The Supply Chain Matters blog provides added highlights along with industry supply chain and product management perspectives relative to the ongoing global-wide grounding of the Boeing 737 MAX aircraft.
Previous published updates and supply chain management perspectives included that of April 18 and an earlier April 3 and March 29 reader updates. As we anticipated, the ongoing crisis has garnered a lot of general business and industry global visibility, placing Boeing in a vortex of corporate accountability and crisis response.
On Monday, Boeing conducted its Annual Meeting of Shareholders where CEO Dennis Muilenburg declared that the aerospace provider was making steady progress on the path to re-certification of the 737 MAX return to operational service and that the company is planning to provide “enhanced education and training materials” for 737 MAX pilots. The company’s chief executive then had to respond to pointed questions from attending investors and press in what was reported as tense interaction.
Leading up to this week’s event was additional developments that add to Boeing’s challenges in restoring customer confidence.
The Wall Street Journal reported that 737 MAX launch, and currently largest operating customer, Southwest Airlines, along with other operating carriers, were not informed that the safety feature designed to warn pilots about a malfunctioning angle of attack sensor had been deactivated by Boeing. The report further disclosed that FAA safety inspectors responsible for monitoring Southwest were also unaware of the change. The airline was reportedly informed of that action after the Lion Air tragedy in Indonesia.
The WSJ further reported that U.S. FAA investigators were investigating what was described as a dozen Boeing whistleblower complaints alleging safety compromises in the manufacturing of the aircraft. Some complaints focused on debris from assembly processes remaining in sensitive areas after production completion, similar to reports related to other Boeing aircraft models.
Also, on Monday, Boeing indicated that certain safety alerts on the 737 MAX did not operate as airlines anticipated because of a previously undisclosed error on the part of the commercial aerospace manufacturer. That statement suggested that Boeing engineers and safety regulators may have overlooked one additional software design issue when this aircraft was originally certified. According to published reports, this was the first time that Boeing explicitly indicated that the alert “was intended to be a standard, stand-alone feature on MAX airplanes” but that goal was not achieved “because the feature was not activated as intended” when aircraft rolled off the assembly line. According to reporting by the WSJ, “Monday’s statement raises new questions about what Boeing told customers, pilots, regulators and others in the wake of the first MAX crash in October.”
Adding to Boeing’s ongoing challenges, this week the FAA imposed a new Airworthiness Directive on the manufacturer’s separate 787 Dreamliner aircraft that calls for additional checks on that aircraft’s aileron and elevator power control units after reports of hydraulic fluid leakage caused by lightning strikes. The directive will go into effect on June 3.
Ongoing Supply Network Concerns
This week, a separate report by the WSJ indicates that 737 MAX suppliers are struggling to sort through the uncertainties related to the continued grounding and the temporary cutback in the monthly production schedule to 42 aircraft per month.
The good news, from our Supply Chain Matters lens, is that the report indicates that critical component suppliers such as engine producer CFM International and fuselage manufacturer Spirit AeroSystems are continuing to produce at the former production rate of 52 aircraft per month. In the case of Spirit, Boeing has directed that excess manufactured fuselages be stored by the supplier for later use. CFM indicated to the publication that the supplier is maintaining prior production levels and has been coordinating with Boeing on various specific needs.
Other suppliers are described as bracing for potential impacts should the aircraft remain grounded beyond the summer. The Chief Executive of supplier Honeywell International, provider of 737 MAX mechanical systems and avionics, declared on that company’s earnings briefing that most suppliers are optimistic that the aircraft will resume production in the second-half and thus impacts can be managed. Some are concerned about individual cash-flow impacts as the groundings continue., while at the same time trying to assess how quickly Boeing will ramp-up to former production levels once the MAX model is cleared. In Boeing’s Q1 briefing of financial performance, the company’s CFO reiterated: “When we do come back up and ramp, we’re going to do it in a very steady fashion with stability in each step along the way.”
What caught are eye in a positive way was a statement from the CFO of Ducommun Inc., a supplier of wing flaps, floor panels and pylons for the MAX. He indicated that production remains at the product support output rate of 52 aircraft per month and that the company’s management discusses the situation every day, including a lot of scenario planning. That is a positive statement related to supply chain risk analysis and mitigation.
Additional Supply Chain Matters Thoughts
As noted in our prior updates, three areas of attention are becoming very clear.
Boeing must extend all efforts to restore the trust of airline operators, global regulators, individual pilots, and of-course, flying passengers in many different areas. Thus far, the company’s CEO has been clear in new language depicting that: “we own it.” That needs to continue, along with efforts to be as transparent as-possible.
This crisis has surfaced shortcomings in Boeing’s product design, verification, production assembly and quality control processes. Each has to be addressed with proactive and visible corrective actions. Reports of debris and trash in various models of completed aircraft must be acknowledged and addressed with root cause analysis and corrective actions.
Third, and by no means last, is a culture of corporate arrogance that Boeing has fostered for a long time, and in many dimensions. It was reflected in the prior grounding crisis involving the lithium ion batteries of the 787 Dreamliner, which began as denial, and ultimately led to corrective actions. The ongoing 737 MAX crisis is another signpost that arrogance can lead to other consequences and negative perceptions. This is a time of transparency, openness, and doing whatever is required to restore trust in the corporate brand. Even after this aircraft is returned to service, actions remain.
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