Boeing Undergraduate Case Competition 2016

UNLOCKING THE NEXT
100 YEARS OF SUCCESS
CHRISTINA LI
CALEB KWOK
CASEY CONNER
CHRISTIAN GIBSON
CARLEY BELSTERLING

BOEING’S 1916 – 2016 AT A GLANCE
Operate as One
Delivering
customer value
Leading with
innovation
Growing through
productivity
Leveraging
global strength
100 Years
Kaizen
J.I.T. Efficiency
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
• 120 to U.S. Navy (2017 – 2021)
• 180 to Germany (2017 – 2021)
• Produce 5 per month at capacity
V-22 OSPREY CONTRACTS
Circling Back
Renegotiated Contract:
• 120 to U.S. Navy (2017 – 2021)
• 180 to Germany (2017 – 2026)
• Max 90 to Germany (2017 – 2021)
How can we scale back production while
maintaining profitability?

K.E.E. CONCEPTS INITIATIVE
CELEBRATING THE PAST, PREPARING FOR THE FUTURE
A three-pronged strategy for success

hson
K.E.E. Concepts Initiative
Efficiency in our supply chainE
Kaizen-centered cultureK
Efficiency in the workplaceE
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

REDEFINING CORPORATE CULTURE
02• S.M.A.R.T. goals
• Recognizing achievements
• Celebrate hard work
04• Increase participation
• Teach growth philosophy
• Operating as One Boeing
• Inspire passion in
employees
01
03• Establish relationships
• Improve communication
Kaizen
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

57
hours
65
hours
KAIZEN’S VALUE ADD
Mentorship KaizenCulture Recognition
12%
increase productivity
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

EFFICIENCY IN THE SUPPLY CHAIN
Just-In-Time
Sourcing
100% of suppliers on
JIT contracts by Year 3
100% supplier quality
sign off by Year 3
Kanban “Card”
Pull system
Material replenishment
Takt Time “Rhythm”
Pace of production
Production time ÷ demand
Continuous Flow
Reduced work in progress
Minimal delay between steps
Standardized Work
Measure & document best practices
Minimize opportunity for variation
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

SOURCING CHANGES
Costs Per Aircraft
Incumbent $30,403,440
Weighted-Value
On-Time 40.00%
Quality 30.00%
Cost 20.00%
Lead-Time 10.00%
Engine
Supplier 1 Supplier 2 Suppler 3
5 3 1
5 3 5
1 3 5
5 5 3
4.2 3.2 3.2
Incumbent New
AVERAGE ON-TIME PERCENTAGE
99%
95%
New suppliers $29,507,500
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

5S PROGRAM: MATURITY LEVEL FOUR
Goal
Document housekeeping functions
Consistently follow schedules
Report sources and frequency of problems
Develop corrective action plans
Structure written housekeeping,
inspections, and workplace arrangements
Minimize needed items in work area
Arrange items for retrieval and use
Inspect workplace cleanliness daily
Restock equipment based on visual controls
Reduce production time
Sort
Set
Shine
Standardize
Sustain
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

DEMING CYCLE P.D.S.A.
Self-examine
processes and
take corrective
measures
Design
improvements
and define
success metrics
Implement
plan and
measure its
performance
Evaluate
effects of plan
and document
monitored results
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

PRODUCTION AND FINANCIAL IMPACT
0
10
20
30
40
50
60
70
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
AircraftProduction
Year
Germany
U.S. Navy
Gross
Income NPV
$889 MM
$1,337 MM
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

IMPLEMENTATION TIMELINE
Year 1
• Implement Kaizen
cultural programs
• All employees
complete Kaizen
Training
Year 3
• 100% suppliers
J.I.T. and quality
inspection
• 5S maturity level 4
Year 5
• Complete U.S.
Navy contract
• Continue transfer
of employees to
Chinook program
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
Year 10
• Complete Germany
contract
• Actualize project
NPV and gross
income
J.I.T. Efficiency

