In light of the experience with supply chain challenges at Airbus and Boeing, the markets have been eyeing the CSeries development program at Bombardier with a well deserved jaundiced view. After all, if the big OEMs can’t get it right, how could a smaller OEM?
Bombardier’s CSeries encompasses the new risk profile facing all new airplane projects, which include international supply chains and more complex designs. There are simply no programs that are assembled by one company in one country. Look at new programs anywhere; Brazil, China, EU, USA and Russia. The Canadians are no different.
Today Spirit AeroSystems, a key supplier to Boeing (and an ex-Boeing company) is now also supplying Airbus with parts for their A350XWB. If Spirit runs into labor trouble, for example, both Airbus and Boeing will suffer. There are other firms in the same position as Spirit – Honeywell, MTU, Alenia, and so on.
When looking at Bombardier’s CSeries project, we see two key firms that could potentially become an Achilles heel. The first is Shengyang Corporation in China and the second is Alenia in Italy. Of the program’s supplier base, more than 75% of its suppliers are based in North America – which means they are close to the production facility in Mirabel.
Let’s look more closely at the two vendors we think might be “risky.”
Concern about Shenyang (SAC) is typically based on its experience and distance from the Mirabel factory. Bombardier and SAC inked their agreement on the CS program in July 2008. This agreement followed a previous deal signed with AVIC 1 in April 2007. (AVIC owns SAC)
What is forgotten by critics of AVIC and SAC is that Bombardier has had a relationship that long predates CSeries. Bombardier has a 25-year relationship with SAC. In July 2006, Bombardier entered into an agreement which stipulated SAC would manufacture certain structural aircraft components for the Q400 that were previously sourced from Mitsubishi Heavy Industry in Japan. Consequently, SAC (and AVIC) is a known quantity to Bombardier. Therefore, the risk from Shenyang is manageable. The CS test hull supplied by SAC for the CSeries by all appearances has met the standards expected.
Next, let’s look at Alenia. The concern with Alenia is primarily driven by that firm’s industrial partnership on Boeing’s 787 program, which has been a source of frustration, delays, workmanship issues and poor quality control from the start and continues to this day. Indeed the problems are of such concern, Boeing plans to in-source the 787-9 tail assembly work now done by Alenia for the 787-8.
To keep tabs on Alenia (and all suppliers), Bombardier undertook a rigorous supplier selection process developed over many years using offshore suppliers on multiple programs. Risk assessments on supplier’s experience, technical skills, resources knowledge, financial health and lessons learned from past contracts in the industry are standard elements of Bombardier’s due diligence process.
In contrast to Boeing’s initial approach on the 787 in which Boeing oversight was lacking, Bombardier follows a policy of continuously communicating with suppliers through a strong governance process that includes daily meetings at the work-package level, weekly program status assessments, regular Program Management Reviews (PMRs) and twice-yearly all suppliers event. Key performance indicators are reviewed during these governance meetings to ensure both proper execution on technical requirements and program schedule. If a new potential risk or issue is identified, high-level management is informed, timely and risk mitigation plans are developed and corrective actions taken.
In summary, it is fair to carefully watch Bombardier’s production supply chain. There are clearly areas of concern, especially with Alenia. Boeing will benefit from lessons learned on the 787-8. Airbus strives to benefit by observing Boeing’s program issues as it proceeds with the A350. But Bombardier has the benefit of two important factors that should ease concerns – first it has been doing this for a long time and has developed a proven system to monitor suppliers, and second, it has watched and learned from the hard lessons faced by Airbus and Boeing.
But it is also fair to recognize that Bombardier has put into place proven risk reduction as strategies. Long supply chains are risky. They can break no matter how many trip wires are in place. But we suggest that if anything negative was to happen in its supply chain, Bombardier will know immediately and likely mitigate program delays.