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Boeing Dreamliner :. Managing New Product Development and Supply Chain Risks. Agenda. Supply Chain Transformation Process 1.1 Vision 1.2 Transformation 1.3 Problem Diagnosis 1.4 Supply Chain Redesign Deriving Competitive Advantage 2.1 Porter Market Analysis

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boeing dreamliner

Boeing Dreamliner:

Managing New Product Development andSupply Chain Risks

agenda

Agenda

Supply Chain Transformation Process

1.1 Vision

1.2 Transformation

1.3 Problem Diagnosis

1.4 Supply Chain Redesign

DerivingCompetitive Advantage

2.1 Porter Market Analysis

2.2 Model

2.3 MaintainingCompetitive Advantage

agenda3

Agenda

Supply Chain Transformation Process

1.1 Vision

1.2 Transformation

1.3 Problem Diagnosis

1.4 Supply Chain Redesign

DerivingCompetitive Advantage

2.1 Porter Market Analysis

2.2 Model

2.3 MaintainingCompetitive Advantage

vision 2016

Vision 2016

Change Boeing from a wrench-turningmanufacturerto a masterplanner, marketerandsnap-togetherassemblerofhigh-techairplanes.

Created bevor the Boeing-McDonnell Merger in 1997

transformation

Transformation

Vision

Means

Suppliers

ExpectedBenefits

Outsourcing

Reducefinancialinvestment

IncreaseSupplierResponsibilities

Constructionofentireparts

Reducedevelopment time

FromManufacturertocoordinator

Strategic Partnership

Reductionoffinancialrisk

Technological Innovation

IncreaseProductionCapacity

Air Transportation

Exploitsuppliers‘ knowledge

problem diagnosis8

Problem Diagnosis

Invisible to Boeing

problem diagnosis9

Problem Diagnosis

Delay causedbytheencounteredproblemscosts Boeing penaltiesof $500m per monthofdelay

supply chain redesign implemented

Supply ChainRedesign: Implemented

Boeing tookthefollowingmeasurestoadresstheproblemsandrisksencountered:

Redrawareaofresponsibilities

More control

Supplychainexpertise

Endedthestrike, withdrawalofcharges

supply chain redesign recommendations

Supply Chain Redesign: Recommendations

Ourrecommendation:ProactiveRiskReduction/Elimination

Risks

ProactiveMeasures

supply chain redesign

Supply Chain Redesign

Noaccurateuseofplanningsystem:

Little knowledgeaboutprogressofsuppliers (esp. Tier-2) andlatedetectionofdelays

Supply Chain

supply chain redesign13

Supply Chain Redesign

Overburdenedorinexperiencedsuppliers

 delays

Supplier

supply chain redesign14

Supply Chain Redesign

Tendencyforsupplierstodeliverlate in order toavoid unfair punishment

Supplier

slide16

Labor Strikes

$100m/day

Labor Relationship Management

slide17

Loss ofcustomersʹ trust

+

ContractualPenalties

Customer Relationship Management

agenda18

Agenda

Supply Chain Transformation Process

1.1 Vision

1.2 Transformation

1.3 Problem Diagnosis

1.4 Supply Chain Redesign

DerivingCompetitive Advantage

2.1 Porter Market Analysis

2.2 Model

2.3 MaintainingCompetitive Advantage

industry overview20

IndustryOverview

Competition

Aerospace manufacturingindustryishighlyconcentrated

Top competitors:

  • EADS (anditssubsidiary Airbus)
  • Lockheed Martin
  • Northrop Grumman
industry overview21

IndustryOverview

Substitutes

Airbus isdevelopingthe A350 (late-2014)

industry overview22

IndustryOverview

Potential Entrants

highlyregulatedindustry (Federal Aviation Administration, EPA)

Technical expertiseiscrucial

Capital-intensive industry

These factorsposebarrierstoentry

However, due toBoeing‘s „order-to-performance“ thecompanyriskscreatingnewfuturecompetitors.

industry overview23

IndustryOverview

2013

2016

2016

industry overview24

IndustryOverview

Supplier

Not a traditional supplier-buyerrelationship

Insteadpartners in the sense of mutual dependency

Minimum bargaining power

industry overview25

IndustryOverview

Customer

Limited numberofairlinemanufacturers

Customers order aircraftyearsbeforetheaircraftisfinished, areobligatedtofulfillthecontract

Furthermore, Boeing facesconsiderabledemand:

Backlog

GrowingdemandfromAsia

Defense spending

deriving competitive advantage model

DerivingCompetitive Advantage: Model

Core competencies

Opportunities

Improved Value Chain

Value Chain

deriving competitive advantage model27

DerivingCompetitive Advantage: Model

Core competencies

Opportunities

Match

  • Well-diversifiedbusiness
  • Market leadershipexperience
  • Know-how/expertisefor
  • buildingcommercialaircrafts
  • Emerging trends in Asia
  • (defenceas well ascomm.
  • planes)
  • Positive long-termoutlook
  • in aviationindustry
  • High defensespending
deriving competitive advantage model28

DerivingCompetitive Advantage: Model

Core competencies

Opportunities

Improved Value Chain

Improved Value Chain

  • strategicflexibility
  • organizat. learning
  • technology
  • management
deriving competitive advantage model29

DerivingCompetitive Advantage: Model

Core competencies

Opportunities

Improved Value Chain

Efficiency/Effectiveness

Responsivenesstocustomers

Quality

Innovation

maintaining competitive advantage

MaintainingCompetitive Advantage

  • Applytofurtherprojectsandthusleveragetheeffect
  • Monitor andcontinuallyimproveSupply Chain Process

Currentcompetitiveadvantage: uniqueexperience in supplychainprocess

Future Competitive Advantage

slide31

Presentedby

Laura Kirsch

Melina Zurek

Marcus Wigand

Michael Combach

appendix trends and opportunities

Appendix: Trends andOpportunities

Industry Trends

Increasingimportanceofefficiency due to volatile fuelprices

Industryconsolidationandformationofpartnerships: Fivemajorcompaniesdominate, andhundredsofothercompaniesactassuppliers

IndustryOpportunities

Outsourcing ofaircraftmaintainancethroughairlinesasnewbusinessopportunity

Replacementofairforcefleet

appendix future competitors analysis

Appendix: Future competitorsanalysis

Bombardier

The Canadiancompanywithheadquarters in Montreal producesaircrafts, businessjets, masstransportationequipmentand also providesfinancialservices.

