• Cross-functioned with a group of Engineering and Business students to plan Boeing’s future manufacturing. • Budgeted change in employment and select to insource suppliers’ components in order to minimize cost.

1. 2018 BOEING CASE COMPETITION
TEAM SIGEP
1

2. TEAM SIGEP
2
RENEGOTIATION OF DEFENSE CONTRACT
‣ German military defense budget cuts
‣ Extended contract of V-22 delivery schedule
‣ Scaling down production while still remaining profitable
‣ US contract over course of first 5 years
‣ Total amount of V-22’s is 300:
๏ 180 for Germany
๏ 120 for US

3. TEAM SIGEP
OVERVIEW OF PROPOSAL
3
‣ Optimizing Manufacturing
‣ Supplier Relations
๏ Selecting suppliers to improve quality and lower cost
‣ Employment
๏ Reducing labor headcount
‣ Finance
๏ Analyzing probability and justifying decisions

4. TEAM SIGEP
4
0
10
20
30
40
50
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
US German
V-22 PRODUCTION

5. TEAM SIGEP
5
4 G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G
3 G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G
2 A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A
1 A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A
J F MA M J J A S O N D J F MA M J J A S O N D J F M A M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D
2019 2020 2021 2022 2023
DELIVERY SCHEDULE

6. TEAM SIGEP
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2 G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G
1 G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G G
J F MA M J J A S O N D J F MA M J J A S O N D J F M A M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D
2024 2025 2026 2027 2028
DELIVERY SCHEDULE

7. TEAM SIGEP
7
MANUFACTURING

8. TEAM SIGEP
8
German/US German/US German/US German/US German/US
German
US
German
US
ORIGINAL V-22 PRODUCTION LINE
Stage 1
INNOVATED V-22 PRODUCTION LINE
Stage 7Stage 6Stage 5Stage 4Stage 3Stage 2

9. TEAM SIGEP
9
‣ Flow Management
๏ Takt Time : 65,000 hours for German,
55,000 for American
๏ Line balancing
‣ Waste Minimization
๏ Minimize time wasted
๏ First time quality
‣ Worker and Cost of Labor Ratio
๏ Prioritizing worker flow as well, no man
left standing
WHAT WE ARE PUSHING FOR RESULTS
‣ Establish Valuable KPI’s (Key Predictive
Indicators)
๏ On time production
๏ Efficient use of labor
๏ No workplace accidents

10. TEAM SIGEP
10
SUPPLIER RELATIONS

11. TEAM SIGEP
11
Commodity Qty Per A/C Supplier Location Unit Price Total Lead-time Delivery % Quality Accept %
Engines $2.00 Northeast USA * $3,250,000.00 $6,500,000.00 13 Mos 99.5 100
Aux. Power Units 2 Southwest USA * $261,900.00 $523,800.00 11 Mos 92 99
Landing Gear Set 1 Midwest USA * $900,000.00 $900,000.00 11 Mos 95 98
Cockpit Displays 2 Midwest USA* $300,000.00 $600,000.00 10 Mos 99.2 100
Radar 1 Midwest USA * $2,000,000.00 $2,000,000.00 13 Mos 99.2 98
Radios 2 Midwest USA * $152,000.00 $304,000.00 8 Mos 98 100
Flight Controls 2 Northeast USA * $170,000.00 $340,000.00 10 Mos 85 99
Cabin Intercom System 1 Southwest USA * $151,000.00 $151,000.00 10 Mos 100 99
Flight Control Computers 2 Euro Zone * $350,000.00 $700,000.00 12 Mos 98 100
Fuel Tanks 4 Southeast USA * $107,000.00 $428,000.00 10 Mos 75 90
Guidance System 1 Southwest USA * $1,050,000.00 $1,050,000.00 13 Mos 99.9 99.5
Troop Seats 24 Northwest USA * $450.00 $10,800.00 6 Mos 100 99.5
Crew Seats 2 Midwest USA * $475.00 $950.00 6 Mos 100 100
Interior Lighting System 1 Euro Zone * $125,000.00 $125,000.00 11 Mos 85 90
Flight Control Actuators 10 Northeast USA * $77,000.00 $770,000.00 13 Mos 99.4 99.7
Other - Required Commodity Parts $16,000,000.00 $16,000,000.00
Total $30,403,550.00 95.01333333 98.11333333
INCUMBENT

