THE FUTURE OF FLIGHT April 17, 2010 & CONSULTING Nick Martin Celine Junke Margeaux Girardin Daniel...
Transcript of THE FUTURE OF FLIGHT April 17, 2010 & CONSULTING Nick Martin Celine Junke Margeaux Girardin Daniel...
THE FUTURE OF FLIGHT
April 17, 2010
&C O N S U L T I N G
Nick MartinCeline Junke
Margeaux GirardinDaniel Schacter
AGENDA
Current SituationSupply Chain OpportunitiesFuture Competitive AdvantageConclusion
BRIDGING THE GAP
APR 2004Announced the Launch of 787
SEP 2005Firm
Configuration Completed
JUN 2006Major Assembly Began
JAN 2008 Revision
OCT 2007Revision
APR 2008 Revision
END OF 2010First 787 delivery expected
DEC 2009851 Confirmed Orders
First Flight
2000
33,000 suppliers
2010
12,000 suppliers
Current Situation Supply Chain Future Advantage
Conclusion
THE CHARGE
1. Create a recommendation to address Boeing’s supply chain difficulties
2. Create a recommendation to address Boeing’s corporate vision in the long-term
Current Situation Supply Chain Future Advantage
Conclusion
EXECUTIVE MANDATE
By optimizing our existing supply chain and
leveraging our 787 knowledge, we will be able to
reduce Boeing’s supply chain related costs from
$0.5B to $1.4B per year and generate an
additional $141B in firm orders over the next 20
years.
OPTIMIZING THESUPPLY CHAIN
SUPPLY CHAIN STRUCTURE
PARTNERS CUSTOMERSBOEINGSUPPLIERS
Build subassemblies
Piece together subassemblies
Receive completed
plane
Manufacture components
Current Situation Supply Chain Future Advantage
Conclusion
SUPPLY CHAIN STRUCTURE
PARTNERS CUSTOMERSBOEINGSUPPLIERS
One supplier can halt the supply chain
Kawasaki Wheel Well
Brake Pads Lifting Motors
Landing Gear
Suspension
Current Situation Supply Chain Future Advantage
Conclusion
SUPPLY CHAIN STRUCTURE
PARTNERS CUSTOMERSBOEINGSUPPLIERS
Subassemblies may not arrive
completed
Everett Boeing Plant
Kawasaki Wheel Well
Alenia Center Fuselage
Mitsubishi Wing
Current Situation Supply Chain Future Advantage
Conclusion
SUPPLY CHAIN STRUCTURE
PARTNERS CUSTOMERSBOEINGSUPPLIERS
Customers may lose confidence
due to 787 delays
2009: Loss of 59 orders
2010: $6.9B in penalties
Current Situation Supply Chain Future Advantage
Conclusion
3 PRONG SUPPLIER STRATEGY
1
Implement a solution
23
Find the problem
Evaluate the situation
Current Situation Supply Chain Future Advantage
Conclusion
RFID
CONSULTING
Enforce supplier requirementAccess real time information Adapt to production delaysUtilize 2nd supplier if needed
Proactively react to delaysImprove supplier’s operations
Capitalize on Boeing knowledge
IMPROVED INFORMED AUDITING
INSPECTIONS Maintain yearly auditPerform informed audit
SUPPLIER CONTROL
Current Situation Supply Chain Future Advantage
Conclusion
RFID AUDITING
ScrewsMounts
BoltsFrameMotors
Glazing Sealant
Fuji Mitsubishi
Spirit
BOEING
WingBox
Wing
AssemblyForward Fuselage
PARTNERS
SUPPLIERS
Supply chain becomes 20% more efficient
Optimized supply chain means
savings on delay penalties
Current Situation Supply Chain Future Advantage
Conclusion
RFID Financial
Pessimistic (3%) Optimistic (5%) Savings $ 1,428M $ 2,380MTotal Cost $ 953M $ 953M
Gross Savings $ 475M $ 1,427M
Assumptions:Based on 3-5% average savings for firms adopting RFID provided by Alinean Research
Total COGS (M) $ 47,600
Savings 3% $ 1,428
Savings 5% $ 2,380
RFID Implementation and Usage CostsParts per plane (767) 3.1M
cost per RFID Tag $0.50
Cost per plane $1.6M Planes Delivered 432
Total Variable Cost $670M
Total Infrastructure Cost (Wal Mart) $3,000M Size comparison (based on PPE) 9.5%
Total Infrastructure cost to Boeing $285M
Total RFID Cost in First Year $955M Additional Cost to our Supply Chain $2,000M
Savings
DELAYS & PENALTIES
2008 2009 2010 2011 2012 2013 20140
20
40
60
80
100
120
140
160
180
Projected Delivery
Due Date
Total Penalty:$6.9B7
87
s D
eliv
ere
d
Current Situation Supply Chain Future Advantage
Conclusion
CONSULTATION AUDITING
WHY?
