Supply Chain Expectations

Transcription

1 Supply Chain Expectations Boeing Global Supplier Conference Washington, DC Jim Morris Vice president of Supplier Management for Boeing Commercial Airplanes and chairman of the Boeing Supplier Management Process Council The Boeing Company 16 September 2004 Two years ago this conference issued a challenge to each one of us that raised the bar in terms of performance. This challenge hasn t changed. We still today have the highest expectation of ourselves and our partners as we continue to play an ever-increasing role in our business. That s why I want to talk to you now about the expectations that we see for our partners. The topics I m going to talk about are our Lean Global Enterprise and what that means for our partnership in terms of the performance expectations, continuous improvement every day, and tools that are available. Two years ago when we talked, we were just thinking about those tools, but we ve made a lot of progress over the past two years. We are still in the journey. We are not there all the way, but we re making great progress. Our 2016 Vision - We did make a change to this. The vision statement is People working together as a global enterprise for aerospace leadership. We used to talk about being a global company, but we decided our partners around the world are really important to the success of this enterprise. So we changed it from a global company to a global enterprise. We also talked about core competencies, and one of those was the Lean Enterprise. We added into the description excellent supplier management, which says we had to do things differently than we were doing before. In our Supplier Management Process Council we developed a strategic focus on people and being an involved team -- each of us working together for the best of each of our businesses and for our customers.

2 Our Customers -- We need to understand their needs so we can develop the most competitive products for the marketplace when our customers need them. You, our partners -- We need to develop better partnerships with you, share more information with you, understand your needs and processes, deploy lean, efficient practices every day to become more competitive. And technologies -- Exploit for efficiency and speed. Do not implement technology for its own sake. Think about our relationships. We are moving from a traditional-style relationship to a partner-style relationship. There are a lot of changes we have to make, and a lot of changes that you have to make. Good relationships enable collaboration, and lean actions enable better products and services. Diversity - Our focus is on diverse suppliers. We found that if we work with diverse suppliers around the globe large and small businesses -- we re going to get better ideas. We re going to get better solutions. We are going to better satisfy our customers. We ve made huge progress over the past several years under the leadership of Carrie Hill and her team, and today we have a workshop about supplier diversity. Please attend it. We established our Supplier Diversity Program in We have targets annually. We review our progress monthly. We re an active member of the Minority Supplier Development Council. We have a lot of outreach and as a result we ve been recognized for it. As you can see here we have made progress over the past several years moving from about 18% of our dollars for small businesses to 22% estimated this year. This is great improvement. The Export-Import Bank is with us today and they will be part of Carrie Hill s workshop. As part of their charter, the Exim Bank offers competitive financing for U.S.-based suppliers and for medium-sized and small suppliers. So go talk to them today. Find out what the programs are and see if you can take advantage of their programs. Ethical Conduct - Rudy deleon mentioned this in his opening remarks. We re committed to conducting business fairly and partially in an ethical and proper manner. We ve seen the impact a few people can have on an overall business. We ve developed some clauses for our partners, and they are available on the internet now. Our plan is to incorporate the clauses in all our new contracts, which began in July, and incorporate it into selected existing contracts. We are revising all our standard T s and C s right now. Earlier there was a question about intellectual property. We think we re moving towards understanding how intellectual property gives all of us a competitive edge. We want intellectual property developed by Boeing to be used by our suppliers to perform work for Boeing. Also, want to be able to use that intellectual property for suppliers to do third party work with proper licensing. We ll do a business case analysis that gives the best overall value for you and for Boeing.

