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True grit - Boeing Competition
- 1. TRUE GRIT The Boeing Company 2017 Case Study Competition Derek Winokur & Hai Pham
- 2. IN ORDER TO MEET RISING DEMAND, WE NEED TO INCREASE PRODUCTION, DESPITE THE FACTORY WORKFORCE BEING AT MAXIMUM CAPACITY. Increase Production Enhance Workforce Looking Ahead
- 3. 324 300 272 232 192 144 96 48 0 0 24 52 92 132 180 228 276 324 0 50 100 150 200 250 300 350 Production Plan 2017-2024 Total Backlog Total Produced
- 4. Boeing Approved Supplier Technical Capabilities Lead Times Costs On-Time Core Competencies Quality Rating Ability to Adjust Sub-Tier Suppliers
- 5. Supplier Rating Scale Boeing A B C Site on time (1-10) 8.87 5 10 9 Site quality Acceptance (1-10) 10 8 10 9.5 Cost (without tooling) (1-10) 9 10 9 9.5 Lead times (1-10) 7 7 8 9 Tooling Cost (1-3) 3 2 1.5 2 Union Shop (0-1) 1 0 1 0 Sub Tier Suppliers (1-5) 3 2 4 3 Ability to Adjust (1-5) 3 5 3 5 TOTAL 54 44.87 39 46.5 47
- 6. Benefits and Risks of Option C Order From Supplier C Save Labor on UK Chinooks Work at Optimal Efficiency
- 7. Composites (6 month Lead Time) Dynamics (4 month Lead Time) JIT Delivery
- 8. Ordering Log Timeline Outsourcing Ordering Parts for 24 UK 2017 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D Production begins Jan 2018 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D C D Year 2019 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D C D Year 2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D C D Year 2021 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D C D Year 2022 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D C D Year 2023 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C D Year 2024 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 0 0 0 0 0 0 0 0 0 0 0
- 9. Meeting Offset requirements Union Cost Efficiency Quality Lead Times Quality Rating
- 10. 45% 6% 49% UK Contract Offset Requirements UK contribution US Contribution Rest of Contract < 50%
- 11. Increase Production Enhance Workforce Looking Ahead IN ORDER TO MEET RISING DEMAND, WE NEED TO INCREASE PRODUCTION, DESPITE THE FACTORY WORKFORCE BEING AT MAXIMUM CAPACITY.
- 12. 280 316 332 332 399 399 399 399 29 34 49 49 60 60 60 60 150 205 332 332 399 399 399 399 17-Jul 18-Jul 19-Jul 20-Jul 21-Jul 22-Jul 23-Jul 24-Jul # of Employed Workers # of Employed Management # of Employed Support
- 15. Sort Simplify Sweep Standard -ize Self- discipline Keep only the necessary items in the workplace Arrange items to promote efficient workflow Focus on the areas visual appearance and clean as you go Set standards for a efficiently organized workplace Set a culture around the improved workplace to sustain 5S success Six Sigma: 5S
- 16. Increase Production Enhance Workforce Looking Ahead IN ORDER TO MEET RISING DEMAND, WE NEED TO INCREASE PRODUCTION, DESPITE THE FACTORY WORKFORCE BEING AT MAXIMUM CAPACITY.
- 17. What’s Next? New Ability to Enter Further Contracts Completed US and UK contracts Met Offset Requirements Increased Workforce
- 18. Long Term Benefits • INCREASED WORKFORCE • ENHANCED PRODUCTION CAPABILITIES • POTENTIAL FOR RENEWABLE CONTRACTS
- 19. Cash Flows (2017-2024): NPV Analysis Initial Investment: 10 Million Cost of Capital: 10% NPV: $339,985,325
- 20. Increase Production Enhance Workforce Looking Ahead IN ORDER TO MEET RISING DEMAND, WE NEED TO INCREASE PRODUCTION, DESPITE THE FACTORY WORKFORCE BEING AT MAXIMUM CAPACITY.
