The Impact of the Boeing Strike on the Supply Chain |

One impact of the IAM strike at Boeing has been the pull-back of purchase orders from the supply chain for components needed for aircraft production. Boeing has been planning and postponing a monthly rate of 38 737 MAX aircraft for the last two years, with the pandemic and the door panel blowout substantially impacting Boeing’s capability to deliver. The company has been taking on inventory at higher rates than it has been producing aircraft, which is unsustainable over the long term without a de-stocking event. Of course, from the supplier's perspective, this presents a complex problem, both from the unpredictability of future production and the unknown time frame for the strike, which is not under their control. A de-stocking will likely lead to a more prolonged cessation in production for suppliers than the length of the strike. The unknown time frame makes it impossible for suppliers to accurately forecast demand, maintain revenues, and determine whether they need to lay off workers. Strike provides an opportunity The IAM strike provides Boeing with the excuse to trim supplier production. It allows balancing inventory levels with production by delaying orders from the supply chain when production resumes. Boeing has been slowly increasing MAX production rates to the low to mid-20s per month, still far from the planned 38 per month. While the company has reduced its finished aircraft inventory with a resumption of deliveries to China, it has not yet been able to significantly reduce component inventory levels. Now is the time for that to happen. The key for Boeing will be providing accurate commitments to the supply chain as production resumes and accurately estimating the component rates needed to support the post-strike production ramp-up. This will be a complex task, as the supply chain is not a monolith, and several key industry players are having difficulty ramping up production post-pandemic due to labor shortages. While things are improving, bringing on new employees typically requires 2-3 years for them to become fully productive, and we’re not quite there yet. We don’t expect a fully stable supply chain until 2025-2026, and the strike's impact may be to push things back further. In the interim, suppliers to both Airbus and Boeing, who may have fallen behind on the aggressive Airbus narrow-body production rates, may have an opportunity during the strike to build additional components for Airbus in the short-term, helping to alleviate bottlenecks. Suppliers need to continue to deliver products, and the Boeing strike and likely subsequent de-stocking will provide suppliers an opportunity to ramp Airbus production to higher levels during the strike, as Airbus and Boeing share many vital suppliers. Competitive Impacts Regarding priorities, Boeing may be falling vis-à-vis more stable competitors such as Airbus and Embraer. From the 737 MAX crashes and door plug incidents to multiple 787 groundings to delays on the 777X to the pandemic, Boeing suppliers have been whipsawed by an inability to forecast future demand and production rates accurately. When you can’t accurately plan what production levels will be and need to ensure that your factory is full, management will seek out stable and steady OEMs to work with. Boeing’s instability has made the company a risky bet for suppliers. That impact won’t be forgotten when the time comes to participate or not in Boeing’s forthcoming programs and build that risk into pricing. One of Boeing's critical suppliers is Spirit AeroSystems, which Boeing is planning to acquire next year. With those employees also represented by the IAM, will they demand parity in rates to those that the IAM will achieve post-strike in Seattle? Labor could likely play a part in this acquisition and seek inclusion in an overall Boeing bargaining unit. Our take is that labor costs for fuselages will likely undoubtedly rise in Wichita, but the question is when and by how much. The Bottom Line Boeing’s cost-cutting will entail a pause in supplier production for the MAX and other programs and a likely de-stocking of some components to better match component inventories with actual production rates rather than its 38 per-month goal. The timing of the resumption of supplier production may differ as the company analyzes its cash flow and inventory-carrying costs. The impact of the IAM strike on the supply chain will be negative, particularly if it is protracted. Adjusting component inventory levels to match projected production rates more accurately will likely result in a de-stocking of MAX components supporting the Renton production line while causing chaos down the supply chain. This will get messy—stay tuned.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

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