3 Supply Chain Security - Since September 11, the requirements for security have been evolving every day. And the customs trade partnership against terrorism is looking to protect our supply chain. Its initiative is between business and government to protect global commerce from terrorism. It s a program of evolving requirements, but the goal is to secure our supply chain to make sure that we can deliver competitive products on time. Ken Konigsmark and his team will be having a breakout work session on that today after lunch. Please visit them and understand what these evolving requirements are. This brings us to our Lean Global Enterprise. Our focus of the Lean Global Enterprise is on engineering, production, supplier management, being fully aligned and using the best the world has to offer. This means we re going to ask each of you to do more in the future. If you re doing components, we re going to ask you to do subassembly. If you re doing build-to-print, we re going to ask you to start doing engineering design. We re making great progress towards this vision on the 777 and on Future Combat Systems. We re not there yet, but we have started the journey. Our focus is going to be on large-scale system integration, looking at total customer solutions and lifetime support. As a result we re having significant reductions in the Boeing footprint through the application of Lean Manufacturing and through the use of consolidation. We re also aligning and consolidating our supplier partner base. We re keeping the best for Boeing in terms of quality, cost and delivery. You represent the best of Boeing. Let s look at a couple of metrics that demonstrate this. This chart shows Boeingoccupied square feet of office and factory space. If you go back to 1998, it was over 120 million square feet of office and factory space within Boeing. Today, it s just over 90 million square feet. That s a reduction of 30 million square feet. If you look in the newspapers, the cost per square foot is something like $20 for occupancy depending on where you are around the world. We ll take 30 million times 20 or $600 million a year that we can now invest in new products and services to keep us competitive around the world. Let s look at our supplier base specifically in terms of our production suppliers and our nonproduction suppliers. Back in 1998 we had over 30,000 suppliers in these two areas. Today we have just over 5,000 suppliers. This today is the Best of Boeing and the best of the supplier partner base in terms of quality, cost, and delivery. What a change, and the journey is not over yet! Our supply base management emphasis is to have excellent supplier management. We work through our Process Councils, Supplier Management Process Council, the Boeing Operations Council, the Engineering Council and through our supply base management process action team. You know we have some objectives that we re trying to achieve.

4 Operational Efficiency We want to significantly improve communications with you to improve execution for all of us. We re looking at a whole series of processes to see how we can improve those every day. We have identified strategic sourcing teams in nine specific areas. They are commodity-based teams and they look across all of Boeing, our whole enterprise, to understand capacity, improvement in quality, improvement of delivery performance, and how we re doing in keeping our customers satisfied. We work hand-in-hand with the Boeing Operations Council, which focuses on utilizing Best Practices, implementing Lean across the enterprise and making best use of our assets. They also have process action teams in the commodity areas and on processes, and together we re making a difference. The Engineering Council ensures innovation and technical integrity. It enables quality and productivity improvements, leverages our intellectual capital to make us more competitive, and ensures high performance in everything we do. We hope through these efforts we ll have better collaboration and we ll develop better partnerships around the world. Performance Expectation How goes it in terms of quality, cost, delivery and customer satisfaction? We ve developed a supplier performance measurement report for each of our partners. We have developed common criteria and we re still improving on those. We are not there yet, but we re making improvements every day. We ve developed a common database in the Best system. One of the major concerns at the last supplier conference was the integrity of that data base. We ve made a lot of improvements to it, and we re continuously improving it. The whole idea is for each of us as a team to get better each day. Quality Performance - Just look at this chart and the improvements we ve made since the year These are defects per million. We re down under 5,000 defects per million, but we want to get to six sigma, which is 3.4 defects per million. We ve made huge progress in order of magnitude, but we still have a long ways to go on our journey. I d like to thank you for all your great work in terms of improving quality. Thank you! Of course we re not stopping. You can see that in 2005 we re going to raise the bar again because each of us every day is getting better and better. Cost It s so important today to have the best products at a competitive cost. We have developed some tools to do it. We ve developed through the Business Units, Councils, Programs and you the ways that we can lower the cost of doing business. We still have healthy businesses for you, for us and for our customers. Just look at some of the things that our teams are doing across the enterprise. In Long Beach on the C-17 program, the Lean tools are being applied. We ve done things that allow us to keep the program moving forward through multi-year production contracts. Our folks in St. Louis are working on the F/A-18 cost reduction with flawless execution, better than planned, with lean being applied every day. They