HOW?
WHO?
Suppliers that are delaying subassemblies halt supply chain
Former Boeing workers specialized in each particular fields
RFID system displays which suppliers are falling behind and teams are sent
Current Situation Supply Chain Future Advantage
Conclusion
CUSTOMER RELATIONS
What Maintain Transparency
Highlight Positive Milestones
Communicate Innovative
Design Features
IncreaseCustomer Relation Channels
Account Manager Communication
RSS Feed on Customer Portal
How
Current Situation Supply Chain Future Advantage
Conclusion
Online Sources
2010 2011 2015
Trainworkforce
Establish workforce
2012 2013
SUPPLY CHAIN IMPLEMENTATION
Deploy consultancy services
2014
IBMconsultation Local implementation within
Boeing
Assist supplier RFID implementation
IBMconsultation
Consulting
RFID
Current Situation Supply Chain Future Advantage
Conclusion
FUTURE COMPETITIVE ADVANTAGE
FUTURE TRENDS
44%
47%
7%
Single Aisle Twin-Aisle747 or Larger Regional
Increased demand for single-aisle planes in next 20 years
Push for greater fuel efficiency due to rising fuel prices
Increased short haul point to point travel
Current Situation Supply Chain Future Advantage
Conclusion
*Source: Boeing, 2010
*
FUTURE OPPORTUNITIES*Source: Boeing
New Airplanes:
7,690Market Value:
$680B
3.2% growth*60% Short
Haul
Replacement Strategy
New Airplanes:
7,330Market Value:
$800B
4.1% growth*94% Short
Haul
Replacement Strategy
Current Situation Supply Chain Future Advantage
Conclusion
New Airplanes:
8,960Market Value:
$1,130B
7.1% growth*67% Short
Haul
Expansion Strategy
CREATING AN ADVANTAGE
CREATE COMPETITIVE ADVANTAGESupply Chain
LEVERAGE CURRENT CORE COMPETENCIES1. High end design2. Engineering3. Systems integration
ADAPT FOR THE FUTURE1. Capitalize on supply chain2. Embrace future trends
Current Situation Supply Chain Future Advantage
Conclusion
DIVISION ALTERNATIVES
Cargo
Commercial
Division to focus on going forward
Airbus A400M disaster - $11B over budget
Airbus legal disputes over government contracts
Military
Current Situation Supply Chain Future Advantage
Conclusion
DIVISION ALTERNATIVES
Cargo
Commercial
Division to focus on going forward
5.4%
4.9%
$170 Billion
$3.2 Trillion
Even though larger growth, not
comparable in size
GROWTH SIZE
Current Situation Supply Chain Future Advantage
Conclusion
DIVISION ALTERNATIVES
CommercialDivision to focus on
going forward
Current Situation Supply Chain Future Advantage
Conclusion
PROJECT DECISION MATRIX
S M L
Models A320 737 A350 787 A380 747
1st Roll Out ‘88 ‘68 ‘13 ‘10 ‘07 ‘70
Growth Potential (K)%
11.5K 24K 3.5K 8K 0.9K 1K
110% 130% 10%
Competition
AirbusBombardier
EmbraerChineseRussia
High-Speed Rail
Airbus Airbus
Current Situation Supply Chain Future Advantage
Conclusion
TIME FOR A CHANGE
1992
1994
1996
1998
2000
2002
2004
2006
2008
0
50
100
150
200
250
300
350
400
450
BoeingAirbus
Un
its p
rod
uced
(A
32
0/7
37
)
26% drop in 737 annual sales since 2007
737 NG Debuts
Current Situation Supply Chain Future Advantage
Conclusion
THE NEW 737 GREEN LINER
Current Situation Supply Chain Future Advantage
Conclusion
Leverage the 787 experience in advanced
materials
Capitalize on future growth in short-haul flights
Leverage pre-existing customer infrastructure
737 Next Generation GR
EEN
L
INER
FIRST MOVER ADVANTAGE
NEW 737
787
A380
A400M
AIRBUS
A350
BOEING
Airbus will not be able to respond?
OCT 2007
DEC 2010 DEC 2010
2016
2013
$33B R&D
$21B R&D
$20B R&D
$10B R&D
$1 = €.74
Current Situation Supply Chain Future Advantage
Conclusion
FINANCES
0
500
1000
1500
2000
Market Valuein Billion US $
Market Value
Optimistic Expected Pessimistic
Total Market Value $1410B $1410B $1410BExpected Market Share 44% 30% 20%
Firm Order Value $620B $423B $282BVariance $383B $141B
= Air Insights forecast for Single Aisle market share over next 20 years due to increased competition and possible upgrades to 737
Current Situation Supply Chain Future Advantage
Conclusion
IN CLOSING
IN CLOSING
.
