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The Dreamliner :for Boeings New Future Nahyun, An Jiyoon, Kang Soohwan, Kim Margeum, Kim.

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Presentation on theme: "The Dreamliner :for Boeings New Future Nahyun, An Jiyoon, Kang Soohwan, Kim Margeum, Kim."— Presentation transcript:

1 The Dreamliner :for Boeings New Future Nahyun, An Jiyoon, Kang Soohwan, Kim Margeum, Kim

2 2 787 Project Business Objectives Business Objectives Boeing 787 Dreamliner Boeing 787 Dreamliner Whats Next for Boeing after the 787? Market Forecast and Strategic Direction New Challenges Competing against Airbus Competing against Airbus Competing against New Entrants Competing against New Entrants 787 Project Problems & Solutions Problems and Reactions Problems and Reactions Lessons Learned from 787 Project Lessons Learned from 787 Project

3 787 PROJECT 3

4 4 BUSINESS OBJECTIVES

5 Business Objective Regain our position as an industry leader in the commercial aircraft industry, by delievering our customers innovative aircrafts faster than our competitors and offering them after service of quality Our objective here is to: 5

6 Business Objective 6

7 787 PROJECT 7 BOEING 787 DREAMLINER

8 Boeing 787 Dreamliner By launching 787, Boeing aimed at obtaining market leadership under changing Environment. Change in the airline industry World airline fleets to double The number of airline companies increase Fierce competition Needs of a differentiated aircrafts Cutting the price? Creating new value? Improve end-user comfort Improve flight operational efficiency Change the supply chain Challenges for aircraft manufacturers OUTSOURCING PRODUCT INNOVATION 8

9 Boeing 787 Dreamliner Boeings role changed to serve as a master planner leveraging its knowhow in order to respond the market request. OUTSOURCING PRODUCT INNOVATION OUTSOURCING PRODUCT INNOVATION Change in OUR ROLE: Assembly Integrator Master Planner How to Implement: Managing GLOBAL SCM Leveraging Customer Knowledge 9

10 Boeing 787 Dreamliner Parts Customers Outsourced 35~50% of Process 30days for final assembly Thousands of Suppliers : Build to detailed print by Boeing Boeing as a Final Manufacturer : Assembling all the parts *Major Role *Relationship Traditional Supplier Relationship : Fixed-Price Contract based *Major Role Parts Sections Parts Sections Customers 3days for final assembly Outsourced 70% of Process Tier2 : Producing parts for Tier1 Tier1 : Developing and producing sections Boeing as a Master Planner : Coordinating sections snap-together *Relationship Strategic Partnership : Risk-sharing Contract based BEFORE 787AFTER 787 Boeings supply chain has been different with 787 project as the starting point. 10

11 787 PROJECT PROBLEMS & SOLUTIONS 11 PROBLEMS AND REACTIONS

12 Problems and Solutions Boeing suffered from delays in production. DELAYS in production due to problems in Global Supply Chain First Flight Aug-07Mar-08June-08Oct.-Dec.-08 Apr.-June-09 Dec-09 First Delivery May-08Nov.-Dec.-08Left openJul.-Sep.-09Jan.-Mar.-10 Original TImeline Succeeded Repeated delays Nov.-Dec.-10 (expected) 12

13 Problems and Solutions Categories addressed below are major reasons for delayed schedule. CUSTOMERDISTRUST DELAYS 13

14 Problems and Solutions Process System CUSTOMERDISTRUST DELAYS 14

15 Problems and Solutions Causes, actions taken and further suggestions related to process supporting system are shown below. CauseActions Taken Further Suggestions Inefficiency of Information System Risk Sharing System - Financial Contract - Moral Hazard Financial Aid (Spirit) Improvement of EXOSTAR Adoption of RFID 15 Introduction of Incentive System

