Executive Briefings

For Boeing, a New Aircraft Means a Revamped Supply Chain

Along with production of the 787 Dreamliner comes a whole new approach to the way that Boeing manufactures aircraft. Outsourcing is the key.

Design and fuel efficiency aren't the only things about The Boeing Co.'s 787 "Dreamliner" that are new. The project represents a huge change in the way the company manages its production supply chain. What's more, that strategy is making it possible for Boeing to turn out a entirely new type of aircraft in record time.

Scheduled for initial delivery in the summer of 2008, the 787 has been designed for maximum efficiency. With a capacity of between 223 and 259 passengers, depending on the model, the aircraft is expected to burn 20 percent less fuel per passenger than older planes of similar size. It is constructed from lighter, composite materials that were designed for a faster prototype which was scrapped in favor of the 787, when operating efficiency became more important than speed.

But the most innovative aspect of the 787 might be the way in which it is being built. For previous models, Boeing played the traditional role of main manufacturer, contracting with an army of suppliers for individual parts and systems, then laboriously assembling them into the finished product. This time around, major suppliers will design and build entire sections of the plane, shipping them to Boeing for final assembly and testing at Everett, Wash. Various components might travel around the world, passing through multiple contractors, before ending up at their final destination. In this way, the majority of each aircraft will actually be built by Boeing's global partners.

The plan will lessen the need for Boeing's own resources while speeding up construction. Each aircraft will be assembled over a three-day period. To make that possible, Boeing had to achieve a whole new level of collaboration with key suppliers around the world.

"Instead of multi-tiered suppliers, we truly have partners," says Tim Opitz, director of production and support systems for Boeing Commercial Airplanes. In all, the company is relying on 135 locations around the world for manufacturing and fabrication. With responsibilities spread so thinly, the slightest delay at any point in the supply chain could paralyze production.

 

Answer Close to Home

Enter Exostar LLC, the Herndon, Va.-based supplier of software and collaboration hubs for aerospace and defense contractors. Not coincidentally, Boeing is one of Exostar's owners, along with BAE Systems, Lockheed Martin Corp., Raytheon Co. and Rolls-Royce. The partners were seeking a way to lower the cost of supplier collaboration, adapt internet technology for direct procurement of design and parts, and deal with the many overlapping suppliers that served them, according to Peter Scott, Exostar vice president of marketing and corporate development.

Exostar had worked with Boeing in various capacities since its inception in 2000. But the entity's real value to Boeing didn't become evident until the 787 project. With 34,000 registered suppliers in its trading network, Exostar was the ideal vehicle for ensuring that all of the 787 partners were in close communication about every aspect of design, logistics and production.

Visibility of demand data was a key element in the collaborative model. Suppliers need the latest information from Boeing, and the manufacturer must know whether they are adhering to the production plan. All major subassemblies have to arrive in Everett on time and in precise order, so that planes roll off the line on schedule.

Exostar provides a platform for the exchange of such information, in the form of a hosted service. Boeing and its suppliers can log into the system to view information on engineering changes, production delays, parts orders and the like. The tool, built on software supplied by Redwood City, Calif.-based E2open Inc., can also be used by Boeing to solicit parts and suppliers through requests for quotation (RFQs). Other processes that can be managed through the hub include schedule planning, purchase order issuance and tracking, returns management and shipment tracking.

"It's a very simple, elegant and low-cost solution," says Opitz. The system doesn't require all of the partners to integrate disparate information systems. Instead, they can access a common hub. "Everybody's got visibility of what they're supposed to do, and validation of what they did," he says.

Parts management, a difficult task in any supply chain, is also made easier by the hub concept. Boeing can keep close tabs on parts being consumed by its tier-one partners. It even retains direct contacts with tier-two suppliers, shortening their payment cycles while maintaining better control of the whole supply chain. Exostar allows Boeing to implement a pull-based replenishment model for parts flowing to tiers one and two, minimizing unnecessary inventory expense.

 

Early-Warning System

The most important aspect of the Exostar hub might be its ability to warn of any disruptions in a supply chain for which there is precious little room for error. Boeing can learn of potential problems early enough to head off impacts further along the chain. It can adjust a whole series of subassembly production schedules accordingly.

In all cases, the system is built around exception reporting, meaning the principals aren't inundated with a lot of useless information. For example, a supplier might send out an invoice with the wrong unit price. An application delivered through the Exostar system detects the mismatch between invoice and purchase order, and kicks it back to the supplier for a correction.

Boeing's use of Exostar has progressed steadily over the past two years, says Scott. It began with basic transactions, such as the sending of purchase orders to suppliers, and receipt of their responses. The system has since become far more collaborative, as partners join to manage the entire process, including inventory management.

"Transactions aren't the value [of the hub concept]," says Scott. "They're used to put data into a common system. Then you can apply process rules and analytics."

Keeping with the need for speed, the Exostar system was put into place for the 787 program in August 2005. It went live within 90 days. That was followed by an updated release last July, with another scheduled for the spring of this year. "Boeing is adding more and more capabilities to meet its timeline," says Scott.

"We were trying to get a product into the customers' hands far sooner than before," says Opitz. In fact, the first test flight was slated for the end of 2006. In any case, Boeing won't have to worry about finding buyers. Two years after plans for the 787 were announced, the aircraft maker already had 350 orders, with production capacity sold out through 2011.

Opitz says Exostar will likely play a role in future aircraft programs at Boeing, including those for existing types. "Within Boeing Commercial Airplanes, we see Exostar being deployed throughout the company," he says, adding that the technology will be melded with a new enterprise resource planning system.

