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The Dreamliner :for Boeing’s New Future. Nahyun , An Jiyoon , Kang Soohwan , Kim Margeum , Kim. Agenda. 787 Project Business Objectives Boeing 787 Dreamliner. 787 Project Problems & Solutions Problems and Reactions

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slide1

The Dreamliner

:for Boeing’s New Future

Nahyun, An Jiyoon, Kang Soohwan, Kim Margeum, Kim

slide2

Agenda

  • 787 Project
  • Business Objectives
  • Boeing 787 Dreamliner
  • 787 Project Problems & Solutions
  • Problems and Reactions
  • Lessons Learned from 787 Project
  • New Challenges
  • Competing against Airbus
  • Competing against New Entrants
  • What’s Next for Boeing after the 787?
  • Market Forecast and Strategic Direction
787 project1
787 Project

BUSINESS OBJECTIVES

business objective
Business Objective

Our objective here is to:

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

787 project2
787 Project

BOEING 787 DREAMLINER

boeing 787 dreamliner
Boeing 787 Dreamliner

By launching 787, Boeing aimed at obtaining market leadership under changing

Environment.

Challenges for aircraft manufacturers

Change in the airline industry

Cutting the price?

Change the supply chain

World airline fleets to double

Improve flight operational efficiency

The number of airline companies increase

→ Fierce competition

Creating new value?

Improve end-user comfort

OUTSOURCING

Needs of a differentiated aircrafts

PRODUCT INNOVATION

boeing 787 dreamliner1
Boeing 787 Dreamliner

Boeing’s role changed to serve as a master planner leveraging its knowhow in order to respond the market request.

OUTSOURCING

PRODUCT INNOVATION

Change in OUR ROLE:

Assembly Integrator

Master Planner

INNOVATION THROUGH

GLOBAL COLLABORATION

  • How to Implement:
  • Managing GLOBAL SCM
  • Leveraging Customer Knowledge
boeing 787 dreamliner2
Boeing 787 Dreamliner

Boeing’s supply chain has been different with 787 project as the starting point.

BEFORE 787

AFTER 787

Outsourced 35~50% of Process

Outsourced 70% of Process

Parts

Parts

Sections

Sections

Parts

Customers

Customers

Parts

Sections

30days for final assembly

3days for final

assembly

Parts

Parts

*Major Role

Tier2

: Producing parts

for Tier1

Tier1

: Developing and

producing sections

Boeing as a Master Planner

:Coordinating sections snap-together

*Major Role

Boeing as a Final Manufacturer

:Assembling all the parts

Thousands of Suppliers

: Build to detailed print by Boeing

*Relationship

Strategic Partnership :Risk-sharing Contract based

*Relationship

Traditional Supplier Relationship :Fixed-Price Contract based

787 project problems solutions
787 Project problems & solutions

PROBLEMS AND REACTIONS

problems and solutions
Problems and Solutions

Boeing suffered from delays in production.

DELAYS

in production

due to problems in

Global Supply Chain

First Flight

Apr.-June-09

Aug-07

Mar-08

June-08

Oct.-Dec.-08

Dec-09

Succeeded

Original TImeline

Repeated delays

First Delivery

May-08

Nov.-Dec.-08

Left open

Jul.-Sep.-09

Jan.-Mar.-10

Nov.-Dec.-10

(expected)

problems and solutions1
Problems and Solutions

Categories addressed below are major reasons for delayed schedule.

DELAYS

PROCESS

SUPPORTING

SYSTEM

CUSTOMER

DISTRUST

PARTNERS

BOEINGINTERNALLEADERSHIP

problems and solutions2
Problems and Solutions

Process System

DELAYS

PROCESS

SUPPORTING

SYSTEM

CUSTOMER

DISTRUST

PROCESS

SUPPORTING

SYSTEM

PARTNERS

BOEINGINTERNALLEADERSHIP

problems and solutions3
Problems and Solutions

Causes, actions taken and further suggestions related to process supporting system are shown below.

Cause

Actions Taken

Further

Suggestions

  • Improvement of EXOSTAR
  • Adoption of RFID

PROCESS

SUPPORTING

SYSTEM

  • Inefficiency of Information System
  • Risk Sharing System
  • - Financial Contract - Moral Hazard
  • Financial Aid (Spirit)
  • Introduction of Incentive System
problems and solutions4
Problems and Solutions

Partners

DELAYS

PROCESS

SUPPORTING

SYSTEM

CUSTOMER

DISTRUST

PARTNERS

PARTNERS

BOEINGINTERNALLEADERSHIP

problems and solutions5
Problems and Solutions

Causes, actions taken and further suggestions related to partners are shown below.