RISK MITIGATION
Investment in human
capital and the future
of Boeing
Heavy weight given to
suppliers with the
highest on-time delivery
rates
Accelerated re-training
program for V-22 work
Additional contracts
Supplier reliability
Extensive training
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
J.I.T. Efficiency

hson
Efficiency in our supply chainE
Kaizen-centered cultureK
100 Years
Kaizen
5S Efficiency
Implementation
Risk Mitigation
K.E.E. Concepts
Circling Back
Efficiency in the workplaceE
J.I.T. Efficiency

APPENDIX: SUPPLIER ANALYSIS
Engine Aux Power Units Landing Gear Seat Cockpit Displays Radar
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
On-Time 5 3 1 1 5 3 5 3 1 3 1 5 3 1 5
Quality 5 3 5 3 5 5 3 1 5 5 3 5 1 3 5
Cost 1 3 5 1 3 5 5 3 1 3 5 1 1 3 5
Lead-Time 5 5 3 3 5 5 3 5 1 5 3 1 3 1 5
4.2 3.2 3.2 1.8 4.6 4.2 4.2 2.6 2.2 3.8 2.6 3.8 2 2 5
Flight Control CPU Fuel Tanks Guidance System Troop Seats Crew Seats
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
On-Time 5 3 5 1 3 5 3 5 5 5 5 3 5 5 5
Quality 5 3 1 3 5 5 3 5 5 3 5 5 5 5 5
Cost 1 5 3 5 1 3 1 3 5 1 5 3 1 3 5
Lead-Time 5 5 5 3 5 3 3 1 5 5 5 5 5 5 5
4.2 3.6 3.4 2.6 3.4 4.4 2.6 4.2 5 3.6 5 3.8 4.2 4.6 5
Radios Flight Controls Cabin Intercom System Interior Lighting System Flight Control Actuators
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
Supplier
1
Supplier
2
Suppler
3
On-Time 5 1 3 5 3 1 3 5 5 1 3 5 1 3 5
Quality 3 5 5 3 3 3 5 5 3 3 5 5 5 3 5
Cost 3 5 1 3 5 5 3 1 5 1 3 5 5 3 3
Lead-Time 3 1 5 3 5 5 5 3 3 3 5 1 5 3 3
3.8 3 3.4 3.8 3.6 2.8 3.8 4 4.2 1.8 3.8 4.6 3.4 3 4.4

APPENDIX: SOURCING BREAK DOWN
Commodity Supplier On-Time Quality Cost Lead-Time
Engines Supplier 1 99.50% 100.00% $6,500,000.00 13 Mos
Aux. Power Units Supplier 2 95.00% 98.00% $525,000.00 11 Mos
Landing Gear Set Supplier 1 98.00% 99.50% $850,000.00 12 Mos
Cockpit Displays Supplier 3 99.50% 100.00% $606,000.00 12 Mos
Radar Supplier 3 100.00% 100.00% $1,150,000.00 12 Mos
Radios Supplier 1 100.00% 95.00% $300,000.00 9 Mos
Flight Controls Supplier 1 100.00% 100.00% $350,000.00 11 Mos
Cabin Intercom System Supplier 3 98.00% 99.00% $151,000.00 10 Mos
Flight Control Computers Supplier 1 98.00% 100.00% $700,000.00 12 Mos
Fuel Tanks Supplier 3 100.00% 100.00% $456,000.00 10 Mos
Guidance System Supplier 3 100.00% 100.00% $1,015,000.00 12 Mos
Troop Seats Supplier 2 100.00% 100.00% $1,045,000.00 14 Mos
Crew Seats Supplier 3 100.00% 100.00% $940.00 7 Mos
Interior Lighting System Supplier 3 100.00% 100.00% $123,000.00 12 Mos
Flight Control Actuators Supplier 3 100.00% 100.00% $770,000.00 12 Mos

APPENDIX: V-22 OSPREY TAKT TIME
Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
# aircrafts 50 60 40 30 30 30 20 20 10 10
Daily TT 0.136986 0.164384 0.109589 0.082192 0.082192 0.082192 0.054795 0.054795 0.027397 0.027397
Average Daily TT 0.082192
Original Daily TT: 0.164384