12. TEAM SIGEP
12
‣ Overall Goal:
๏ Cut cost without sacrificing quality
‣ Decisions on suppliers were
determined with 3 categories:
๏ Price
๏ First time quality
๏ Lead time
SUPPLIERS SELECTION STRATEGY

13. TEAM SIGEP
13
NEW MODEL
Commodity Qty Per A/C Supplier Location Unit Price Total Lead-time On Time Delivery % Quality Accept %
Engines $2.00 Southwest USA $3,150,000.00 $6,300,000.00 13 Mos 99 99
Aux. Power Units 2 Southwest USA * $261,900.00 $523,800.00 11 Mos 92 99
Landing Gear Set 1 Western USA $850,000.00 $850,000.00 12 Mos 98 99.5
Cockpit Displays 2 Midwest USA* $300,000.00 $600,000.00 10 Mos 99.2 100
Radar 1 Euro Zone $1,150,000.00 $1,150,000.00 12 Mos 100 100
Radios 2 Midwest USA * $152,000.00 $304,000.00 8 Mos 98 100
Flight Controls 2 Northeast USA $175,000.00 $350,000.00 11 Mos 100 100
Cabin Intercom System 1 Northwest USA $145,000.00 $145,000.00 10 Mos 100 100
Flight Control Computers 2 Euro Zone * $350,000.00 $700,000.00 12 Mos 98 100
Fuel Tanks 4 Southwest USA $114,000.00 $456,000.00 10 Mos 100 100
Guidance System 1 Southwest USA $1,015,000.00 $1,015,000.00 12 Mos 100 100
Troop Seats 24 Midwest USA $440.00 $10,560.00 6 Mos 100 100
Crew Seats 2 Midwest USA * $475.00 $950.00 6 Mos 100 100
Interior Lighting System 1 Northeast USA $123,600.00 $123,600.00 10 Mos 99.4 100
Flight Control Actuators 10 Northeast USA * $77,000.00 $770,000.00 13 Mos 99.4 99.7
Other - Required Commodity Parts $16,000,000.00 $16,000,000.00
Total $29,298,910.00 98.86666667 99.81333333

14. TEAM SIGEP
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Incumbent New model Difference
Total Cost $30,403,550.00 $29,298,910.00 ($1,104,640.00)
% on time delivery average 95.01% 98.86% 3.85%
% Quality average 98.11% 99.81% 1.7%

15. TEAM SIGEP
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LEAD TIME CHART
Year Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Part 9 Part 10 Part 11 Part 12 Part 13 Part 14 Part 15
2018
Q1
Q2
Q3
Q4
Start
Q1
2019
Q1
Q2
Q3
Q4
Start
Q1
2020
Ordered placed
Lead time for Shipping

16. TEAM SIGEP
16
LABOR STRATEGY

17. TEAM SIGEP
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V-22 Production = Labor x
Efficiency
(Support)
-
Insourcing Suppliers’
Components
LABOR STRATEGY

18. TEAM SIGEP
18
LABOR STRATEGY
V-22 Production = Labor -
Insourcing Suppliers’
Components
Efficiency
(Support)
x

19. TEAM SIGEP
LABOR STRATEGY
19
2020 20232019 2024 2025 2026 2027 20282021 2022
‣ Eliminate Overtime
‣ Fixed 5% employee layoff
‣ Proportional downsizing of Management,
Support Personnel and touch labor
‣ Replace people from Shift 1 to Shift 2
‣ Major reallocation of touch labor to in-house
manufacturing
YEAR 1-5 YEAR 6-10

20. TEAM SIGEP
TOUCH LABOR REDUCTION
20
500
625
750
875
1000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
SHIFT
1
SHIFT
2
850
950

21. TEAM SIGEP
TOUCH LABOR REDUCTION
21
500
625
750
875
1000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
SHIFT
1
SHIFT
2
900900

22. TEAM SIGEP
22
500
625
750
875
1000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
SHIFT
1
SHIFT
2
540540
TOUCH LABOR REDUCTION