- 21. Appendix: Employment and Onboarding Plan at Boeing Plant Year # of Employed Workers # of Employed Management # of Employed Support Onboarding Schedule # of Workers Training # of Managers Training # of Support Training 17-Jan 280 29 150 17-July 36 5 55 18-Jan 316 34 205 18-Jan 16 15 127 19-Jan 332 49 332 19-July 0 0 0 20-Jan 332 49 332 20-July 67 11 67 21-Jan 399 60 399 21-July 0 0 0 22-Jan 399 60 399 22-July 0 0 0 23-Jan 399 60 399 23-July 0 0 0 24-Jan 399 60 399 24-July 0 0 0
- 22. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2017 Production Goal (AC/year) 24 Increase % Revenue $600,000,000.00 Suppliers Expenses $407,286,000.00 Salary Expenses $52,165,000.00 Fringe Benefits* $12,666,500.00 Overhead Expenses $54,000,000.00 Outsourcing Expenses** $9,600,000.00 Net Income $64,282,500.00 Net Margin 10.71%
- 23. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2018 Production Goal (AC/year) 28 Increase % 16.67% Revenue $720,000,000.00 Suppliers Expenses $485,818,040.00 Salary Expenses $50,345,000.00 Fringe Benefits* $15,344,000.00 Overhead Expenses $62,835,750.00 Outsourcing Expenses** $2,200,000.00 Net Income $27,357,210.00 Net Margin 14.37%
- 24. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2019 Production Goal (AC/year) 40 Increase % 42.86% Revenue $1,020,000,000. 00 Suppliers Expenses $689,461,040.00 Salary Expenses $50,345,000.00 Fringe Benefits* $19,897,500.00 Overhead Expenses $89,853,750.00 Outsourcing Expenses** $2,200,000.00 Net Income $52,992,710.00 Net Margin 16.49%
- 25. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2020 Production Goal (AC/year) 40 Increase % Revenue $1,020,000,000. 00 Suppliers Expenses $689,461,040.00 Salary Expenses $74,242,500.00 Fringe Benefits* $19,897,500.00 Overhead Expenses $89,853,750.00 Outsourcing Expenses** $2,200,000.00 Net Income $29,095,210.00 Net Margin 14.15%
- 26. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2021 Production Goal (AC/year) 48 Increase % 20.00% Revenue $1,220,000,000. 00 Suppliers Expenses $825,223,040.00 Salary Expenses $74,242,500.00 Fringe Benefits* $23,955,750.00 Overhead Expenses $107,853,750.00 Outsourcing Expenses** $2,200,000.00 Net Income $45,174,960.00 Net Margin 15.29%
- 27. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2022 Production Goal (AC/year) 48 Increase % Revenue $1,220,000,000. 00 Suppliers Expenses $825,223,040.00 Salary Expenses $74,242,500.00 Fringe Benefits* $23,955,750.00 Overhead Expenses $107,853,750.00 Outsourcing Expenses** $2,200,000.00 Net Income $45,174,960.00 Net Margin 15.29%
- 28. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2023 Production Goal (AC/year) 48 Increase % Revenue $1,220,000,000. 00 Suppliers Expenses $825,223,040.00 Salary Expenses $74,242,500.00 Fringe Benefits* $23,955,750.00 Overhead Expenses $107,853,750.00 Outsourcing Expenses** $1,100,000.00 Net Income $45,174,960.00 Net Margin 15.38%
- 29. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement 2024 Production Goal (AC/year) 48 Increase % Revenue $1,440,000,000. 00 Suppliers Expenses $814,572,000.00 Salary Expenses $74,242,500.00 Fringe Benefits* $23,955,750.00 Overhead Expenses $108,000,000.00 Outsourcing Expenses** Net Income $262,629,750.00 Net Margin 29.11%
- 30. * 35% (percent) is applied to all salaries. **For Outsourcing Expense: The Non-Recurring for rate tooling is a one-time cost, and is accured in year of 2017. **The Outsourcing process begins in July 2017 to July 2023, so the whole period is counted as 5 years. Appendix: Income Statement Total Production Total (AC/year) 324 Increase % Revenue $8,460,000,000. 00 Suppliers Expenses $5,562,267,240. 00 Salary Expenses $524,067,500.00 Fringe Benefits* $163,628,500.00 Overhead Expenses $728,104,500.00 Outsourcing Expenses** $21,700,000.00 Net Income $571,882,260.00 Average Net Margin 16.35%
Editor's Notes
- *suppliers *lean manufacturing *outsourcing
- Things we take a look at to decide whether to use a sub-supplier.