APPENDIX: 2017 – 2026 INCOME STATEMENT
US Navy Aircraft $4,800,000,000.00
Germany Aircraft $11,700,000,000.00
Total Revenue $16,500,000,000.00
Depreciation -$1,666,666,666.67
Production Worker Pay -$550,680,000.00
Production Fringe -$192,738,000.00
Support Worker Pay -$392,560,000.00
Support Fringe -$137,396,000.00
Management Pay -$70,400,000.00
Management Fringe -$24,640,000.00
Supplier Parts -$8,852,250,000.00
In House Parts -$2,213,062,500.00
Overhead -$1,062,000,000.00
Total Costs -$15,162,393,166.67
Gross Income $1,337,606,833.33

APPENDIX: DISCOUNTED GROSS INCOME
FLOW
2017 2018 2019 2020 2021
Net Income Flow $30,177,583.33 $275,333,833.33 $143,318,333.33 -$50,177,916.67 -$50,177,916.67
Discounted Value $30,177,583.33 $250,303,484.85 $118,444,903.58 -$37,699,411.47 -$34,272,192.25
2022 2023 2024 20225 2026
Net Income Flow $440,822,083.33 $238,325,833.33 $238,325,833.33 $35,829,583.33 $35,829,583.33
Discounted Value $273,715,831.22 $134,528,719.78 $122,298,836.16 $16,714,765.05 $15,195,240.96
Total Gross Income
$1,337,606,833.33
NPV
$889,407,761.21

APPENDIX: EMPLOYMENT TIMELINE
Year 2017 2018 2019 2020 2021
Production 1500 1800 1100 825 825
Support 834 1000 612 459 459
Management 109 130 80 60 60
Total 2443 2930 1792 1344 1344
Year 2022 2023 2024 2025 2026
Production 825 550 550 275 275
Support 459 306 306 153 153
Management 60 40 40 20 20
Total 1344 896 896 448 448

APPENDIX: 2017 INCOME STATEMENT
Total Revenue $2,500,000,000.00
Depreciation -$166,666,666.67
Supplier Parts -$1,475,375,000.00
In House Parts -$368,843,750.00
Overhead -$180,000,000.00
Total Costs -$2,469,822,416.67
Gross Income $30,177,583.33

Total Revenue $3,150,000,000.00
Supplier Parts -$1,770,450,000.00
In House Parts -$442,612,500.00
Overhead -$216,000,000.00
Total Costs -$2,874,666,166.67
Gross Income $275,333,833.33

US Navy Aircraft $800,000,000.00
Total Revenue $2,100,000,000.00
Supplier Parts -$1,180,300,000.00
In House Parts -$295,075,000.00
Overhead -$144,000,000.00
Total Costs $1,956,681,666.67
Gross Income $143,318,333.33

Germany Aircraft $650,000,000.00
Total Revenue $1,450,000,000.00
Supplier Parts -$885,225,000.00
In House Parts -$221,306,250.00
Overhead -$99,000,000.00
Total Costs -$1,500,177,916.67
Gross Income -$50,177,916.67

Total Revenue $1,450,000,000.00
In House Parts -$221,306,250.00
Overhead -$99,000,000.00
Total Costs -$1,500,177,916.67
Gross Income -$50,177,916.67

US Navy Aircraft $0.00
Total Revenue $1,950,000,000.00
In House Parts -$221,306,250.00
Overhead -$108,000,000.00
Total Costs $1,509,177,916.67
Gross Income $440,822,083.33

Total Revenue $1,300,000,000.00
In House Parts -$147,537,500.00
Overhead -$72,000,000.00
Total Costs -$1,061,674,166.67
Gross Income $238,325,833.33

Total Revenue $650,000,000.00
Management Fringe -$770,000.00
In House Parts -$73,768,750.00
Overhead -$36,000,000.00
Total Costs -$614,170,416.67

Boeing Undergraduate Case Competition 2016

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