23. TEAM SIGEP
23
FINANCE

24. TEAM SIGEP
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INCOME STATEMENT-REVENUE
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Revenue
US $840,000,000 $840,000,000 $840,000,000 $840,000,000 $840,000,000 $- $- $- $- $- $4,200,000,000
German $1,210,000,000 $1,155,000,000 $990,000,000 $825,000,000 $770,000,000 $1,210,000,000 $1,155,000,000 $990,000,000 $825,000,000 $770,000,000 $9,900,000,000
Total $2,050,000,000 $1,995,000,000 $1,830,000,000 $1,665,000,000 $1,610,000,000 $1,210,000,000 $1,155,000,000 $990,000,000 $825,000,000 $770,000,000 $14,100,000,000
‣ $55 Million per German V-22
‣ $35 Million per US V-22
‣ Paid upon delivery
๏ Follow delivery schedule

25. TEAM SIGEP
25
INCOME STATEMENT-EXPENSE
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Expense
Payroll
Management $13,020,000 $12,390,000 $11,760,000 $11,130,000 $10,605,000 $10,080,000 $9,555,000 $9,135,000 $8,610,000 $8,190,000 $104,475,000
Support $80,750,000 $76,755,000 $72,930,000 $69,275,000 $65,790,000 $62,560,000 $59,415,000 $56,440,000 $53,635,000 $50,915,000 $648,465,000
Touch Labor $104,310,000 $99,094,500 $94,139,775 $89,432,786 $84,961,147 $80,713,090 $76,677,435 $72,843,563 $69,201,385 $65,741,316 $837,114,997
Fringe $69,328,000 $65,883,825 $62,590,421 $59,443,225 $56,474,651 $53,673,581 $50,976,602 $48,446,497 $46,006,235 $43,696,211 $556,519,249
Total Payroll $267,408,000 $254,123,325 $241,420,196 $229,281,011 $217,830,798 $207,026,671 $196,624,037 $186,865,061 $177,452,620 $168,542,527 $2,146,574,246
Fixed Cost
Supplier Purchase $1,242,005,211 $1,156,017,095 $1,072,439,862 $991,273,510 $912,518,040 $490,613,736 $428,734,438 $369,266,022 $312,208,487 $257,561,835 $7,232,638,235
Other
Components Cost
$248,401,042 $231,203,419 $214,487,972 $198,254,702 $182,503,608 $98,122,747 $85,746,888 $73,853,204 $62,441,697 $51,512,367 $1,446,527,647
Total Fixed Cost $1,490,406,253 $1,387,220,514 $1,286,927,834 $1,189,528,212 $1,095,021,648 $588,736,483 $514,481,326 $443,119,226 $374,650,185 $309,074,202 $8,679,165,883
Other Cost
Factory Overhead $168,120,000 $171,990,000 $174,300,000 $175,050,000 $174,240,000 $177,840,000 $165,750,000 $152,100,000 $136,890,000 $120,120,000 $1,616,400,000
Manufactoring
Development
$100,000 $- $- $- $- $- $- $- $- $- $100,000
Total $1,926,034,253 $1,813,333,839 $1,702,648,030 $1,593,859,223 $1,487,092,446 $973,603,154 $876,855,363 $782,084,287 $688,992,805 $597,736,728 $12,442,240,129

26. TEAM SIGEP
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INCOME STATEMENT-FIXED COST
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Fixed Cost
Supplier Purchase $1,242,005,211 $1,156,017,095 $1,072,439,862 $991,273,510 $912,518,040 $490,613,736 $428,734,438 $369,266,022 $312,208,487 $257,561,835 $7,232,638,235
Other Cost $248,401,042 $231,203,419 $214,487,972 $198,254,702 $182,503,608 $98,122,747 $85,746,888 $73,853,204 $62,441,697 $51,512,367 $1,446,527,647
Total Fixed Cost $1,490,406,253 $1,387,220,514 $1,286,927,834 $1,189,528,212 $1,095,021,648 $588,736,483 $514,481,326 $443,119,226 $374,650,185 $309,074,202 $8,679,165,883
‣ Materials from Suppliers
๏ Gradually insource components in house
‣ Other cost
๏ Assumed 20% of the material purchased
from suppliers