- Possibly add ranges of lead times?? Eg. 7 & 4.5 mths, 6 & 4 months Supplier Criteria/grading criteria? ---- this allows us to not only help pick new suppliers, but also keep our existing suppliers in check. If they are two months late delivering a product, then their “on time” rating would be docked points, and hurt them in the long run, Instead of supplier A, B,C should we do Supplier by location? *What are we doing here? BENEFIT: Choosing Option C frees up 137,400 (5,500 per UK Chinook) hours at our boeing facilty. It is the most reliable option when we look at on time and quality acceptance. Their lead times were not shown, we contacted the supplier and required that they disclose their estimated lead times in order to stay in the bidding process. They reported a better estimated lead times than the boeing facility. Overall this decision will save Boeing approx 137,400 hours while remaining a safe and quality option. The only downside is it will cost the contract $6,975,400 more. Negative: The only downside is it will cost the contract $6,975,400 more and the supplier is not a union.
- Derek Boeing Lean Management Courses, 5S, LEAN+ and Kaizen events. After encouraging the supplier in Seattle to understand Boeing reason for Takt Timing and Just In Time contracts. A lead team disclosed of (6 Months) for Composites and (4 months) for dynamics has the opportunity for Supplier C to make 2 sets of deliveries per year from July 2017 through January 2023 staggering order times for Composites and Dynamics Risks: Option C is not a Union, we have to be careful to not outsource too much work or else the Unions would become upset, potentially resulting in a strike, delaying production of a contract.
- Stagger order times in order to not waste factory square footage. This saves money and helps avoid risking efficiency. Option C Specs: Composites and Dynamics Supplier: SE, USA Total Cost: ($ 13,200,000.00 + 8,500,000) = $21,700,000 Lead Times: Composites (6 months) Dynamics (4 months) Orders Per Year: 4 Order Time Every Year: July 2017-July 2023 Jan/July for Composites and March/September for Dynamics Hours Saved:137,000 (Philadelphia) Cost Per CH-47: $550,000 Cost Per Year: $2,200,000 Non-Recurring Tooling Cost: $8,500,000 Total Cost: ($ 13,200,000.00 + 8,500,000) = $21,700,000
- Option C Specs: Composites and Dynamics Supplier: SE, USA Total Cost: ($ 13,200,000.00 + 8,500,000) = $21,700,000 Lead Times: Composites (6 months) Dynamics (4 months) Orders Per Year: 4 Order Time Every Year: July 2017-July 2023 Jan/July for Composites and March/September for Dynamics Hours Saved:137,000 (Philadelphia) Cost Per CH-47: $550,000 Cost Per Year: $2,200,000 Non-Recurring Tooling Cost: $8,500,000 Total Cost: ($ 13,200,000.00 + 8,500,000) = $21,700,000
- Quality Rating Lead Times Cost Efficient Union (incumbent)
- UK contribution $8,927,060.00 US Contribution1,220,000 Rest of Contract @ 50% $9,816,505.00 Without having to substitute quality, we ensured great lead times and quality parts by using part of the US contract to meet the 50% requirement of the contract. Talk about Offsets and why they are a thing.
- *So now that we have met the manufacturing needs, we can move on to how we are going to enhance our workforce in order to be able to cope with the increase in production.
- Proper proportion of management (calculated from the suggested shift ratios) 14:1
- What Is Takt Time? Takt is the German word for the baton that an orchestra conductor uses to regulate the tempo of the music. Takt time may be thought of as a measurable “beat time,” “rate time” or “heartbeat.” In Lean, takt time is the rate at which a finished product needs to be completed in order to meet customer demand. If a company has a takt time of five minutes, that means every five minutes a complete product, assembly or machine is produced off the line because on average a customer is buying a finished product every five minutes. The sell rate – every two hours, two days or two weeks – is the takt time. With An even distribution among the work cell. The time it takes to manufacture goods can be calculated to make sure production stays on track. Efficient workers staying on track ensures the production is timely. If something is not on time, this is an indicator for management to search for the root of the cause and fix the issue.
- Why? Identify and cut waste Increase capacity Build a foundation for continuous improvement Sort Simplify Sweep Standardize Self Discipline
- Throughout history Boeing has notoriously made a reputation to continue to provide quality products on time making it so successful. By fulfilling the United Kingdoms contract, we now have a heightened workforce and proved that we can meet quota. Meeting this standard, we can expect renewed contracts of equal or more value.
- Throughout history Boeing has notoriously made a reputation to continue to provide quality products on time making it so successful. By fulfilling the United Kingdoms contract, we now have a heightened workforce and proved that we can meet quota. Meeting this standard, we can expect renewed contracts of equal or more value.