March 2005 
Volume 03, Issue 10 
Commercial Airplanes

The Case to Place

Why Boeing partners with firms from around the world to develop commercial airplanes


The Case to PlaceGoing global is good for business.

This is especially true in today's highly competitive marketplace in which access to the best in design and production technology means honing the keen edge of success.

"We can't be world-class at everything," said Hank Queen, retiring vice president of Commercial Airplanes Engineering and Manufacturing. "We focus on our strengths and reach out to the world for the best skills and technology to complement those strengths."

"Global work placement is a way to improve your business, not an end in itself," added Jim Morris, previously vice president of Commercial Airplanes Supplier Management. "By working with the best suppliers, we get the best value for our customers, which means we sell more airplanes. Selling airplanes is job security for everyone." Although global suppliers are important, Boeing itself produces 65 percent of the value created in the company's current product line in the United States. In addition, 22 percent of the value comes from U.S. suppliers, Morris said. That's based on the dollar value of the airframe, excluding engines.

Morris listed four main reasons for placing work outside Boeing:

"We always look at the business case first," said Morris, now BCA vice president of Engineering and Manufacturing. Does placing the work make good business sense in terms of excellent quality, cycle time, delivery requirements, and cost?

  • Having a presence in a country can be important to building long-term relationships that can lead to sales.
  • If a government owns the airline, Boeing often is required to place work in that country.
  • Sometimes Commercial Airplanes can help the larger Boeing enterprise by placing the work.

Airbus seeks global suppliers' edge

Like Boeing, Airbus works with suppliers around the globe to gain a competitive advantage in the commercial airplane industry. Airbus is focusing its efforts on the United States, Russia and Asia.

In recent years, Airbus has announced three new engineering centers outside its home nations:

Wichita (Kan.) Design Center, opened 2002, currently staffed by approximately 140 engineers

Moscow Design Center, opened 2003, staff planned to increase to 100 by the end of 2004

China Engineering Center, opening this year, staff level planned to rise to 200 by 2008

Much of the recent push to expand Airbus' supplier base globally came during the development of the A380. Here are some of Airbus' larger suppliers on the A380.

United States: Airbus claims up to 50 percent of A380 procurement will be from U.S. suppliers, including General Electric, Rockwell Collins, Goodrich, Honeywell and Northrop Grumman.

Russia: As part of an industrial cooperation program worth $800 million over 10 years, Airbus recently announced placement with Irkut of A320 work packages, including the nose landing gear bay, keel beam, flap track and a floor grid section.

China: Last fall, Airbus announced plans to increase its China procurement from around $15 million to $120 million by 2010.

Japan: Fuji Heavy Industries is producing composite assembly structures for the A380 vertical tail plane. Jamco is designing and manufacturing the A380 electronics bay rack.

Indonesia: Indonesia Aerospace (formerly IPTN) is providing wing rib assemblies for the A380.

Malaysia: Composite Technology Research Malaysia is designing and producing the fixed leading edge lower panels and the inboard outer fixed leading edge for the A380.

Korea: Korea Aerospace Industries Ltd. is supplying the A380 wing bottom panel.

—Janet Boggs

"Access to markets is important because the company traditionally sells approximately two-thirds of its airplanes outside the United States," Queen said. "In years when our domestic customers experience difficulties, we sell even more."

In 2004, more than 90 percent of Commercial Airplanes' orders were from customers outside the United States, Queen noted. "The company applies certain criteria the company before placing it anywhere," Queen said. "Does the work provide a competitive advantage? Is it applicable to future products? Does it offer training opportunities? Does it help us retain up-to-date understanding of engineering and manufacturing processes?"

If the work meets these criteria, the company generally decides to keep it in house, he added.

The ability to tap around-the-clock expertise is another factor in deciding to place work externally. As workers in the United States go home, the company's international partners and suppliers are just beginning their day. As a result, work moves forward 24 hours a day, which helps compress schedules and cuts cost.

The Boeing Design Center in Moscow a competitive edge. "Russia has a large, well-trained pool of aerospace engineers and an outstanding knowledge of airplanes in general, especially in the area of monolithic structures, which will help us simplify our products," Queen said. "Through working with the Boeing Design Center, we take advantage of their expertise and improve our business overall."

Using the Boeing Design Center's skills helped Commercial Airplanes make the business case for going ahead on the 747 Special Freighter and for awarding the 787 work to Wichita, Kan., Queen said. In both instances, including the center's engineers as part of the design virtual team reduced costs and allowed the entire team to win.

Although there is no direct linkage to the Boeing Design Center, Queen added that Commercial Airplanes' relationship with the center smoothed the way for polar routes through Russian airspace for world airlines. It also helped with as the activation of alternate airfields to allow Boeing 777s to fly new extended-range twinengine operations flights connecting U.S., European and Asian destinations. In addition, it encouraged the placement of 19 used Boeing airplanes in that country.

"The long-term commitment of the company to the Boeing Design Center enhances access to future markets," Queen said.

Stabilizing the workforce is another reason for placing work. By engaging the research capacity of the Boeing Design Center during the development surge of a new product, and afterward employing its people on sustaining work, the company hopes to avoid the swings in employment that affect employees and their communities.

"The Russians know this is the case upfront, and that makes a difference," Queen said. By doing this, the company preserves highly skilled, high-tech jobs for its U.S. employees.

What does the company's global work placement strategy mean to the future of Boeing?

"Our industry is always changing because technology is always moving forward. We'll always need the leading edge in design tools. We'll always need to be training to maintain and increase our skills," Morris
said. "That's what Boeing is all about—innovating to give us the competitive advantage that will secure our future.


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