LEADING EDGE - LOGISTICS

Introduction(V)

• BOEING was incorporated in Seattle, Washington by William E. Boeing, on July 15, 1916, as "Pacific Aero Products Co.“

• International headquarters has been in Chicago, Illinois, since 2001.• Boeing is the largest global aircraft manufacturer by revenue, orders and

deliveries, and the largest aerospace and defense contractor in the world.• It employs 157,500 people in more than 70 countries• W. James McNerney, Jr., Chairman, President & CEO of Boeing since

2005.• Products :

Commercial airliners Military aircraft Munitions Space systems Computer Services

Boeing Assembly Plant :

• Seattle-Everett, Washington (747, 767, 777, and 787 Dreamliner)

• Long Beach, California (McDonnell Douglas aircraft assembly and testing)

• Seattle-Renton, Washington (737 & former 707, 727 & 757) • Philadelphia assembly site• Seattle-Boeing Field, Washington (Flight testing for Boeing

aircraft except McDonnell Douglas-designed aircraft) • North Charleston, South Carolina .• Wichita, Kansas. Facility manufactures parts and components

for all aircraft types

Boeing's Commercial Aircraft Supply ChainBoeing's supply chains across its business units are quite

complex and, more importantly, quite different from one another.

The operating model and supply chain network for Boeing commercial aircraft is explored here in five main areas. These are – Orders by Channel, – Order Fulfillment, – Facilities, – Customers and – Suppliers.

Suppliers : The large commercial aircraft supply chain is broken down

into three main components. These are aero structures, engines and avionics.

AERO STRUCTURES: Are structural assemblies that make-up the visible frame of

an aircraft Aluminum, titanium and, more recently composite materials. Aero structures do not include engines or avionics. These components have separate supply-chains and are integrated into the aircraft after the main components of the aircraft are assembled.

Contd…ENGINES There are four suppliers of engines for Boeing commercial

aircraft. These are Rolls-Royce, Pratt & Whitney, CFMI and General Electric. The industry practice for selecting engines for aircraft requires the aircraft manufacturer to certify with the regulating bodies .This selection process creates the grounds for competition among the engine manufacturers. Boeing has several engines certified for most of its aircrafts

Contd..

AVIONICS :

Boeing has substantial avionics manufacturing capabilities on the military side as well as the commercial side. There are also very strong suppliers in this sub-segment such as Honeywell, Rockwell Collins and Thales SA. Currently, Boeing supplies approximately 50% of the avionics on its commercial aircraft. The remaining 50% is provided by customer selected suppliers.

The Make vs. Buy Decision and Supplier Selection :• Five main factors: core competencies, costs, capital investment, labor

relations and market access• Decisions are made on aero structures and avionics as Boeing does not

possess engine manufacturing capabilities. Boeing has been pursuing a two-prong consolidation policy with regards to its 2nd and 3 rd tier partners on the supply side.

• It is de-leveraging itself from component assembly operations and hence reducing the total number of parts that is assembled in its facilities.

• It is reducing the number of suppliers and selecting more capable ones that can deliver more complex products to the assembly site.

• Lean manufacturing practices serve as selection criteria for supplier selection. Those who can transform their operation to cater to Boeing's lean operational flexibility and efficiency have a bigger chance of continuing their relationship with the manufacturer.

DEMAND PLANNING & FORECASTING• Forecasting down the supply chain is also important for Boeing. For most

suppliers that deal directly with raw materials suppliers, Boeing tries to produce accurate forecasts that would enable the component suppliers to be more informative to the raw materials suppliers.7 3 This in turn, reduces order lead time in an area where bottlenecks occur as all manufacturing industries compete with the aircraft industry for resources.

CUSTOMER MANAGEMENT• Boeing is divided into 4 categories large commercial airlines, national

airlines, large low-cost airlines, and small to medium airlines.• Each segment has varying degree of negotiating power against Boeing in

price, delivery flexibility, maintenance terms and some other airlines specific items. The large airlines as well as national airlines are powerful enough to influence Boeing's design development for future aircraft. Negotiating power for an airline in all fields decreases as the size of its fleet decreases

AFTER-MARKET LOGISTICS & SUPPORT• The aircraft aftermarket logistics support is an area with very serious

competitive and operational implications for Boeing. This segment is forecasted to have revenues that are 1.5 to 2 times that of the aircraft manufacturing industry in the next 15 years. This ratio will increase as the installed base of aircraft increases with healthy trends in air travel and air cargo transportation.

