Page 27 - Insurance Times May 2024

The aircraft manufacturer's supply chain woes did not
commence with the 737 Max. In his 2020 article for
SupplyChainDigital.com, The Boeing 787 Dreamliner: A tale
of terrible supply change management, Freddie Pierce
wrote: "Boeing's production of the 787 Dreamliner is almost
laughable. It has become such a mess, such a supply chain
disaster, that it almost makes you think Boeing execs made
Dreamliner decisions in some sort of strange alternative
universe, like the Twilight Zone or something."

Critical components get sourced from South Korea, Italy,
Japan, Australia, China, Sweden, France and Canada. All
have significant roles in the production of the 787
Dreamliner. The cogs turning to receive supplies from such of aircraft manufacturing, to focus on design and final
a vast network of global vendors have taken their toll on assembly.
Boeing, explained Pierce.
The reason manufacturers outsource certain component
Brooke Sutherland is Bloomberg News' Boston bureau chief. work is because doing so makes the overall process more
She has written several eye-opening features on what's been efficient and allows the companies up and down their supply
recently going on at Boeing. Before a plugged door blew chains to focus on their respective strengths. Boeing is never
open on a 737 Max 9 Alaska Airlines flight in January, Boeing going to be the ideal manufacturer of nuts and bolts.
had disclosed two separate quality-control issues tied to
Spirit AeroSystems: one involving incorrectly installed rear Spirit had "always been a cost centre that was forced to
fittings and the other being improperly drilled fastener become a profit centre", says Sutherland. In its quest to
holes. bolster earnings and reduce the company's dependence on
Boeing, Spirit signed contracts with Airbus SE and the
As the maker of the Max's fuselage, Spirit would have been defense industry on lopsided terms that ended up
responsible for constructing the exit doors, both the useable compounding forward losses on the Boeing 737 and 787
ones and the plugged ones, although Boeing is meant to do programmes. Both Boeing and Airbus have a keen interest
quality-control checks on pressurisation and seals on the in keeping Spirit alive because neither can produce airplanes
finished planes at its own factories, and the FAA was meant without the structural components made by the supplier.
to be double-checking each 737 on its way out the door.
But the plane makers have historically not shown much
That the incident will trigger sweeping changes as to how interest in allowing Spirit to make the kind of profits that
Boeing will work with its suppliers to build aircraft is the would allow it to be a successful and truly independent
business. Spirit has relied on advances from Boeing and
prevailing wishful thinking. Among the astute observers is
Airbus and a rejiggering of terms on the 737 and 787
NYU Stern business ethics Professor Alison Taylor. "Boeing
is paralysed, and this failing by its executives and directors contracts to stave off a potential cashflow crunch. This isn't
is to blame. The problem isn't a lack of controls, visibility or a healthy supply chain, reminds Sutherland.
knowledge. It's the lack of innovative thinking," she asserts
in a recent op-ed for MarketWatch . Rather than regretting the hive-off or even wishing to
reacquire Spirit, Boeing should be looking at the following
risk triggers.
Lest we miss the signal, let's shortly return to 'its corporate
culture may be a big reason'.
Corporate culture

Spirit was a part of Boeing until 2005, writes Brooke Corporate scandals have a tendency to refocus us all on
Sutherland, when the company sold the underlying assets questions of corporate culture and governance, and Boeing
of its aerospace structures business to private equity firm is no exception. David Calhoun is the latest of a spate of CEOs
Onex Corp. The idea at Boeing was to boost profit margins to step down in disgrace, his fall cushioned by the usual
by outsourcing the more capital-intensive fabrication work golden parachute.

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