5 have implemented a cost-reduction program and technology insertion programs to make that airplane better and less costly for our customers. How about the folks in Seattle with the 737 moving line. What a difference that s made in the production of our commercial airplanes. There is more than 50% reduction of flow time, 75% reduction in inventory, and 52% reduction in work-inprocess. We re working to be more competitive every day. Here s the folks in Philadelphia with the CH-47 Chinook. By using the best that you have to offer we ve made significant reduction in the cost of major assemblies. Through our collaborative efforts in value engineering, we ve redesigned as necessary to get the cost out and we re using the best to produce the Chinook. We ve reduced the suppliers for the structure from 60 down to 10. This is the best in terms of quality, cost and delivery. Delivery Trend Again, what a great story! In the year 2000, we were down to about 78% on-time delivery. Today we re at about 97% for the entire supply base. Fabulous improvement! Thank you! And yes, the aerospace industry is going back up again. This is great news! Commercial deliveries are increasing. Defense and Space sales also are increasing. This afternoon we have a workshop on how to get ready for that upturn, which is upon us now. We need your ideas and your feedback so we re ready to have flawless execution during the upturn. Customer Satisfaction Two years ago you can see that we reached a plateau in terms of our customer satisfaction. I ll have to say you have made huge improvements over the past two years, and we re going to continue to improve. Thank you for all the work you ve done to make our customers more pleased than ever with what we provide them. We have tools available now. We ve turned thoughts and concepts into tools such as Lean, E-Buy, Common Systems and Standards, Common Performance Measurement and Cost Improvement Collaboration. We used to think that Lean was about operations on the factory floor. We ve come to realize it s about the whole life cycle of the product from raw material suppliers, to lean supplier operations, to lean Boeing operations and to lean services after the fleet has been deployed. It is so important that we all employ the lean principals just to make our businesses better each day. E-enabling the Supply Chain We have teamed with Exostar to develop a whole series of products and services to help us communicate better and be more efficient. One example of that is the Min/Max Ordering System that many of you are involved in today. Use of that system in Wichita allowed us in a single year to reduce the inventory by more than $300 million. That s a savings we can invest in new products and services. This afternoon there will be a workshop on E- Buy with Paul Pasquire

6 and his team, so that we can understand better what the tools are, what s available for usage, and how with feedback from you we can improve every day. Quality Requirements Back in 1997 there were multiple Boeing site-unique requirements. We are moving toward using aerospace industry standards to make it easier for you and to gain a more consistent set of quality standards for all of us to use. Preferred Supplier Certification This is an effort to accelerate or sustain performance improvements. It improves our competitiveness, provides bidder and source selection preference, and facilitates Boeing supplier integration. We have a set of criteria for preferred suppliers, but we re also open-minded. As we move from production flyer programs to development programs, we re continuing to re-evaluate our criteria. Common Terms and Conditions At the last supplier conference we had an idea of what we wanted to do. Over the last two years we ve developed those common terms and conditions and we ve begun the journey of implementing across the supply partner base. We ve developed common source selection criteria with evaluation options and ranges of waiting on things like price, management, technical and overall performance. We ve developed training courses -- we call it Supplier Management University. This provides a forum for our Boeing folks, and on a selected basis for our partners from around the world, to help blend cultures, practices, tools and techniques. It s allowing us to become better every day through education and training. To date we ve trained more than 1,700 people through Supplier Management University. It doesn t mean we don t have challenges, and although we ve made huge progress over the last two years, we need to still develop stronger relationships and partnerships. We need to develop a strong, diverse, global and financially healthy supplier partner base. I firmly believe that if you suppliers are not financially healthy in the long run, we re not going to be financially healthy. So we want to develop ways for us to both be successful. We want to continue to E-enable our relationships. We want to work together to improve quality, to improve cost, and to improve delivery. We have great relationships. We are improving them every day. We want to turn that into true partnerships of sharing so we can move forward together. We ve had fabulous improvements in performance in terms of quality, cost and delivery, and we ve done it as a team. We ve seen how lean can apply to the whole lifecycle of our products and services, but we need to do it working together. We ve become e- connected. We re continuing on that journey to become connected across the industry. I d just like to say thank you. Thank you for all your efforts, thank you for working together, and thanks for improved performance as we move into the future together. Thank you!