16 Problems and Solutions Partners CUSTOMERDISTRUST DELAYS 16

17 Involvement in 2 nd and 3 rd Tier Selection YET, Benefits: Qualified partners, Network with potential buyers & Tech learning effect Problems and Solutions CauseActions Taken Further Suggestions Part Shortage - 1 st tiers lack of capability - 1 st tier partners arbitrary contracts with unqualified 2 nd and 3 rd tiers Inefficiency in Outsourcing Overseas - Problems in comm. (Language & Culture) Heightened Level of Control - Acquired Vought - Sent Boeing engineers to partners sites Improvement of Information System - Overcoming Language problem (ex. Codes) - Education of IS and Sharing Boeing Global SCM culture Causes, actions taken and further suggestions related to partners are shown below. 17

18 Involvement in 2 nd and 3 rd Tier Selection YET, Benefits: Qualified partners, Network with potential buyers & Tech learning effect Problems and Solutions Causes, actions taken and further suggestions related to partners are shown below. CauseActions Taken Further Suggestions Part Shortage - 1 st tiers lack of capability - 1 st tier partners arbitrary contracts with unqualified 2 nd and 3 rd tiers Inefficiency in Outsourcing Overseas - Problems in comm. (Language & Culture) Heightened Level of Control - Acquired Vought - Sent Boeing engineers to partners sites Improvement of Information System - Overcoming Language problem (ex. Codes) - Education of IS and Sharing Boeing Global SCM culture Does Boeing have the right partners? Has too much been outsourced overseas? No : Lack of Capabilities and Ownership : Adjustable Inefficiency vs. Huge Benefits 18

19 Problems and Solutions Boeing Internal Leadership CUSTOMERDISTRUST DELAYS 19

20 Feasible Timeline for Next Product Development Problems and Solutions CauseActions Taken Further Suggestions Difficulties in Timeline Management - Risk in Global SCM - New technology Labor Problem - Job security issue Appointed Pat Shanahan Adjusted Product Features Convincing Employees of the Needs for Outsourcing Delving into a Win-Win Solution Increased Wage Drew a limit in Degree of Outsourcing Causes, actions taken and further suggestions related to Boeing internal leadership are shown below. 20

21 Problems and Solutions Customers dissatisfaction and distrust would be resolved by executing followings. CUSTOMERDISTRUSTDELAYS Given that No further delays promised, Penalty paid, and Spare airplane during delay provided, Actions below would be of help to convince customers : Sharing Information on System Improvement Visibility: Real-time Tracking System 21

22 787 PROJECT PROBLEMS & SOLUTIONS 22 LESSONS LEARNED FROM 787 PROJECT

23 Lessons Learned from 787 Project Huge volume of sales Proves the customer oriented approach based on Customer Knowledge is the right thing to do. Problems caused and our solutions MUST Dos: More control on partners Efficiency in information flows Guarantee of open communication Obtain knowhow in System Integration We could make it obvious what are our core competencies. 23

24 NEW CHALLENGES 24

25 NEW CHALLENGES 25 COMPETING AGAINST AIRBUS

26 Competition It is expected that a current major competitor, Airbus, and new market entrants would drive competition. 26

27 Competing against AIRBUS AIRBUS announced the launching of A350 which is in the same segment with 787 and is a test model for more aggressive outsourcing strategy than ever. A direct competitor of 787 (Same segment) Stretched outsourcing 27

28 Competing against AIRBUS AIRBUS Factories in 4 European Countries Final Assembly lines In France and Germany Strategic Partners 2 nd Tier AIRBUS Factories in 4 European Countries Final Assembly lines In France and Germany and China Strategic Partners2 nd Tier More Outsourcing to Strategic Partners Less Reliance on In-house Production From A350, Airbus has assigned more roles to its strategic partners while increasing the number of global outsourcing partners. AIRBUS: Supply Chain 28

29 Competing against AIRBUS Boeing competitive advantages over Airbus would be process efficiency. Process Efficiency obtained through Boeings global collaboration model 29

30 NEW CHALLENGES 30 COMPETING AGAINST NEW ENTRANTS

31 Competing against New Entrants China and Japan are said to be new entrants. 31

32 Competing against New Entrants China and Japan emerged as future competitors due to the global collaboration strategy of Boeing and willingness to forward integration. - Experience learned from outsourcing partnership - Open structure enabled by Boeings global collaboration model - Any parts and components are now available on market: All you need to do is assembly. Global Collaboration Strategy of Boeing - China: Government driven - Japan - Kawasaki Heavy Industries(KHI) - Mitsubishi Heavy Industries(MHI) Willingness to Forward Integration 32