• This area is treated as a separate business unit within the commercial airplanes business unit. The aircraft that Boeing sells have a maintenance warranty that covers maintenance costs several years after purchase. Boeing has 9 service centers around the world with 3 of them offering avionics maintenance services

• A large majority of Boeing's customers' needs are met by either in-house maintenance facilities or through maintenance and repair organizations that offer third-party services. These facilities are certified by the related civil aviation organizations for maintenance service capabilities for each aircraft type.

Supply-Side Business Processes -- Defining Lean Through Lean Enterprise Self-Assessment Tool (LESAT)

• Is a tool developed by Boeing to conduct a self-assessment of the degree of progress they have made in evolving lean enterprises.

• Definition of the Lean Transformation Leadership Process reflects the strategic scope of lean processes and practices: "Develop and deploy lean implementation plans throughout the enterprise leading to – (1) Long-term sustainability, – (2) Acquiring competitive advantage and – (3) Satisfaction of stakeholders.”

(V)

Boeing Criteria for 3PL :• Boeing's top priority for selecting a 3PL in its Lean environment was

getting its warehousing off site.

• Boeing's corporate Lean initiative emphasizes & focuses on what it does best—final assembly, test and integration—and outsources other areas to experts.

• Boeing works with 9-12 "core" partners.

• A formal certification process that all 3PLs go through before being considered by Boeing.

• Boeing's contract say no suppliers could operate in the union-run facility.

• 3PL locate its facility within 45 miles of Boeing's facility and within 20 miles of a hub airport.

• Another criterion in evaluating and selecting a 3PL was the provider's ability to customize its solutions for Boeing's needs.

DIGITAL MODELING :• In 1990, Boeing stunned the design world with the launch of its

Boeing 7E7 project. • Using CATIA V4 from Dassault Systemes the company's

engineering group modeled the 777's parts as 3D solids, simulated the geometry of the airplane's design on a computer, and thereby avoided the time-consuming and costly investment in physical mockups.

• The final assembly line included more than 10,000 parts. • Boeing reports that using digital 3D models in the design phase

helped reduce the number of changes, errors, and rework by more than 50%.

• Boeing in this bold digital project garnered the top manufacturing prize in 1995 in the annual Computerworld Smithsonian Awards.

Contd..

• Boeing revolutionized the way it works with its partners - 7E7 Project• Instead of some 10,000 items being assembled by Boeing at project's

end, Boeing assemble only 13 to 17 units at the end. • Many of these subassemblies is wholly designed by partners hailing

from various parts of the United States and from around the world.– Vertical fin - Boeing's Frederickson, Washington, facilities;– Fixed and movable leading edges of the wings- Tulsa, Oklahoma;– Flight deck and forward fuselage section - Wichita, Kansas; – Movable trailing edges - facilities in Australia; – Wing-to-body fairing - Winnipeg, Canada.

• Boeing supply 35% of the structure of the aircraft, rest different parts come from other areas within the United States.

Contd..

• Partners working on 7E7 structure include Japan's Fuji Heavy Industries, Kawasaki Heavy Industries, and Mitsubishi Heavy Industries. Vought Aircraft Industries of Dallas and Alenia Aeronautica of Italy are also involved.

• Boeing and Dassault Systemes have created the GCE (Global Collaborative Environment).

• Through the GCE, all of the partners on the project use the same set of tools, all of the appropriate project data reside in the GCE.

Software Use By Boeing : Software for aircraft design and simulation was all internally

developed.

Boeing developed FlyThru, a high-performance CAD visualization system. Used to "preassemble" the Boeing Help engineers in determine the geometric relationships and mechanical

interferences between parts. Based on digital mockup

Boeing developed Easy5 a set of engineering analysis software tools used to model, simulate, and analyze dynamic systems.

Voxmap PoinShell evaluates part proximity and part interferences. detected over 10,000 part interferences in the initial.

Contd.. Boeing perform noise protection modeling & Hydraulics analysis

by using commercially available software.

Structural analysis - Elfini (finite element analysis  system) from Dassault Systemes and Nastran

Catia 5 & BCSLIB-EXT, a utility for engineers to view up to 500 parts at a time and electronically assemble major airplane sections.

EPIC (electronic preassembly integration on CATIA) tests the fit of components.

