Boeing Grounded: What Your Company Can Learn

The Resilient Enterprise | The riskmethods Blog
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March 19, 2019

Most major regulators have now instituted a ban of the Boeing 737 MAX 8 jet. As a supply chain risk organization, we at riskmethods asked ourselves what the implications of the grounding are for the global supply network.

by Birgit Müller

The alert came through riskmethods Risk Intelligence™ on March 11: Boeing’s 777X debut postponed after Ethiopian crash. This was only the beginning of the business repercussions of the Boeing crash, as it soon became apparent that the 737 MAX 8 jet was going to be grounded by most of the major regulators, including the US Federal Aviation Administration.

Grounding Affects Multiple Airlines

The effect of the Boeing grounding on the aerospace industry has been the topic of multiple news pieces, but much of the conversation has been about how the grounding affects airlines. Companies like Southwest Airlines and American Airlines have both made statements about possible effects; American said that 85 daily flights would be impacted, and Southwest said it has 34 MAX 8 planes in its fleet. Both companies are going to have to make some tough decisions in order to keep their businesses running as usual, potentially relying on older aircraft to sub in for their grounded machines. 

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The Ripple Effect of Supply Chain Disruptions

The suppliers who sell parts to Boeing will also be affected by the grounding, though. Spirit AeroSystems Holdings. United Technologies Corporation. Honeywell. General Electric. The list goes on. If the end result is that Boeing starts getting canceled orders, they’re not the only one who’s going to feel it—all of their suppliers are going to feel it too.

Supply chain disruptions have a ripple effect, and it’s not going to stop there. Suppliers of suppliers—suppliers of AeroSystems, of UTC, of Honeywell, of GE—could all be affected. And if a massive cancelation of Boeing orders shuts down a sub-tier supplier of Boeing—and that sub-tier supplier is also one of your suppliers—you could be affected too. In other words: The potential business impacts of the 737 MAX jet grounding are about more than airlines. (Fact: Sub-tier visibility is one of the top 3 risks facing the A&D supply chain. Learn what the other two are.)

Of course, it’s not a given that this scenario will occur. But the hypothetical is a good demonstration of how a resilient supply chain is essential to the resilience of a company. What are you doing to make sure you’re staying on top of all the potential events that might disrupt your business—especially the ones you might not even realize are brewing in the background?

You Can See the Ripples Coming

If you’re just waiting to hear about a supply chain disruption once it happens, you’re not being proactive enough. In fact, the Boeing grounding is an especially relevant example of this; the current length of backorders is so long that the effects of a massive cancelation of Boeing crafts wouldn’t hit suppliers for years down the road.

But if you’ve got an eye on the suppliers it might affect and know that one of them is yours, you can monitor them for any predictive warnings about insolvency or other problems—massive layoffs and major ownership structure changes, for example, are often indicators of larger financial problems coming down the road. (Actually, company viability is one of the top supply chain risks facing companies these days.)

No matter what happens, I have a feeling our Risk Intelligence is going to be watching this event for quite a while.

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Birgit Müller

Marketing Director

Birgit is the director of marketing at riskmethods. Got questions about how supply chain risk is threatening your business? Drop her a line at om@riskmethods.net.

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