ItsnewCSeriesareequippedwithnew, moreefficientenginesandthefuselagecontains a highpercentageofcompositematerials. Furthermore, Bombardier stressestheairplaneseco-friendliness. In theseaspects, theCseriesaresimilartothe Boeing 787 andthe A350.

Sincethe Boeing 737-600 isbasically a smallerversionof a biggerairplane, itisratherinefficientand was soldonlyfewtimes.

appendix future competitors analysis37

Appendix: Future competitorsanalysis

Commercial AircraftCooperationof China

appendix future competitors analysis38

Appendix: Future competitorsanalysis

United Aircraftcorporation

appendix list of competitors

Appendix: List ofCompetitors

AgustaWestland

Airbus

BAE System

Bombardier

Dassault Aviation

Embraer

EADS

Finmeccanica

GE Aviation

General Dynamics

Goodrich Corp.

Kaman

Lockheed Martin

  • Northrop Grumman
  • Raytheon
  • Rockwell Collins
  • Textron
  • Thales
  • United Technologies
appendix swot strengths 1 3

Appendix: SWOT Strengths (1/3)

Strong Growth Prospects:

  • P/E ratioof 12.2 exceeds S&P 500 companiesaverageof 9.2 (atthe end offiscalyear)

Sustainedbusiness due to strong order backlog:

  • Significantbacklogincrease in 2009 ($316B) and 2008 ($323B) - comparedto 2007 ($296,6B)
  • New ordersexceededdeliveries (737 NG, 767, 777, 787)
appendix swot strengths 2 3

Appendix: SWOT Strengths (2/3)

Leadingmarketposition

  • Commercial airlineindustry: oneofthetwomajormanufacturersofairplanes
  • Defense airplaneindustry: secondlargestcontractor in the U.S.

Well-diversifiedandbroadproductrange:

  • Foursegments:
    • Commercial airlines
    • Integrated defensesystems
    • Boeing Capital Corporation
    • Others (e.g. airtrafficmanagement)

decline/stagnation in onebusinesscanbeoffsetbyanothersegment

appendix swot weaknesses 1 3

Appendix: SWOT – Weaknesses (1/3)

Deterioatedliquidityposition:

  • Weakerfinancialpositionthancompetitors

currentratioof 0.8 comparedto S&P companiesaverage 1.4 (year 2008)

  • Decliningsalesvolume in commercialairlinesresulted in increase in inventory
appendix swot weaknesses 2 3

Appendix: SWOT- Weaknesses (2/3)

  • Declining operating margin

Indicatesineffecientcostmanagmentand

weakpricingstrategy.

appendix swot weaknesses 3 3

Appendix: SWOT-Weaknesses (3/3)

Strikes

  • Strikes ofthe IAM in 2008 resulted in a slowdownand substantial decline in deliveries
  • Lost revenuesamountedto $6.4B
appendix swot opportunities

Appendix: SWOT-Opportunities

Development ofAsia-Pacific Region

  • Extraordinarydefenseacquisitions (e.g. India, China, Japan)
  • Market liberalization: enablementoflow-costairlinestogainmarketshare

demandfor planes as well as MRO services

Aircraftfinancingmarketgraduallyimproving

Long-termoutlookofaviationindustry

(next 20 years)

appendix swot opportunities49

Appendix: SWOT-Opportunities

Long-termoutlookofaviationindustry

(next 20 years)

  • Estimatedincrease in commercialtravel: 5%
  • Estimatedincrease in cargosector: 5,8%
  • Expectedrise in demandforairplanes: upgradeofnumberofairplanesfrom 19,000 in 2008 to 35,800 (2027)
appendix swot threats

Appendix: SWOT-Threats

Dependence on U.S. budgetspending

  • Integrated Defense systembusinessrepresentslargestfractionofgeneratedrevenues

Global economy still fragile

Intensecompetition

  • Commercial aircraft: Airbus
  • Integrated defensesystems: EADS

Currency exchangerates

  • Purchases, sales, borrowings: many different localcurrenciesas well as different markets
  • Fluctuations in exchange rate affect Dollar valueandtherebyhave a considerableimpact on profitability
appendix pay for performance

Appendix: Pay for Performance

Elements which should be included in PfP schemes: innovation,

independent actions, contributions to team performance etc.

Results of empirical analyses:

  • Overall no correlation between PfP and company performance
  • Reverse causality possible: company performance results in incentives
  • PfP increases motivation only for simple, well measurable tasks
  • Badly designed PfP systems can have negative effects:
  • With “multiple tasks” concentration on tasks that lead to monetary incentives
  • Short-term orientation
  • Imbalance of exploration and exploitation
appendix pay for performance54

Appendix: Pay for Performance

What’s Wrong with PfP?

Assumption of PfP systems:

• People have enough information to work effectively and all other organizational systems are not the main roadblocks to performance

• Performance is under the control of the people who get the incentives

• Financial incentives turn attention to the organizational values and its priorities

• PfP attracts the right people and repels the wrong ones

 Many organizations implement PfP because it is a management fashion