June 2006 
Volume 05, Issue 2  
Leadership Message

Let’s take services productivity to the next level

James Bell
Executive vice president, Finance, The Boeing Company
Boeing companywide sponsor, Internal Services Productivity initiative
Chief financial officer, The Boeing Company

James BellAt Boeing’s annual investor conference last month, the financial community responded positively to the company’s excellent operational performance, record backlog, strong competitive position and prospects for future growth. And our stock is valued near an all-time high.

So if things are going so well, why are we putting so much emphasis on improving productivity and controlling costs?

Because the key to growing Boeing and remaining competitive in the future is continually finding ways to run the business better tomorrow than we did today—and even better the next day.

The Internal Services Productivity initiative, which I sponsor, is a companywide effort to significantly reduce indirect costs that are centrally managed or embedded in the business, while boosting functional productivity to enable growth opportunities and improve business performance. Boosting Boeing productivity strengthens our competitiveness, fuels growth and drives world-class financial performance. The initiative is a means by which we must operate the company.

Whether it’s eliminating redundancy, improving efficiency or providing more timely service users really need, you can think about it as taking Lean into the office environment.

The opportunity for savings is big. Boeing’s centrally administered costs, corporate and business unit functional support, Information Technology, shared services and nonproduction procurement consume a significant portion of annual revenues—and would continue to grow if unchecked.

Variability, complexity and lack of standardization add expense, hamper efficient business operations, jeopardize competitiveness and limit staff mobility. We must change to survive and thrive. If we can take redundancy out, get efficiency in and simplify our processes, we’ll see significant savings.

While declining to cite specific targets, Boeing Chairman, President and CEO Jim McNerney has said he’s looking for “nothing less than meaningful improvement” in Boeing productivity. And he’s predicted the initiatives and business momentum can take Boeing financial performance beyond our current 7 percent net-margin target.

None of this is to suggest Boeing businesses haven’t already been operating efficiently—they have. But now we’re taking it to a whole new level and applying it in new ways. It’s about changing the way we think about support functions and the way we operate the company—managing the “transactional cost” of supporting the business. To make sure we’re capturing good work already begun, we’re working to catalog projects across the enterprise in a central database where we can share best practices and spur new ideas.

We’re already seeing success stories from all corners of the company. At Shared Services, reducing purchase options and leveraging Boeing’s buying power for certain computer printer toner, for example, saved $450,000 in one year. Partnering with the 787 Dreamliner team to manage logistics for certain parts and materials used in final assembly and delivery enabled SSG to cut costs by 65 percent for a 10-year savings of $193 million.

At Commercial Airplanes, the Cost Management group is creating a standard operating procedure for forecasting labor rates in the Finance organization. Through this work, they think they can reduce cycle time from 12 days to four and whittle hand-offs from 40 to three.

We’re even getting more productive in the way we tell our financial story to external stakeholders like the investors we met last month. This year, we changed the way we post our annual report on the World Wide Web and shaved more than 90 percent of the cost of that process.

Whether on the manufacturing line or behind a desk, every Boeing employee makes a difference in company productivity. With every decision we make—whether it’s consolidating office supply purchases, value-stream-mapping major processes or challenging the way we have done things in the past to attack key cost drivers—we each have an opportunity every day to ask whether this can be done faster, more cost-effectively, with fewer touch points, less rework and with better quality from the customer’s perspective.

Every dollar we free up through productivity improvements is a dollar we can put into growing the company and, ultimately, creating more opportunities for employees and our communities. Ultimately, the more productive we become, the more we will help the company grow—for everyone’s benefit.


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