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THE FUTURE OF FLIGHT April 17, 2010 & CONSULTING Nick Martin Celine Junke Margeaux Girardin Daniel Schacter.

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Presentation on theme: "THE FUTURE OF FLIGHT April 17, 2010 & CONSULTING Nick Martin Celine Junke Margeaux Girardin Daniel Schacter."— Presentation transcript:

1 THE FUTURE OF FLIGHT April 17, 2010 & CONSULTING Nick Martin Celine Junke Margeaux Girardin Daniel Schacter

2 AGENDA Current Situation Supply Chain Opportunities Future Competitive Advantage Conclusion

3 BRIDGING THE GAP APR 2004 Announced the Launch of 787 SEP 2005 Firm Configuration Completed JUN 2006 Major Assembly Began JAN 2008 Revision OCT 2007 Revision APR 2008 Revision END OF 2010 First 787 delivery expected DEC 2009 851 Confirmed Orders First Flight 2000 33,000 suppliers 2010 12,000 suppliers Current SituationSupply ChainFuture AdvantageConclusion

4 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 SituationSupply ChainFuture AdvantageConclusion

5 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.


7 SUPPLY CHAIN STRUCTURE PARTNERS CUSTOMERSBOEINGSUPPLIERS Build subassemblies Piece together subassemblies Receive completed plane Manufacture components Current SituationSupply ChainFuture AdvantageConclusion

8 SUPPLY CHAIN STRUCTURE PARTNERS CUSTOMERSBOEINGSUPPLIERS One supplier can halt the supply chain Kawasaki Wheel Well Brake PadsLifting Motors Landing Gear Suspension Current SituationSupply ChainFuture AdvantageConclusion

9 SUPPLY CHAIN STRUCTURE PARTNERS CUSTOMERSBOEINGSUPPLIERS Subassemblies may not arrive completed Everett Boeing Plant Kawasaki Wheel Well Alenia Center Fuselage Mitsubishi Wing Current SituationSupply ChainFuture AdvantageConclusion

10 SUPPLY CHAIN STRUCTURE PARTNERS CUSTOMERSBOEINGSUPPLIERS Customers may lose confidence due to 787 delays 2009: Loss of 59 orders 2010: $6.9B in penalties Current SituationSupply ChainFuture AdvantageConclusion

11 3 PRONG SUPPLIER STRATEGY 1 Implement a solution 2 3 Find the problem Evaluate the situation Current SituationSupply ChainFuture AdvantageConclusion

12 RFID CONSULTING Enforce supplier requirement Access real time information Adapt to production delays Utilize 2 nd supplier if needed Proactively react to delays Improve supplier’s operations Capitalize on Boeing knowledge IMPROVED INFORMED AUDITING INSPECTIONS Maintain yearly audit Perform informed audit SUPPLIER CONTROL Current SituationSupply ChainFuture AdvantageConclusion

13 RFID AUDITING Screws Mounts Bolts Frame Motors Glazing Sealant Fuji Mitsubishi Spirit BOEING Wing Box Wing Assembly Forward Fuselage PARTNERS SUPPLIERS Supply chain becomes 20% more efficient Optimized supply chain means savings on delay penalties Current SituationSupply ChainFuture AdvantageConclusion

14 RFID Financial Pessimistic (3%)Optimistic (5%) Savings $ 1,428M $ 2,380M Total Cost $ 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 Costs Parts per plane (767)3.1M cost per RFID Tag $0.50 Cost per plane $1.6M Planes Delivered432 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

15 DELAYS & PENALTIES Total Penalty: $6.9B 787s Delivered Current SituationSupply ChainFuture AdvantageConclusion

16 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 SituationSupply ChainFuture AdvantageConclusion

17 CUSTOMER RELATIONS What Maintain Transparency Highlight Positive Milestones Communicate Innovative Design Features Increase Customer Relation Channels Increase Customer Relation Channels Account Manager Communication RSS Feed on Customer Portal How Current SituationSupply ChainFuture AdvantageConclusion Online Sources

18 20102011 2015 Train workforce Establish workforce 20122013 SUPPLY CHAIN IMPLEMENTATION Deploy consultancy services 2014 IBM consultation Local implementation within Boeing Assist supplier RFID implementation IBM consultation Consulting RFID Current SituationSupply ChainFuture AdvantageConclusion


20 FUTURE TRENDS 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 SituationSupply ChainFuture AdvantageConclusion *Source: Boeing, 2010 *

21 FUTURE OPPORTUNITIES *Source: Boeing New Airplanes: 7,690 Market Value: $680B 3.2% growth* 60% Short Haul Replacement Strategy New Airplanes: 7,330 Market Value: $800B 4.1% growth* 94% Short Haul Replacement Strategy Current SituationSupply ChainFuture AdvantageConclusion New Airplanes: 8,960 Market Value: $1,130B 7.1% growth* 67% Short Haul Expansion Strategy