27. TEAM SIGEP
27
INCOME STATEMENT-PAYROLL
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Payroll
Management $13,020,000 $12,390,000 $11,760,000 $11,130,000 $10,605,000 $10,080,000 $9,555,000 $9,135,000 $8,610,000 $8,190,000 $104,475,000
Support $80,750,000 $76,755,000 $72,930,000 $69,275,000 $65,790,000 $62,560,000 $59,415,000 $56,440,000 $53,635,000 $50,915,000 $648,465,000
Touch Labor $104,310,000 $99,094,500 $94,139,775 $89,432,786 $84,961,147 $80,713,090 $76,677,435 $72,843,563 $69,201,385 $65,741,316 $837,114,997
Fringe $69,328,000 $65,883,825 $62,590,421 $59,443,225 $56,474,651 $53,673,581 $50,976,602 $48,446,497 $46,006,235 $43,696,211 $556,519,249
Total Payroll $267,408,000 $254,123,325 $241,420,196 $229,281,011 $217,830,798 $207,026,671 $196,624,037 $186,865,061 $177,452,620 $168,542,527 $2,146,574,246
‣ Payroll Costs
๏ Touch Labor: $30/hr
๏ Management and Support personnel paid
annually.
๏ Fringe Benefits 35%
‣ Reducing head count
๏ 5% each year for touch labor
๏ Reduce Management and Support
personnel at the same rate as touch labor
to maintain efficiency
‣ Labor strategy will save Boeing 20% in payroll
over the next 10 years.

28. TEAM SIGEP
28
INCOME STATEMENT-OTHER COST
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Factory Overhead $168,120,000 $171,990,000 $174,300,000 $175,050,000 $174,240,000 $177,840,000 $165,750,000 $152,100,000 $136,890,000 $120,120,000 $1,616,400,000
Manufacturing
Development
$100,000 $- $- $- $- $- $- $- $- $- $100,000
Number hours
German
1,482,000 1,326,000 1,170,000 1,014,000 858,000 1,482,000 1,326,000 1,170,000 1,014,000 858,000
Number hours US 1,320,000 1,320,000 1,320,000 1,320,000 1,320,000
Overhead/hr in
house
$60 $65 $70 $75 $80 $120 $125 $130 $135 $140
‣ Overhead Costs
๏ Currently $60 per labor hour in factory
๏ Comes from additional support, material handling,
and quality control.
๏ Increases each year due to insourcing components.
‣ Manufacturing Development Cost
๏ $100,000 non-recurring development
๏ Modifying the factory floor plan
‣ Overhead cost spikes between 2023 and
2024

29. TEAM SIGEP
29
INCOME STATEMENT-PROFIT
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Profit
Net Present Value $123,965,747 $181,666,161 $127,351,970 $71,140,777 $122,907,554 $236,396,846 $278,144,637 $207,915,713 $136,007,195 $172,263,272 $1,657,759,871
Profit Margin 6% 9% 7% 4% 8% 20% 24% 21% 16% 22% 12%
‣ Profit Margin
๏ All positive despite decreasing revenue per year
๏ Highest: 24%
๏ Lowest: 4%
๏ Total: 12%
๏ Conservative estimates
‣ Net Present Value
๏ Positive overall trend
๏ At peak after finishing US contract
๏ Total profit made equals $1.65 billion

30. TEAM SIGEP
30
INCOME STATEMENT-PROFIT
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total
Profit
Net Present Value $123,965,747 $181,666,161 $127,351,970 $71,140,777 $122,907,554 $236,396,846 $278,144,637 $207,915,713 $136,007,195 $172,263,272 $1,657,759,871
Profit Margin 6% 9% 7% 4% 8% 20% 24% 21% 16% 22% 12%
0%
6%
12%
18%
24%
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
ProfitMargin

31. TEAM SIGEP
CONCLUSION
31
‣ 120 US V-22’s and 180 German V-22’s produced on schedule
‣ Production has been slowed and efficiency has been maintained
‣ Profit margins will be sustained

32. 2018 BOEING CASE COMPETITION
QUESTIONS
32