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Boeing Dreamliner :

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 :

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  1. Boeing Dreamliner: Managing New Product Development andSupply Chain Risks

  2. 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

  3. 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

  4. DreamlinerSupply-Chain Transformation Process

  5. Vision 2016 Change Boeing from a wrench-turningmanufacturerto a masterplanner, marketerandsnap-togetherassemblerofhigh-techairplanes. Created bevor the Boeing-McDonnell Merger in 1997

  6. Transformation Vision Means Suppliers ExpectedBenefits Outsourcing Reducefinancialinvestment IncreaseSupplierResponsibilities Constructionofentireparts Reducedevelopment time FromManufacturertocoordinator Strategic Partnership Reductionoffinancialrisk Technological Innovation IncreaseProductionCapacity Air Transportation Exploitsuppliers‘ knowledge

  7. Problem Diagnosis

  8. Problem Diagnosis Invisible to Boeing

  9. Problem Diagnosis Delay causedbytheencounteredproblemscosts Boeing penaltiesof $500m per monthofdelay

  10. Supply ChainRedesign: Implemented Boeing tookthefollowingmeasurestoadresstheproblemsandrisksencountered: Redrawareaofresponsibilities More control Supplychainexpertise Endedthestrike, withdrawalofcharges

  11. Supply Chain Redesign: Recommendations Ourrecommendation:ProactiveRiskReduction/Elimination Risks ProactiveMeasures

  12. Supply Chain Redesign Noaccurateuseofplanningsystem: Little knowledgeaboutprogressofsuppliers (esp. Tier-2) andlatedetectionofdelays Supply Chain

  13. Supply Chain Redesign Overburdenedorinexperiencedsuppliers  delays Supplier

  14. Supply Chain Redesign Tendencyforsupplierstodeliverlate in order toavoid unfair punishment Supplier

  15. Lack ofsupply-chainknow-howofthemanagementteam Management Team

  16. Labor Strikes $100m/day Labor Relationship Management

  17. Loss ofcustomersʹ trust + ContractualPenalties Customer Relationship Management

  18. 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

  19. IndustryOverview

  20. IndustryOverview Competition Aerospace manufacturingindustryishighlyconcentrated Top competitors: • EADS (anditssubsidiary Airbus) • Lockheed Martin • Northrop Grumman

  21. IndustryOverview Substitutes Airbus isdevelopingthe A350 (late-2014)

  22. IndustryOverview Potential Entrants highlyregulatedindustry (Federal Aviation Administration, EPA) Technical expertiseiscrucial Capital-intensive industry These factorsposebarrierstoentry However, due toBoeing‘s „order-to-performance“ thecompanyriskscreatingnewfuturecompetitors.

  23. IndustryOverview 2013 2016 2016

  24. IndustryOverview Supplier Not a traditional supplier-buyerrelationship Insteadpartners in the sense of mutual dependency Minimum bargaining power

  25. IndustryOverview Customer Limited numberofairlinemanufacturers Customers order aircraftyearsbeforetheaircraftisfinished, areobligatedtofulfillthecontract Furthermore, Boeing facesconsiderabledemand: Backlog GrowingdemandfromAsia Defense spending

  26. DerivingCompetitive Advantage: Model Core competencies Opportunities Improved Value Chain Value Chain

  27. 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

  28. DerivingCompetitive Advantage: Model Core competencies Opportunities Improved Value Chain Improved Value Chain • strategicflexibility • organizat. learning • technology • management

  29. DerivingCompetitive Advantage: Model Core competencies Opportunities Improved Value Chain Efficiency/Effectiveness Responsivenesstocustomers Quality Innovation

  30. MaintainingCompetitive Advantage • Applytofurtherprojectsandthusleveragetheeffect • Monitor andcontinuallyimproveSupply Chain Process Currentcompetitiveadvantage: uniqueexperience in supplychainprocess Future Competitive Advantage

  31. Presentedby Laura Kirsch Melina Zurek Marcus Wigand Michael Combach

  32. QuestionsandAnswers Questions?

  33. Appendix: Boeing‘sSuppliersfortheDreamliner

  34. Appendix: Trends andOpportunities Industry Trends Increasingimportanceofefficiency due to volatile fuelprices Industryconsolidationandformationofpartnerships: Fivemajorcompaniesdominate, andhundredsofothercompaniesactassuppliers IndustryOpportunities Outsourcing ofaircraftmaintainancethroughairlinesasnewbusinessopportunity Replacementofairforcefleet

  35. 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.

  36. Appendix: Future competitorsanalysis

  37. Appendix: Future competitorsanalysis Commercial AircraftCooperationof China

  38. Appendix: Future competitorsanalysis United Aircraftcorporation

  39. 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

  40. Appendix: SWOT (1/2)

  41. Appendix: SWOT (2/2)

  42. 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)

  43. 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

  44. Appendix: SWOT- Strengths (3/3)

  45. 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

  46. Appendix: SWOT- Weaknesses (2/3) • Declining operating margin Indicatesineffecientcostmanagmentand weakpricingstrategy.

  47. Appendix: SWOT-Weaknesses (3/3) Strikes • Strikes ofthe IAM in 2008 resulted in a slowdownand substantial decline in deliveries • Lost revenuesamountedto $6.4B

  48. 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)

  49. 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)

  50. 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

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