha to Frankfurt schedule. Today’s release states: “Qatar Airways announces that the Airbus A350 aircraft ceremonial transfer of title has been postponed until further notice

In its published news release, Bloomberg’s opening sentence stated the obvious: “Airbus Group which prided itself on keeping to the development schedule for the new A350 jet suffered an embarrassing last-minute delay as first customer Qatar Airways Ltd. halted a handover planned for this week.” The Bloomberg report further indicates that Akbar Al Baker, the CEO of Qatar is notorious in the industry for his public grilling of both Airbus and Boeing, underscoring the growing influence of Middle Eastern air carriers that have placed huge jet orders. In June, Qatar postponed the delivery of 13 Airbus A380 super jumbo aircraft, eventually taking delivery in September.

Also in June, Emirates Airlines decided to walk away from its 2007 deal to purchase 50 A350-990 aircraft, the same model type destined for Qatar. Emirates cited a re-look at future fleet requirements as its reason to elect not to take delivery. According to a published Wall Street Journal report reflecting on the Emirates June announcement, it appeared that Emirates was opting to build its long-haul fleet around Airbus A380 and Boeing 777 aircraft while Qatar was opting for Boeing 787 and Airbus A350 aircraft.

Airbus CEO Tom Enders was quick to issue a statement indicating he was confident that delivery to Qatar will happen soon and that the launch aircraft is on the tarmac and ready.

According to reports, Airbus invested nearly $14 billion in development of the new A350 and has positioned this aircraft to compete among competitive offerings of the Boeing 787 and 777. Airbus has booked 778 orders of the A350 as of November.

Chances are that our reading audience has experienced challenges with a rather demanding and influential customer with exacting standards.  In the case of Airbus, a relatively flawless set of A350 pre-launch and first customer milestones goes on temporary hold while one rather influential customer’s demands are completely satisfied to expectations.

Stay tuned.

Bob Ferrari


NTSB Releases Accident Findings from Previous 787 Dreamliner Battery Fires

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In January of 2013 a relatively new Boeing 787 Dreamliner operated by Japan Airlines caught fire while on the ground at Boston’s Logan International Airport. Fortunately, all passengers had deplaned from a 13 hour nonstop flight from Tokyo, while ground crews were making preparations for a return flight.  The fire was traced to the aft JAL787_APU_Battery2 440_293electrical equipment bay and was believed to originate in the aircraft’s auxiliary power system, where a lithium ion battery later exploded, causing a secondary fire. This was the second incident involving a fire condition with the auxiliary batteries.

That incident triggered a subsequent six month grounding of all existing operational 787 aircraft while government safety agencies and Boeing searched for the cause.  At the time, Supply Chain Matters featured a series of ongoing commentaries reporting on subsequent program developments. The aircraft was later approved for service after Boeing initiated a complete redesign of the battery housing unit containing lithium-ion batteries.

Last week, the U.S. National Transportation Safety Board (NTSB) issued its final accident report regarding the 2013 incident. (The investigative actions of government agencies tend to be elongated)

In its report, the NTSB states: “The NTSB determines that the probable cause of this incident was an internal short circuit within a cell of the APU lithium-ion battery, which led to thermal runaway that cascaded to adjacent cells, resulting in the release of smoke and fire. The incident resulted from Boeing’s failure to incorporate design requirements to mitigate the most severe effects of an internal short circuit within an APU battery cell and the FAA’s failure to identify this design deficiency during the type design certification process.”

That conclusion pretty much summarizes what business and other industry media was suspecting all along.  The accident report further identified “cell manufacturing defects and oversight of cell manufacturing processes” within lithium-ion battery supplier GS Yuasa’s manufacturing facilities.  The NTSB identified several concerns, including “foreign object debris (FOD) generation during cell welding operations and a post assembly inspection process that could not reliably detect manufacturing defects, such as FOD and perturbations (wrinkles) in the cell windings, which could lead to internal short circuiting.”  In addition, the NTSB specifically cited the U.S. Federal Aviation Administration’s (FAA) oversight of Boeing and its power sub-systems contractor Thales, oversight of GS Yuasa which did not ensure that the cell manufacturing process was consistent with established industry practices.

The good news is that since Boeing’s re-design of the auxiliary power unit (APU) installation configuration there have been no major additional incidents involving battery short circuiting or thermal runaway. Boeing obviously responded and took appropriate action.

As with previous incidents related to the 787, there are obvious common themes of learning. Earlier this year, the U.S. FAA released the results of its comprehensive joint study of the 787 program. That report concluded that the 787 is soundly designed and that processes exist to identify and correct manufacturing issues. However, the report noted areas that required attention. The most notable was the two-way flow of product design, specification, testing information among various tiers of the global supply chain along with proper oversight of supplier manufacturing processes. At the time of the release of the FAA report Boeing senior executives acknowledged to business media that they lost some control of the manufacturing process because of the nature of the global supply chain, and placing too much reliance on suppliers for the overall quality of 787 components and systems.

From our lens, this latest NTSB accident investigation report adds more credence to the reality that globally extended aerospace and complex equipment supply chains need to consider more timely two-way integration of product lifecycle management (PLM) and manufacturing process test information across B2B supply chain networks. Similar to supply chain planning or execution synchronization, product management information synchronization is equally important.

Last week, Boeing announced that it had initiated the manufacturing of the larger 787-9 (Dash Nine) configuration at its South Carolina assembly facility. The North Charleston, S.C., site joins Boeing’s Everett, Wash., final Boeing_787_SCassembly, which began 787-9 production in May 2013. United Airlines will be the designated customer that takes delivery of the first South Carolina-built 787-9. The overall 787 global supply chain needs to scale-up to meet unfulfilled airline customer orders.

The Dash Nine is designed to be 20 feet longer than the previous 787 models and can accommodate up to 290 passengers. This model was originally due to be delivered in 2010 but its production has been dramatically pushed back due to changes in design, most notably Boeing taking on more responsibility for key major component design and manufacturing.

When it comes to extended global supply chain sourcing of major sub-systems, it often takes time and acquired learning to uncover problem areas. The industry learning is that as commercial aerospace supply chains continue to scale-up to higher volumes of production, network-wide product design and manufacturing process information and oversight is just as crucial as other supply chain business process needs.  B2B supply chain business networks include the need for synchronization of PLM information elements.

Bob Ferrari

 


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