33 Competing against New Entrants China and Japan has future plans leverage their strengths as below. CHINA: Low labor cost (20-25% lower than developed countries) Huge domestic demand AS-IS : Concentrating on producing parts : Producing regional jet ARJ21 TO-BE : By 2016, planning to produce C seat, big aircraft JAPAN: Knowhow to producing AS-IS : Producing 35% parts of B787 include important part - wings TO-BE : Kawasaki Heavy industries(KHI) to enter the large civil aircraft Mitsubishi heavy industries(MHI) to enter the regional market 33

34 Competing against New Entrants Bombardier and Embraer are also said to be new entrants. 34

35 Competing against New Entrants Canada: Bombardier AS-IS : 4 th largest commercial aircraft manufacturer (Yearly delivery) : Focused on business jets : Mainly 50 to 100-seat airplanes TO-BE : By 2013, planning to produce 149-seat airplane AS-IS : 3 rd largest commercial aircraft manufacture (Yearly delivery) : Commercial, military, and corporate aircraft : Focusing on 50 to 120-seat airplanes TO-BE : Possible to enter larger airplane market Brazil: Embraer Canadian and Brazilian aircraft manufacturers, who are now focusing on regional jets, are possible entrants into larger airplane market. 35

36 Competing against New Entrants Boeing competitive advantages over new competitors lie on its ability to read and satisfy customer needs and wants as well as brand equity and loyalty. CHINA JAPAN Canada: Bombardier Brazil: Embraer Brand equity and loyalty from product and service quality Product concept development based on customer knowledge 36

37 37 WHATS NEXT FOR BOEING AFTER THE 787?

38 38 MARKET FORECAST AND STRATEGIC DECISION WHATS NEXT FOR BOEING AFTER THE 787?

39 Market Forecast and Strategic Direction Market trend reports that there would be considerable needs for small-sized and efficient products from quality brands. Airlines, needs: Market Trend End Users needs: Considerable needs for small-sized and efficient aircrafts 39

40 Market Forecast and Strategic Direction Market competition map now and strategic direction for Boeing is as below. Design Range, (nmi) Long-haul aircraft No. of Seats Short &Medium-haul aircraft Airbus320 Boeing 767 Airbus330 Boeing 777 Boeing 747 Airbus 380 Bombardier, Embraer, Boeing737 Leverage customer knowledge and brand equity based. Produce efficient both in function and price based on system integration. Take first-movers advantage in the competition with airbus in this segment 40

41 Market Forecast and Strategic Direction Financial forecast says that entering new market shall pay off in 2 years when 200 orders are taken. + Breakeven point : 200 aircraft, 2 years : No. of orders is assumed on the basis of past data of current regional jet manufacturers. No. of orders for breakeven Breakeven Point 41

42 Thank you for listening.

43 APPENDIX 43

44 Appendix The 787 project : why Boeing start it? Product differentiation : How Boeing serve what customers want? Outsourcing 1 : outsourcing way Boeing did before 787 Outsourcing 2 : changed outsourcing way Boeing doing now Causes of delay : what cause delay in new outsourcing process? Core competencies : condition for core competencies and analyze Boeings the one Manufacture line : what Boeing and competitors produce Breakeven point 1 : basic info about breakeven point in regional jet market Breakeven point 2 : Info about how Boeings breakeven point calculated Things needed to more explain 44

45 The 787 Project To obtain market leadership, Boeing launched new aircraft model, 787. Changes in Industry Dynamics Industry Rivalry Supplier Power Buyer Power Threat of Entry Threat of Substitute High - Boeing vs. Airbus: Not much differentiation in terms of the competencies between the two players. Competiting on price and technology - Future competition expected with Canada, China, Japan and Brazil Midium-low -Forward integration threat by suppliers -Canada, Brazil, China… -Still, high entry barrier due to safety re gulations, high switching costs, high cap ital requirement, and high economics of scale Low -Buyer propensity to substitute (no alter native) - Price and performance (no alternative) Midium-low -Fewer manufactuere choices (Still chance to bargain with Airbus) High -High technology (difficult to duplicate) 45

