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What is the cost to restart both the supply chain and production line? If this lasts long enough, then there are portions of the supply chain that will start to

What is the cost to restart both the supply chain and production line? If this lasts long enough, then there are portions of the supply chain that will start to simply disappear as vendors go under or switch away to different customers and de-prioritize Boeing. It isn't just the monetary cost to re-calibrate machining and tooling, also the staff time and monetary cost to fill in gaps that appeared during the shutdown, both material and vendor relationships. And an abundantly clear lesson (as if the domain experts in sourcing shouldn't know this already) from the debacle is that outsourcing is not plug-and-play: there will be both product and relationship re-alignment and re-certification going on anywhere vendors are swapped out in the supply chain. If Boeing was forward-looking, then they would bite the bullet and keep production going, but use the downtime to crawl through every aspect of production to look for and fix any quality and safety-related concerns on the line (including absolute bottom-up authority for production line escalating concerns through to engineering and design) and in the supply chain. It massively slows down the production, which is perfectly fine right now. It wouldn't matter if they slowed to 10% of normal output, if the deliverable was absolute confidence in what is built on that line; they should have started this a long time ago when the shutdown passed 90 days. Even after the design is amended, planes modified, re-certification awarded by all the aviation agencies around the world, there will be a titanic push to run the line as fast as possible. And if they don't completely debug every piece of that line to an inch of its life, there will be guaranteed production quality problems when it restarts, and if those problems lead to more crashes, Boeing is getting bailed out by taxpayers and unalterably changed. Better to keep the line on "warm standby" while debugging it before the pressure is on.

tzs 7y ago
> If Boeing was forward-looking, then they would bite the bullet and keep production going, but use the downtime to crawl through every aspect of production to look for and fix any quality and safety-related concerns on the line (including absolute bottom-up authority for production line escalating concerns through to engineering and design) and in the supply chain. Where would they put them? These things ain't small. Airliners are expensive. The manufacturers do not build a large number speculatively and then find customers. They find customers, then build what has been ordered. They have enough storage space to serve as a buffer between output and delivery so that minor glitches on either don't affect the other. Also because airliners are expensive, and they get paid on delivery not on order, once past the initial production current production is paid for from recent deliveries. If deliveries have to stop for an extended time, there is no money to fund more production.
- yourapostasy 7y ago
  Good point. IMHO the company's survival is on the line, and the storage opex expense is worth it if it takes dropping production rate to 1% (about 0.6 737 MAX per month) or less to find out what other quality problems are lurking outside of the design realm, and catch technical debt that they would regret later. This is far preferable to writing off the entire product, and would be a concrete start to re-establishing the old company culture's emphasis upon quality. They're under a regulatory and compliance microscope now, and any production problems when they restart are going to get a lot of negative attention. They're tapping more debt and still plan on issuing dividends. Those dividends are likely going to be accompanied by equity buybacks. Those buybacks are measured in billions [1]. Carve out from the buyback funds what it costs to ensure quality where they can control it while waiting for clearance to reassure regulators, politicians and the general public, and tell the investors that it is either hold on with the team until quality is re-established within the culture, sell and come back later, or eventually zero out the investment because no one wants to buy from a plane manufacturer with suspect quality. [1] https://articles2.marketrealist.com/2019/06/boeing-enhances-shareholder-wealth-through-share-repurchases/# https://articles2.marketrealist.com/2019/06/boeing-enhances-...

tzs 7y ago

> If Boeing was forward-looking, then they would bite the bullet and keep production going, but use the downtime to crawl through every aspect of production to look for and fix any quality and safety-related concerns on the line (including absolute bottom-up authority for production line escalating concerns through to engineering and design) and in the supply chain. Where would they put them? These things ain't small. Airliners are expensive. The manufacturers do not build a large number speculatively and then find customers. They find customers, then build what has been ordered. They have enough storage space to serve as a buffer between output and delivery so that minor glitches on either don't affect the other. Also because airliners are expensive, and they get paid on delivery not on order, once past the initial production current production is paid for from recent deliveries. If deliveries have to stop for an extended time, there is no money to fund more production.

yourapostasy 7y ago
Good point. IMHO the company's survival is on the line, and the storage opex expense is worth it if it takes dropping production rate to 1% (about 0.6 737 MAX per month) or less to find out what other quality problems are lurking outside of the design realm, and catch technical debt that they would regret later. This is far preferable to writing off the entire product, and would be a concrete start to re-establishing the old company culture's emphasis upon quality. They're under a regulatory and compliance microscope now, and any production problems when they restart are going to get a lot of negative attention. They're tapping more debt and still plan on issuing dividends. Those dividends are likely going to be accompanied by equity buybacks. Those buybacks are measured in billions [1]. Carve out from the buyback funds what it costs to ensure quality where they can control it while waiting for clearance to reassure regulators, politicians and the general public, and tell the investors that it is either hold on with the team until quality is re-established within the culture, sell and come back later, or eventually zero out the investment because no one wants to buy from a plane manufacturer with suspect quality. [1] https://articles2.marketrealist.com/2019/06/boeing-enhances-shareholder-wealth-through-share-repurchases/# https://articles2.marketrealist.com/2019/06/boeing-enhances-...