March 2008 Edition

news & analysis

Aero firms told: Be sure supply chains really fly

New information from Deloitte Consulting LLP's Aerospace and Defense industry group indicates that the risk of failure for A&D companies is "real and significant" if companies don't implement changes now to help ensure the longevity and success of their supply chains.

"The risks are imminent," says Jim Schwendinger, vice chairman, global aerospace and defense, Deloitte Consulting. "Costs and inventories are growing, service levels are lagging, and products are not making it to customers on time or on budget. Significantly optimizing your supply chain for high-speed performance is an effective way to deliver what customers and the market expect."

Achieving supply chain success, Deloitte says, will likely involve enterprise-wide changes. As programs become larger and more global, the complexity of managing the supply chain grows tremendously. Aligning supply chain capabilities with the company's corporate strategy and growth objectives is key to building a sustainable, integrated model.

By taking an integrated supply chain view, companies can drive improvements in performance while also reducing costs.

"Over the past year the A&D industry has suffered numerous service issues, many as a direct result of inefficient supply chains," says John Coykendall, principal, Deloitte Consulting. "These difficulties have resulted in enormous cost overruns, delayed new product rollouts, missed delivery dates, and have forced companies to make serious adjustments in production, which, in turn, has affected their entire supplier network."

These major setbacks, Coykendall says, are many times the result of supply chain breakdowns. While companies frequently attempt to improve supply chain performance, too often the approach to solving one challenge creates disruption elsewhere in the supply chain. By taking an integrated supply chain view, companies can drive improvements in performance while also reducing costs.

"Supply chains have traditionally been depicted as linear streams, and this narrow view can lead to missed opportunities for improved integration of supply chain capabilities," says Schwendinger.

Five techniques A&D companies should use to boost supply chain performance include the following:

• Aligning supply chain and business strategy: Critical product decisions are made early in the life cycle. Careful thinking about aligning supply chain network strategy with business strategy early can drive performance down the road.
• Integrating multiple supply networks: Knowing when and where to integrate supply chain networks is critical. Single supply chains that serve all businesses will typically underperform on both cost and service objectives.
• Aligning and integrating supply chain planning: Poorly integrated planning activities can be detrimental. Companies need tight coordination and integration of demand plans, inventory plans and production schedules.
• Strategically managing the supply network: Aligning the supply chain organization to facilitate better decision-making is imperative. Businesses must manage multiple linkages and dependencies within the network to gain flexibility and competitive advantage.

Mitigating tiering risks: Companies must provide a consolidated view of demand through multiple supply chain levels. As visibility has shifted away from OEMs to Tier I, supply chain managers must increase their focus on Tier II and III players that have dropped below the radar.

Deloitte Consulting

Supply chain issue slows Dreamliner

The Boeing Company says that the first flight of the 787 Dreamliner has been moved from the end of the first quarter of this year to around the end of the second quarter to provide additional time to complete assembly of the first airplane.

Deliveries are now expected to begin in early 2009, rather than late 2008.

"The fundamental design and technologies of the 787 remain sound," says Scott Carson, president and CEO of Boeing Commercial Airplanes. "However, we continue to be challenged by start-up issues in our factory and in our extended global supply chain."

'Our revised schedule is based upon updated assessments from the 787 management team of the progress we have made and the lessons we have learned to date. This includes our experience on the factory floor completing production work on the airplane that was originally intended to be done by our suppliers,' says Boeing President and CEO Scott Carson.

Carson says that while solid progress has been made on the assembly of Airplane No. 1, the rate at which jobs are being completed has not improved sufficiently to maintain the current schedule.

"Our revised schedule is based upon updated assessments from the 787 management team of the progress we have made and the lessons we have learned to date. This includes our experience on the factory floor completing production work on the airplane that was originally intended to be done by our suppliers," Carson says.

Over the next several weeks, Boeing will be working with its customers and suppliers to assess the specific impacts of the schedule change on the 787's flight test program and entry into service. This effort will include an assessment of supplier progress in meeting their commitments to deliver more complete assemblies on subsequent airplanes.

