Feb. 17, 2020, © Leeham News: Boeing executives said that while the 737 MAX production is suspended, efficiencies are being implemented on the assembly lines.
At a Cowen & Co. conference last week, EVP and CFO Greg Smith outlined some of the efficiencies that are being put in place.
But another area that could be improved, not addressed by Smith, while the lines are shut down is supply chain tracking. This has huge ramifications for cost savings and streamlining. It’s part of the business plan for the next new airplane, whatever this is.
This process is called ERP, or Enterprise Resource Planning. Boeing is transitioning to a more advanced method, called SAP, or Systems Applications Projects.
Boeing Australia and Boeing Global Services have made the transition. But Boeing Commercial Airplanes’ transition is stalled due to middle management inertia, said several people who attended the Pacific Northwest Aerospace Alliance annual conference Feb. 4-6.
Boeing should use the production halt and slow ramp up to implement SAP, they said.
Millions of part are needed to build airplanes. Shipping and tracking them, assuring quality, identifying tampering and having parts arrive when they’re needed is an immense job.
ERP, SAP and similar programs aim to accomplish these requirements. A smooth-running system can also save a company the size of Boeing hundreds of millions of dollars a year.
A poorly implemented system also can cost a company huge amounts of time and dollars.
LNA took a deep dive into Boeing’s transition from ERP to SAP in October 2018.
As reported then, Boeing encountered some disruption on the 737 assembly lines. The company at the time blamed late engines from CFM. But the aerospace analyst for Cowen & Co. pointed a finger at an ERP failure as well, resulting in disruption of parts flowing to Renton.
BCA’s efforts to upgrade to SAP have been bumpy so far, say people with direct knowledge.
In the 2018 LNA report, a Boeing insider acknowledged the transition to SAP would take until at least 2021.
Today, people with direct knowledge say some Seattle-area BCA departments refuse to use the new system. The “GI-GO” factor (garbage-in, garbage-out) appears to be an issue. The LNA report in 2018 quoted John Byrne, by then retired from BCA’s supply chain management, about the importance of near-100% accuracy required for data input.
People at the PNAA conference said that Boeing should use this time to adopt and implement SAP.
When Boeing resumes production—currently, it has an April target date—it will be at low rates. CEO David Calhoun said Boeing doesn’t want to add to inventory. Restarting production will be slow and deliberate.
LNA reported that it will take four years for Boeing to reach rate 57/mo, the intended mark by the end of 2019 before the grounding. The initial low rate production is calculated to be 5/mo, with gradual increases to 52/mo (the pre-grounding rate) by late 2022.
This is the opportune time to make progress in switching to the more advanced SAP, the PNAA attendees said.
Smith told the Cowen conference what Boeing is doing now while production is suspended.
“While the 737 line has been down, the level of effort with the management team as well as the staff that we’ve kept is, what are all the productivity initiatives?” he said.
There were many there were “on the list but didn’t have implemented or had them time-phased because we were at a very high rate.” Which ones were difficult to implement?
“Every one of those is on the table and we’re getting updates on those and engage with those on a regular basis and getting them into place now,” Smith said.
“[We’re] relooking at buffer between us and the supply chain at a higher rate. I think one of the things that that we learned is, when you’re at a rate of 52 and a fuselage is a day late, it makes a big difference. We don’t want work out of position, so making up for it out on the ramp is not something we want to get in. So let’s relook at the buffer.”
Smith said Boeing is taking a new look at economic order quantities. It’s also seeing how staging work kits can be improved.
“We have 6,500 kits deployed, right down to paint brushes for the team,” Smith said. “So, they’ve spent a tremendous amount of effort, two-hour work packages, people on the airplane with everything they need. That’s a big efficiency driver where we’ve modified some of the capital or tooling all under productivity, getting down to root cause on shortages and really driving them to a corrective action. [We’ve been] taking all this time to just dig into these what I would consider inefficiencies at times and how do we come out of this healthier than ever.
“I really believe that we’re in a position to do that and that, ultimately, is going to be an opportunity. It’s going to make us more predictable from a delivery point-of-view, first time quality, no out-of-position work and reliability on delivering to the end customer. It’s going to drive a lot of efficiency, and driving some of that back into the supply chain as well.”