Oct. 16, 2018, © Leeham News: Puget Sound-area Boeing suppliers are anxiously awaiting an Oct. 30th meeting at the Lynnwood Convention Center. The aerospace giant has invited dozens of suppliers to the meeting.
Attendees have been required to sign non-disclosure forms in advance, though Boeing has been tight-lipped about what exactly it plans to discuss with them. Each company has been limited to sending only two representatives, according to several suppliers attending the meeting.
“It doesn’t matter if you’re a machine shop or a big (tier one supplier), you can only send two people,” said an executive at a Puget Sound-area supplier. The supplier spoke on condition of not being named for fear of losing business with Boeing.
Boeing has indicated that the conference is to discuss sweeping changes to how the terms and structure of its supply chain contracts. But it has revealed few details, according to executives at two suppliers.
“You know it’s bad if they won’t tell you what it’s about,” one of the executives said.
The invitation states that Boeing Commercial Airplanes “is looking to streamline its bidding process to increase supply chain efficiencies for all future work, all programs,” the Puget Sound Business Journal’s Andrew McIntosh reported.
“To that end we are looking at doing business differently which includes a new set of terms and conditions with the product life cycle and production system focus,” the invite continues. “Our suppliers are critical to our success and the intent of this conference is to share our request for proposal (RFP) and terms and conditions expectations for new work along with Q and A dialogue.”
McIntosh reports that the meeting is only for interiors work.
The invitation seems to confirm growing concerns among suppliers that Boeing is gearing up to push for another round of price concessions.
Plenty of suppliers are still bitter over Partnering for Success 1.0 and 2.0, when Boeing squeezed substantial cost cuts from its supply chain. However, most suppliers lack the leverage to push back against Boeing’s demands.
Boeing executives made clear the company’s strategic shift into aftermarket work, and the new terms Boeing wants to discuss on Oct. 30 likely will include AM work on serial production contracts, among other topics.
The company’s shifting business strategy is expected to most significantly affect supplier contracts for its New Midsize Aircraft (NMA).
Boeing is taking a different approach with the 757-ish replacement aircraft’s business plan, as LNC analyzed earlier this month. The aerospace giant is not evaluating the program as a stand-alone aircraft program, but rather as an enterprise program that will deliver profits based on services, parts and other revenue streams that come after the airplane has left the factory.
Taking such a new approach will require Boeing to make significant changes to its supplier contracts.