Benefits of Digital Assembly :

Elimination of more than 3,000 assembly interfaces, without any physical prototyping

90% reduction in engineering change requests (6,000 to 600)

50% reduction in cycle time for engineering change request

90% reduction in material rework

50% improvement in assembly tolerances for the fuselage

– The fuselage is 200-ft long. Alignment was off by 0.023 inch, in previous aircraft the alignment is to within a half inch of each other.

– The wing tip was oil by 0.001 in. By comparison, the wing tip on previous one was 4.0 in.

Boeing Tracks Parts with RFID Tags

• In 2004 Boeing and Airbus announced - Working together to issue the RFID (radio frequency identification) requirements to their suppliers.

• RFID, a technology capable of tracking a part from manufacture to installation and beyond.

• Issue the RFID (radio frequency identification) for about 6 million parts, to suppliers for easy tracking.

• Boeing selected RFID to track 1,700 to 2,000 mission-critical parts particularly expensive or require frequent maintenance and replacement.

Contd…

• Information stored on the RFID tag enhance parts traceability and reduce cycle time to solve in-service problems by improving the accuracy of information exchanged between customers and suppliers

• RFID tags :– Easier to track and repair aircraft parts, – Reduce data entry errors – The risk that suspected unapproved parts (which range from parts that

simply have become separated from their documentation to a rare truly counterfeit part) make it onto an aircraft.

BOEING 787: GLOBAL SUPPLY CHAIN MANAGEMENT

• New Boeing super-efficient jetliner -787 Dreamliner.

– Uses 20 percent less fuel per passenger

– Designed for the environment with lower emissions

• Boeing established a core team to design key components of the airplane. General Electric and Rolls-Royce to develop engines -8 percent (increased fuel efficiency).

• New Dreamliner - Completely new manufacturing model - majority fabricated by global partners – delivered as subassemblies – Boeing assemble and test Everett, Washington.

• More than 100 partners across 12 countries on 5 continents are involved in the manufacturing and delivery process.

• 11 major subassemblies will be delivered to Everett, WA for final assembly

Contd..

• Challenge: Manage a multitier supply chain for the new 787 Dreamliner.

• Solution: Exostar Supply Chain Management Solution, powered by E2Open software.

• Results: Comprehensive management of supply chain processes—from outgoing orders and payment of invoices to suppliers—and the ability to track activities at all levels of a multitier supply chain. Potential problem alerts are sent to top-tier suppliers, and to Boeing when necessary.

• Benefits: Business greatly reduces opportunity for error by minimizing inventory and handling in the supply chain, which allows us to offer a better final product

• E2open software, is used to manage the complete order lifecycle and returns process across the multiple partner tiers.

• Allow Boeing and its partners to collaborate on planning schedules, issue purchase orders, track purchase order changes, exchange shipping information, manage returns, track shipments, and to manage inventory consumption across the multiple tiers involved in the manufacturing process.

• The system monitors events and process exceptions that occur between partners and evaluates the impacts of these events against the master schedule using synchronized time-sequenced information.

Customer Value Chain :• From state-of-the-art parts distribution center in Seattle & the

award-winning Boeing PART Page, customers have direct access to Boeing’s extensive information and ordering system.

• Boeing’s PART Page is the most comprehensive web-based ordering system - incorporated customer suggestions- easier to place an order or track its status.

• The site provides up-to-the-minute information on millions of parts, including price and availability.

• If Customer prefer the personal touch, representatives are available around the clock.

• Advanced ordering system helps next-day shipping, helps lower customer inventory holding costs.

Contd..• Boeing, help customer develop a comprehensive spare parts list suited

to their aircraft.

• Boeing recommend a list of replaceable spare parts based on the airplane’s specific requirements.

• Develop a customized provisioning schedule so that customer receive parts just as their maintenance plan requires them.

• Boeing help reduce inventory holding costs without jeopardizing flight and maintenance schedules.

• Work with customer to develop whatever level of materials management they want.

• Global Airline Inventory NetworkSM —GAIN — supply a wide range of expendable parts directly to the maintenance operations of major customers, which reduces their inventory holding costs.

Boeing Honors Suppliers:• 13 companies from 3 countries were honored

with Boeing's premier supplier award for their commitment to excellence and customer satisfaction.

• The 13 award winning Boeing Suppliers of the Year were selected from a field of more than 10,900 Boeing suppliers in more than 66 countries .

• The winning suppliers in each category were chosen on statistical measurements of quality, on-time delivery, post-delivery support and cost during the 12-month period. They also were evaluated on their ability to anticipate and respond to changing customer requirements.

Thank you