Cause

Actions Taken

Further

Suggestions

  • Heightened Level of Control
  • - Acquired Vought
  • - Sent Boeing engineers to partners’ sites
  • Involvement in 2nd and 3rd Tier Selection
  • Part Shortage
  • - 1st tier’s lack of
  • capability
  • - 1st tier partners’
  • arbitrary contracts with unqualified 2nd and 3rd tiers

PARTNERS

YET, Benefits: Qualified partners, Network with potential buyers & Tech learning effect

  • Improvement of Information System
  • - Overcoming Language problem
  • (ex. Codes)
  • - Education of IS and Sharing Boeing Global SCM culture
  • Inefficiency in Outsourcing Overseas
  • - Problems in comm.
  • (Language & Culture)
problems and solutions6
Problems and Solutions

Causes, actions taken and further suggestions related to partners are shown below.

Cause

Actions Taken

Further

Suggestions

Does Boeing have the right partners?

  • Heightened Level of Control
  • - Acquired Vought
  • - Sent Boeing engineers to partners’ sites
  • Involvement in 2nd and 3rd Tier Selection
  • Part Shortage
  • - 1st tier’s lack of
  • capability
  • - 1st tier partners’
  • arbitrary contracts with unqualified 2nd and 3rd tiers

No

PARTNERS

: Lack of Capabilities and Ownership

YET, Benefits: Qualified partners, Network with potential buyers & Tech learning effect

  • Improvement of Information System
  • - Overcoming Language problem
  • (ex. Codes)
  • - Education of IS and Sharing Boeing Global SCM culture

Has too much been outsourced overseas?

  • Inefficiency in Outsourcing Overseas
  • - Problems in comm.
  • (Language & Culture)

No

: Adjustable Inefficiency vs. Huge Benefits

problems and solutions7
Problems and Solutions

Boeing Internal Leadership

DELAYS

PROCESS

SUPPORTING

SYSTEM

CUSTOMER

DISTRUST

BOEINGINTERNALLEADERSHIP

PARTNERS

BOEINGINTERNALLEADERSHIP

problems and solutions8
Problems and Solutions

Causes, actions taken and further suggestions related to Boeing internal leadership are shown below.

Cause

Actions Taken

Further

Suggestions

  • Appointed Pat Shanahan
  • Adjusted Product Features
  • Feasible Timeline for Next Product Development
  • Difficulties in Timeline Management
  • - Risk in Global SCM
  • - New technology

BOEINGINTERNALLEADERSHIP

  • Increased Wage
  • Drew a limit in Degree of Outsourcing
  • Convincing Employees of the Needs for Outsourcing
  • Delving into a Win-Win Solution
  • Labor Problem - Job security issue
problems and solutions9
Problems and Solutions

Customers’ dissatisfaction and distrust would be resolved by executing followings.

DELAYS

PROCESS

SUPPORTING

SYSTEM

CUSTOMER

DISTRUST

  • Given that
  • No further delays promised,
  • Penalty paid, and
  • Spare airplane during delay provided,
  • Actions below would be of helpto convince customers:

PARTNERS

BOEINGINTERNALLEADERSHIP

Sharing Information on System Improvement

Visibility: Real-time Tracking System

787 project problems solutions1
787 Project problems & solutions

LESSONS LEARNED FROM 787 PROJECT

lessons learned from 787 project
Lessons Learned from 787 Project

We could make it obvious what are our core competencies.

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

CUSTOMER KNOWLEDGE

SYSTEM

INTEGRATION

CORE

COMPETENCIES

new challenges1
NEW CHALLENGES

COMPETING AGAINST AIRBUS

competition
Competition

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

AIRBUS

CHINA

JAPAN

BOMBARDIER

EMBRAER

competing against airbus
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.

AIRBUS

CHINA

JAPAN

BOMBARDIER

EMBRAER

  • A direct competitor of 787 (Same segment)
  • Stretched outsourcing
competing against airbus1
Competing against AIRBUS

From A350, Airbus has assigned more roles to its strategic partners while increasing the number of global outsourcing partners.

AIRBUS: Supply Chain

AIRBUS’ Factories in

4 European Countries

AIRBUS’ Factories in

4 European Countries

Less Reliance on In-house Production

More Outsourcing to Strategic Partners

Strategic Partners

Strategic Partners

2nd Tier

Final Assembly lines

In France and Germany and China

Final Assembly lines

In France and Germany

2nd Tier

competing against airbus2
Competing against AIRBUS

Boeing’ competitive advantages over Airbus would be process efficiency.

VS.

SYSTEM

INTEGRATION

  • Process Efficiency obtained through
  • Boeing’s global collaboration model

CUSTOMER KNOWLEDGE

new challenges2
NEW CHALLENGES

COMPETING AGAINST NEW ENTRANTS

competing against new entrants
Competing against New Entrants

China and Japan are said to be new entrants.

AIRBUS

CHINA

JAPAN

BOMBARDIER

EMBRAER

competing against new entrants1
Competing against New Entrants

China and Japan emerged as future competitors due to the global collaboration strategy of Boeing and willingness to forward integration.