46 Product differentiation FeatureValues to Airlines (Immediate Customers) Value to Passengers (End Customers) Composite material-Faster cruising speed, which enables city-pair nonstop flights - Fuel efficiency 20% (lighter material lowers operating cost) - Corrosion resistance (lower mainten ance cost) - Stronger components that require fe wer fasteners (lower manufacturing c ost) -Faster cruising speed, which enables city-pair nonstop flights - Higher humidity in the cabin air is all owed, which increases comfort level Modular design that allows for two typ es of engines (General electric Genx and Rolls-Royce Trent 1000) -Flexibility to respond to future circum stances (market demand) at a reduce d cost) - Simplicity in design allows for rapid engine changeover - Cost savings with cheaper and faste r engine changeover may be passed on to passengers Large and light sensitive windows- Lower operating costs due to less e ned for interior lighting - « Smart glass » window panels work like transition lens – controlling the a mount of light automatically – decreas ing glare and increasing comfort and convenience Redesigned chevron engine nozzle (s errated edges) - Reduction in community noise levels- Reduction in interior cabin decibel le vel Easy preventive maintenance- Boeing provides service so planes a re in operation for longer periods of ti me - Fewer delays due to mechanical pro blems With their detail customer knowledge ability, Boeing serve exactly what immediate and end customers want 46

47 Outsourcing 1 Before 787project, Boeing assembles all parts from thousands of suppliers 47

48 Outsourcing 2 After 787 project, Boeing assembles semi-manufactured from 1 st tier suppliers 48

49 Causes of Delay 49

50 Core competencies Condition for core competence - good for customer - can be adopted to other area - hard to imitate Analyze Boeings core competencies 1.System integration - with cost saving and innovation Boeing can bring better services - can be used to produce any other segments - it need big risk taking which we can lost technology advantage, no one can imitate easily 2. Detail Customer Knowledge - reason we can serve exactly what customers want - can be used to variety area wherever it is need to meet customers needs - It is not just one system or department, it begins from mindset. So it can not be imitated easily Condition for core competence and analyze the Boeings one on the basis of that 50

51 Manufacture line Line B / 400 ER ER ER ER ER LR ER Seats 85~ 96 97~ ~ ~ ~ ~224218~350245~ ~400365~550 Max. Range (nmi) ~ Line A320A330A Seats 150~ ~ ~ ~ 853 Max. Range (nmi) C Series CS100CS100 ER 100~ E-Jets E-170E ~ ~ 2400 BOEING AIRBUSBOMBARDIEREMBRAER Source:http://www.bombardier.comSource:http://www.embraercommercialjets.comSource:http://www.airbus.com/ Source:http://www.boeing.com Specification of aircrafts of 4 major players in the market 51

52 Appendix for Breakeven 1 Before Global collaboration After Global Collaboration Ratio B787 case$ 10 billion$ 6 billion0.6 CRJ700 case *1 $ 1.5 billion$ 0.9 billion *2 0.6 *1 : one of Bombardier aircraft, in here used as a standard *2 : we calculate it by using ratio In Regional Jet Market, breakeven point is usually 200 Proof : CRJ700s cost = 24m, price = 32m revenue = 8m 1.5 billion / 8 million = Resource : * Magazine aerospace America * Article managing new product development and supply chain risks : the Boeing 787 case Basic info about breakeven point of regional jet market 52

53 Appendix for Breakeven 2 Calculating Boeings breakeven point SizeNew airplaneValue Large Twin aisle Single aisle Regional jet Total Resource : Boeing home-page During 5 years after they received orders about B787, they got 850 orders. This is 48 percent of expected orders. Take the fact that regional jet market is four times smaller than twin aisle market into consideration, we assume that we will get 12% of all expected orders per years. Info about how Boeings breakeven point calculated 53


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