Improve information flow throughout supply chain
Capitalize on future trends when developing the new 737 Greenliner
Regain leadership position in commercial aviation
SUCC
ESS
Current Situation Supply Chain Future Advantage
Conclusion
QUESTIONS?
QUESTION & ANSWER PERIOD
EXPECTED ORDER
SCHEDULE
TEN SUPPLIER CATEGORIES
BOEING PROCUREMENT
POLICY
SUPPLIER REQUIREMENTS
BOEING & IT
SUPPLIER REWARDS
CONSULTING
TIMELINE
CONTRACT ENFORCEMENT
SUPPLIER EXPECTATIONS
AIRLINE CHALLENGES
LEGAL FRAMEWORK
EXPECTED ORDER SCHEDULE
2008 2009 2010 2011 2012 2013 2014 2015 37 37
3 65 7 75101 31 132
89 75 16489 75 164
Revised Delivery 0 0 40 65 108 120 164 164 Original Delivery 37 75 132 164 164 164Months Delayed 924 1560 2676 3252 2700 2700 13812
Additional Information: you will be 2.4 years behind schedule 13812 X 0.5M = 6.9B
10 General Categories of Suppliers
Aerospace support Major Structure fuselage
Avionics/Avionics components Non production goods and services
Common aerospace commodities Propulsion systems
Electrical, hydraulic and mechanical systems Purchased outside production
Interiors Technology
BOEING PROCUREMENT POLICY
• Right quality• Right quantity• Right time• Right price• Right sources
SUPPLIER REQUIREMENTS
• Understand benefit of solutions
their products provide
• Share commitment to performance: cost, quality, delivery
• Maintain financial health
• Participate in knowledge shareCREATE ADDITIONAL VALUE BY FOCUSING ON
YOUR CORE COMPETENCIES
General Provisions
Revised 2009
Special Provisions
Revised 2009
Boeing Commercial
AirlinesRevised 2009
Demanding contract but not enforced due to communication lag
Able to improve auditing with RFID amendment in contracts
CONTRACT ENFORCEMENT
SUPPLIER EXPECTATIONS
• Ability• Capacity• Integrity• Financial Status• Geographical location• Performance• Reliability• Delivery• Customer-Supplier relations
BOEING & IT
• E-enabled tools• Information sharing• Exchanging technologies• Work better with suppliers• Exostar• Product Lifecycle Management
(PLM)
General Provisions
Special Provisions
Boeing Commercial Airlines
GP1: Fixed price goods
GP2: Fixed price services
GP3: Labor hour/time and
material GP4: Cost
reimbursement
GP6: Public college and
university fixed price
SP1: Representation
and certifications
SP2: Bailment agreement
SP3: international provisions
Long Beach
Winnipeg
LEGAL FRAMEWORK
CHALLENGES FACING AIRLINES
• Financing issues• High fuel costs• Unions• Fixed costs of planes• Price wars• Low cost airline
SUPPLIER REWARDS
• 12,000 active supplier• 2009: 14 “supplier of the year”•“Supplier of the year award” in 15 categories• “Boeing performance excellence award”
CONSULTING
• Desire: Be able to deal with 10% of supply chain per year
• Supply Chain Size: 12,000• Goal: 1,200 jobs per year
• Avg. time per job 1 month for team of 3• 1,200Jobs /12 months*3employees= 300 employees
per year• Avg. Engineering consulting Salary 121K to 198k
(CBSalary.com)
• Total cost of consulting: $47.9M USD• % of Delay penalties: 47.9M/6.9B= 0.7%
JUNE 2010 DEC 2010 JUNE 2012
Require new RFID training programsInform suppliers of RFID implementation
JUNE 2011 DEC 2011
Implement new RFID training in all Boeing buildings
Assist supplier RFID implementation
RFID IMPLEMENTATION TIMING
Hire IBM to assess supply chain needs
IBM begins RFID implementation design
Apply incentive programs for RFID compliance
JUNE 2012 JUNE 2013 FUTUREJUNE 2014 JUNE 2015
Require RFID training programs
Assist supplier RFID implementation
RFID IMPLEMENTATION TIMING
Apply penalty programs for RFID defiance
RFID DUE
Rehire IBM to assess RFID implementation
JUNE 2010 DEC 2010 JUNE 2012
Hire industry experts to refresh consultants skills
Establish workforce
JUNE 2011 DEC 2011
CONSULTING IMPLEMENTATION TIMING
Inform suppliers of consultant services
Deploy consultancy services