  • Global Collaboration Strategy of Boeing
  • Willingness to Forward Integration
  • - Experiencelearned from outsourcing partnership
  • - Openstructureenabled by Boeing’s global collaboration model
      • Any parts and components are now available on market: All you need to do is assembly.
  • China: Governmentdriven
  • Japan
    • KawasakiHeavy Industries(KHI)
    • MitsubishiHeavy Industries(MHI)
competing against new entrants2
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 C919- 150-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

competing against new entrants3
Competing against New Entrants

Bombardier and Embraer are also said to be new entrants.

AIRBUS

CHINA

JAPAN

BOMBARDIER

EMBRAER

competing against new entrants4
Competing against New Entrants

Canadian and Brazilian aircraft manufacturers, who are now focusing on regional jets, are possible entrants into larger airplane market.

Canada: Bombardier

AS-IS

: 4th 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

Brazil: Embraer

AS-IS

: 3rd 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

competing against new entrants5
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

Canada: Bombardier

JAPAN

VS.

Brazil: Embraer

  • Brand equity and loyalty
  • from product and service quality
  • Product concept development
  • based on customer knowledge

CUSTOMER KNOWLEDGE

SYSTEM

INTEGRATION

what s next for boeing after the 7871
What’s NEXT for boeing after the 787?

MARKET FORECAST AND STRATEGIC DECISION

market forecast and strategic direction
Market Forecast and Strategic Direction

Market trend reports that there would be considerable needs for small-sized and efficient products from quality brands.

Market Trend

End Users’ needs:

Point-to-point travel

Airlines’, needs:

Efficient operation

Considerable needs for

small-sized and efficient aircrafts

market forecast and strategic direction1
Market Forecast and Strategic Direction

Market competition map now and strategic direction for Boeing is as below.

No. of Seats

Airbus 380

550

450

350

Boeing 747

Boeing 777

  • Leverage customer knowledge and brand equity based.
  • Produce efficient both in function and price based on system integration.
  • Take first-mover’s advantage in the competition with airbus in this segment

Airbus330

250

150

50

Airbus320

Boeing 767

Bombardier,

Embraer,

Boeing737

Design Range, (nmi)

1000 2000 3000 4000 5000 6000 7000 8000 9000

Short &Medium-haul aircraft

Long-haul aircraft

market forecast and strategic direction2
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.

Breakeven Point

No. of orders for breakeven

appendix1
Appendix

Things needed to more explain

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 Boeing’s 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 Boeing’s breakeven point calculated

the 787 project
The 787 Project

To obtain market leadership, Boeing launched new aircraft model, 787.

  • Changes in Industry Dynamics
  • Midium-low
  • Fewermanufactuerechoices
  • (Still chance to bargainwith Airbus)
  • High
  • High technology (difficult to duplicate)

Buyer

Power

Supplier

Power

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

Industry

Rivalry

  • Low
  • Buyerpropensity to substitute(no alternative)
  • Price and performance (no alternative)

Threat of

Entry

Threat of

Substitute

  • Midium-low
  • Forwardintegrationthreat by suppliers
  • Canada, Brazil, China…
  • Still, high entry barrier due to safetyregulations, highswitchingcosts, high capital requirement, and higheconomics of scale
product differentiation
Product differentiation

With their detail customer knowledge ability, Boeing serve exactly what immediate and end customers want

outsourcing 1
Outsourcing 1

Before 787project, Boeing assembles all ‘parts’ from thousands of suppliers

outsourcing 2
Outsourcing 2

After 787 project, Boeing assembles semi-manufactured from 1sttier suppliers

core competencies
Core competencies

Condition for core competence and analyze the Boeing’s one on the basis of that

Condition for core competence

- good for customer

- can be adopted to other area

- hard to imitate

Analyze Boeing’s core competencies

  • 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 customer’s needs

- It is not just one system or department, it begins from mindset. So it can not be imitated easily

manufacture line
Manufacture line

Specification of aircrafts of 4 major players in the market

BOEING

Source:http://www.boeing.com

AIRBUS

BOMBARDIER

EMBRAER

Source:http://www.airbus.com/

Source:http://www.bombardier.com

Source:http://www.embraercommercialjets.com

appendix for breakeven 1
Appendix for Breakeven 1

Basic info about breakeven point of regional jet market

<Development cost>

*1 : one of Bombardier aircraft, in here used as a standard

*2 : we calculate it by using ratio

Resource : * Magazine aerospace America 4. 2004

* Article ‘managing new product development and supply chain risks : the Boeing 787 case

<Breakeven point>

In Regional Jet Market, breakeven point is usually 200

Proof : CRJ700’s cost = 24m, price = 32mrevenue = 8m

1.5 billion / 8 million = 187.5

appendix for breakeven 2
Appendix for Breakeven 2

Info about how Boeing’s breakeven point calculated

Calculating Boeing’s breakeven point

<expected demand by size 2009 to 2028>

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.