"We are deeply disappointed by what this delay means for our customers, and we are committed to working closely with them as we assess the impact on our delivery schedules," Carson says.

Under 787 Vice President and GM Pat Shanahan, who assumed leadership of the 787 program last October, Boeing has provided additional resources to more effectively manage the 787 global supply chain. The company says it has assembled "a team of experienced executives, business managers, and planning specialists that will be based at the supplier partners, as well as in its own final assembly facility."

"We have brought together the right skills and leadership from around the company to ensure a successful start-up of our global production system," says Shanahan. "We have put the people, structure, and processes in place to execute our plan and we will take additional steps to strengthen our team if needed. We have made significant progress in reducing parts shortages, improving fastener availability and achieving static and systems test milestones. We are focused on getting the 787 flying, certified and delivered to our customers."

According to Boeing, "There will be no impact from the schedule change on 2007 financial results and the company does not expect the impact on 2008 earnings guidance to be significant."

Boeing Co.

Die racks are key to race for space

Greenheck is on a growth streak, and efficient use of die racks has eased its growing pains.

Having doubled sales in the past five years to almost $500 million, Greenheck is America's leading manufacturer of ventilation equipment. But continuous growth was straining the company's main production facility, which supplies parts nationally.

"We not only had to ramp up production, but also get leaner since we had limited production floor space," says Larry Toboyek, Greenheck's manager of tooling and maintenance at its main production facility in Schofield, WI.

To streamline production and meet quality, cost, and delivery goals, Greenheck purchased larger, progressive die stamping presses and built larger dies in its in-house die center. This helped to automate production into an essentially continuous process. The problem: storing the massive dies, measuring up to 8'x8' and weighing up to 10,000lbs, was impossible on standard storage racks, which typically support loads of only 5,000 to 6,000lbs.

"We had to stack heavier, higher, and more flexibly in die racks to meet our space and production requirements," says Doug Baumann, a manufacturing engineer at the Schofield facility. "And the storage racks had to safely withstand potential abuse since many of our operators aren't dedicated fork truck drivers, but hop on and off between jobs. In our 24-hour operation, we couldn't afford to deal with replacing damaged uprights, loose 2x4s or fallen load beams."

Super-support

The company turned to Wisconsin Lift Truck Corp, a material-handling and automated systems distributor, and Steel King, an industrial die rack and storage rack manufacturer. "Greenheck, which has a decades long relationship with Steel King, selected the die racks for their capacity, structural integrity, and ability to work well with the fork trucks we provided," says Bill Netzel, the CAMH-certified capital equipment representative at Wisconsin Lift Truck who helped with the project.

The heavy-duty Steel King die racks provided Greenheck with the strength, capacity, and flexibility to efficiently store even their largest dies where needed on the production floor.

"Because the racks are made of structural steel, with uprights of structural tubing and shelves of channel, they're very robust," says Baumann. "They allow us to safely store an extra 5,000lbs per rack beyond typical racks." Completely welded bed frames with all beams and supports from front to rear welded into one assembly add to the structural integrity, while heavy-duty 3/4" anchors and shims secure and level the racks.

In consultation with Greenheck and Wisconsin Lift Truck, Steel King provided standard sized die racks for use with standardized sub-plates, allowing efficient die stacking and use of production floor space. For optimal storage flexibility, the shelves are removable from the uprights and the shelf heights are adjustable in 3" increments across their entire vertical height.

Bottom-line support

"Standardizing rack size at the required capacity not only enabled us to add more shelving but also stack dies as high as our building height allows," explains Toboyek. "That gave us the means to cost effectively store our dies despite limited production floor space." In addition, the die rack solid metal shelf design allows die placement anywhere on the shelf, and can accommodate a variety of die sizes, allowing dies to be slid on or off a shelf for easy access and storage.

The efficiency of Greenheck's die rack storage has helped the company maximize its production, enabling continued growth without adding unwanted production overhead.

"We've added about 10 to 15 percent to our bottom line with the larger dies without adding any square footage to our stamping facility," says Toboyek.

Steel King