Besides getting a new plane on the market faster than ever before, Boeing expects to realize "phenomenal" savings through the use of Exostar. In the meantime, Opitz says, "we're still working through the bumps and hiccups of getting it in place."

 

Design and fuel efficiency aren't the only things about The Boeing Co.'s 787 "Dreamliner" that are new. The project represents a huge change in the way the company manages its production supply chain. What's more, that strategy is making it possible for Boeing to turn out a entirely new type of aircraft in record time.

Scheduled for initial delivery in the summer of 2008, the 787 has been designed for maximum efficiency. With a capacity of between 223 and 259 passengers, depending on the model, the aircraft is expected to burn 20 percent less fuel per passenger than older planes of similar size. It is constructed from lighter, composite materials that were designed for a faster prototype which was scrapped in favor of the 787, when operating efficiency became more important than speed.

But the most innovative aspect of the 787 might be the way in which it is being built. For previous models, Boeing played the traditional role of main manufacturer, contracting with an army of suppliers for individual parts and systems, then laboriously assembling them into the finished product. This time around, major suppliers will design and build entire sections of the plane, shipping them to Boeing for final assembly and testing at Everett, Wash. Various components might travel around the world, passing through multiple contractors, before ending up at their final destination. In this way, the majority of each aircraft will actually be built by Boeing's global partners.

The plan will lessen the need for Boeing's own resources while speeding up construction. Each aircraft will be assembled over a three-day period. To make that possible, Boeing had to achieve a whole new level of collaboration with key suppliers around the world.

"Instead of multi-tiered suppliers, we truly have partners," says Tim Opitz, director of production and support systems for Boeing Commercial Airplanes. In all, the company is relying on 135 locations around the world for manufacturing and fabrication. With responsibilities spread so thinly, the slightest delay at any point in the supply chain could paralyze production.

 

Answer Close to Home

Enter Exostar LLC, the Herndon, Va.-based supplier of software and collaboration hubs for aerospace and defense contractors. Not coincidentally, Boeing is one of Exostar's owners, along with BAE Systems, Lockheed Martin Corp., Raytheon Co. and Rolls-Royce. The partners were seeking a way to lower the cost of supplier collaboration, adapt internet technology for direct procurement of design and parts, and deal with the many overlapping suppliers that served them, according to Peter Scott, Exostar vice president of marketing and corporate development.

Exostar had worked with Boeing in various capacities since its inception in 2000. But the entity's real value to Boeing didn't become evident until the 787 project. With 34,000 registered suppliers in its trading network, Exostar was the ideal vehicle for ensuring that all of the 787 partners were in close communication about every aspect of design, logistics and production.

Visibility of demand data was a key element in the collaborative model. Suppliers need the latest information from Boeing, and the manufacturer must know whether they are adhering to the production plan. All major subassemblies have to arrive in Everett on time and in precise order, so that planes roll off the line on schedule.

Exostar provides a platform for the exchange of such information, in the form of a hosted service. Boeing and its suppliers can log into the system to view information on engineering changes, production delays, parts orders and the like. The tool, built on software supplied by Redwood City, Calif.-based E2open Inc., can also be used by Boeing to solicit parts and suppliers through requests for quotation (RFQs). Other processes that can be managed through the hub include schedule planning, purchase order issuance and tracking, returns management and shipment tracking.

"It's a very simple, elegant and low-cost solution," says Opitz. The system doesn't require all of the partners to integrate disparate information systems. Instead, they can access a common hub. "Everybody's got visibility of what they're supposed to do, and validation of what they did," he says.

Parts management, a difficult task in any supply chain, is also made easier by the hub concept. Boeing can keep close tabs on parts being consumed by its tier-one partners. It even retains direct contacts with tier-two suppliers, shortening their payment cycles while maintaining better control of the whole supply chain. Exostar allows Boeing to implement a pull-based replenishment model for parts flowing to tiers one and two, minimizing unnecessary inventory expense.

 

Early-Warning System

The most important aspect of the Exostar hub might be its ability to warn of any disruptions in a supply chain for which there is precious little room for error. Boeing can learn of potential problems early enough to head off impacts further along the chain. It can adjust a whole series of subassembly production schedules accordingly.

In all cases, the system is built around exception reporting, meaning the principals aren't inundated with a lot of useless information. For example, a supplier might send out an invoice with the wrong unit price. An application delivered through the Exostar system detects the mismatch between invoice and purchase order, and kicks it back to the supplier for a correction.

Boeing's use of Exostar has progressed steadily over the past two years, says Scott. It began with basic transactions, such as the sending of purchase orders to suppliers, and receipt of their responses. The system has since become far more collaborative, as partners join to manage the entire process, including inventory management.

"Transactions aren't the value [of the hub concept]," says Scott. "They're used to put data into a common system. Then you can apply process rules and analytics."

Keeping with the need for speed, the Exostar system was put into place for the 787 program in August 2005. It went live within 90 days. That was followed by an updated release last July, with another scheduled for the spring of this year. "Boeing is adding more and more capabilities to meet its timeline," says Scott.

"We were trying to get a product into the customers' hands far sooner than before," says Opitz. In fact, the first test flight was slated for the end of 2006. In any case, Boeing won't have to worry about finding buyers. Two years after plans for the 787 were announced, the aircraft maker already had 350 orders, with production capacity sold out through 2011.

Opitz says Exostar will likely play a role in future aircraft programs at Boeing, including those for existing types. "Within Boeing Commercial Airplanes, we see Exostar being deployed throughout the company," he says, adding that the technology will be melded with a new enterprise resource planning system.

Besides getting a new plane on the market faster than ever before, Boeing expects to realize "phenomenal" savings through the use of Exostar. In the meantime, Opitz says, "we're still working through the bumps and hiccups of getting it in place."