Though there has been no announcement yet, Boeing Co. (NYSE:BA) appears close to acquiring a key supplier to its 787 Dreamliner, as
reported last week on The Deal Pipeline (subscription required). The deal, which calls for Boeing to buy from Vought Aircraft Industries Inc. the North Charleston, S.C., facility where part of the 787 fuselage is assembled, has heated up the debate over the aerospace giant's decision to rely on a global roster of third parties to produce key elements of the next-generation aircraft.
But here's a reality check: Despite the problems of the new supply chain model, there were good business reasons for attempting it -- and for expecting some form of it to be employed in future projects.
True, the 787 is two years behind schedule, creating a raft of issues with customers who are demanding penalties for the delays and with suppliers who are struggling in a tight credit market but not slated to be paid until the plane is closer to flying. Some of the blame for the delays has fallen on suppliers who have been unable to deliver key pieces of the plane by deadlines, or who have produced pieces out of spec and in need of adjustment.
It wasn't supposed to be this way. When Boeing announced plans for its distributed supply chain, the company was widely lauded for taking some of the risk of a innovative new program off of its books and, by creating supplier jobs all over the globe, boosting its chances of selling 787s in Asia and Europe.
The extent of blame the supply chain deserves is a matter of debate, with some Boeing critics claiming it was the company's inability to get accurate specifications to suppliers in a timely manner and other design problems that are at the heart of the 787's delays. An argument can also be made that Boeing, in trying to reinvent both its supply chain and its base materials (composites instead of metals), simply tried to do too much too quickly.
If nothing else by involving so many outside parties, Boeing appears to have set itself up for negative publicity. Any new program as complex as the 787 is likely to have complications and delays. But these complications and delays have been more public because they involve multiple entities and cannot simply be swept under the rug and kept in-house.
But for all this, a distributed supply chain still makes sense for the original reasons, assuming Boeing can make it work. If Boeing eventually gets the hot-selling 787 flying and performing as promised, look for some version of the model to used for other planes. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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