22 CREATING AN ADVANTAGE CREATE COMPETITIVE ADVANTAGE Supply Chain LEVERAGE CURRENT CORE COMPETENCIES 1.High end design 2.Engineering 3.Systems integration ADAPT FOR THE FUTURE 1.Capitalize on supply chain 2.Embrace future trends Current SituationSupply ChainFuture AdvantageConclusion

23 DIVISION ALTERNATIVES Cargo Commercial Division to focus on going forward Airbus A400M disaster - $11B over budget Airbus legal disputes over government contracts Military Current SituationSupply ChainFuture AdvantageConclusion

24 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 SituationSupply ChainFuture AdvantageConclusion

25 DIVISION ALTERNATIVES Commercial Division to focus on going forward Current SituationSupply ChainFuture AdvantageConclusion

26 PROJECT DECISION MATRIX Current SituationSupply ChainFuture AdvantageConclusion

27 TIME FOR A CHANGE 26% drop in 737 annual sales since 2007 737 NG Debuts Current SituationSupply ChainFuture AdvantageConclusion

28 THE NEW 737 GREEN LINER Current SituationSupply ChainFuture AdvantageConclusion Leverage the 787 experience in advanced materials Capitalize on future growth in short-haul flights Leverage pre-existing customer infrastructure 737 Next Generation GREEN LINER

29 FIRST MOVER ADVANTAGE NEW 737 787 A380 A400M AIRBUSAIRBUS A350 BOEINGBOEING Airbus will not be able to respond ? OCT 2007 DEC 2010 2016 2013 $33B R&D $21B R&D $20B R&D $10B R&D $1 = €.74 Current SituationSupply ChainFuture AdvantageConclusion

30 FINANCES OptimisticExpectedPessimistic Total Market Value $1410B Expected Market Share 44%30%20% Firm Order Value$620B$423B$282B Variance $383B $141B = Air Insights forecast for Single Aisle market share over next 20 years due to increased competition and possible upgrades to 737 Current SituationSupply ChainFuture AdvantageConclusion


32 . Improve information flow throughout supply chain Capitalize on future trends when developing the new 737 Greenliner Regain leadership position in commercial aviation SUCCESS Current SituationSupply ChainFuture AdvantageConclusion



35 EXPECTED ORDER SCHEDULE 20082009201020112012201320142015 37 365775 10131132 8975164 8975164 Revised Delivery004065108120164 Original Delivery3775132164 Months Delayed 9241560267632522700 13812 Additional Information: you will be 2.4 years behind schedule 13812 X 0.5M = 6.9B

36 10 General Categories of Suppliers Aerospace supportMajor Structure fuselage Avionics/Avionics componentsNon production goods and services Common aerospace commoditiesPropulsion systems Electrical, hydraulic and mechanical systems Purchased outside production InteriorsTechnology

37 BOEING PROCUREMENT POLICY Right quality Right quantity Right time Right price Right sources

38 SUPPLIER REQUIREMENTS Understand benefit of solutions their products provideShare commitment to performance: cost, quality, deliveryMaintain financial healthParticipate in knowledge share CREATE ADDITIONAL VALUE BY FOCUSING ON YOUR CORE COMPETENCIES

39 General Provisions Revised 2009 Special Provisions Revised 2009 Boeing Commercial Airlines Revised 2009 Demanding contract but not enforced due to communication lag Able to improve auditing with RFID amendment in contracts CONTRACT ENFORCEMENT

40 SUPPLIER EXPECTATIONS Ability Capacity Integrity Financial Status Geographical location Performance Reliability Delivery Customer-Supplier relations

41 BOEING & IT E-enabled tools Information sharing Exchanging technologies Work better with suppliers Exostar Product Lifecycle Management (PLM)

42 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

43 CHALLENGES FACING AIRLINES Financing issues High fuel costs Unions Fixed costs of planes Price wars Low cost airline

44 SUPPLIER REWARDS 12,000 active supplier 2009: 14 “supplier of the year” “Supplier of the year award” in 15 categories “Boeing performance excellence award”

45 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 ( Total cost of consulting: $47.9M USD % of Delay penalties: 47.9M/6.9B= 0.7%

46 JUNE 2010DEC 2010 JUNE 2012 Require new RFID training programs Inform suppliers of RFID implementation JUNE 2011DEC 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

47 JUNE 2012JUNE 2013 FUTURE JUNE 2014JUNE 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

48 JUNE 2010DEC 2010 JUNE 2012 Hire industry experts to refresh consultants skills Establish workforce JUNE 2011DEC 2011 CONSULTING IMPLEMENTATION TIMING Inform suppliers of consultant services Deploy consultancy services

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