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.