Pontifications: In chaos there is opportunity for Boeing during MAX grounding

Feb. 17, 2020, © Leeham News: Boeing executives said that while the 737 MAX production is suspended, efficiencies are being implemented on the assembly lines.

By Scott Hamilton

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.

What is ERP and SAP?

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.

Bumpy so far

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.

What Boeing is doing now

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.”



38 Comments on “Pontifications: In chaos there is opportunity for Boeing during MAX grounding

  1. Hallo,
    I think “SAP” is the name of the software respectively the company selling this software.
    Most people refer to the Software of SAP by saying SAP.
    SAP is one of many available ERP software solutions, apparently one of the most advanced.
    I know a company that recently switched from a small ERP-software to SAP. It was planned with half a year transition time, it ended with 3 years and substantial cost, and is not finished yet.

    • Part of the issue with ERP (incl SAP) implementations is that too much it is the business ends up needing to adapt to fit the ERP, rather than the ERP adapting to fit the business.

      • That ends up being a bad thing. What ends up happening is that the business insists the software is changed to match what it wants. A small army of consultants, a lot of money and time, and it is all finally done. The software then comes out with a new version, and either much of the changes have to be applied and verified on the new version, or since that is usually too much work, they stick to the older software version.

        After a while an article is written about how the company is held back by the software, and they make plans to change. But of course it is a big project, because first they have to customise the software …

      • There is definitely some truth to the “SAP” makes us do things the “SAP” want.

        But consider that one of the goals of an ERP implementation is to drive common processes across an enterprise. And as you can imagine that is not a simple or quick thing to do. Just getting agreement on which of several ways of doing things should be chosen as the new standard way is hard.

        It is also not a technology problem but rather a business, social and political problem…. the hardest kind.

      • That is not limited to software.
        Bookkeepers/ lawyers too in general have a knack to forget the reason for their existance. They are support.
        But quite often you see processes formed by bookkeeping that are unsuitable for the productive process.
        The reverse should be the case. “How can we assist”.

      • Yep, the SAP way or the highway!

        Aside from changing the way the company works to “working the SAP way”, based on my experiences of working for a global US corporation, it’s very likely the SAP migration comes in late and over budget.

    • SAP is a program that comes with different modules. Out of the box it’s useless as you have to adapt, localize and configure the software according to company business processes. The more complex the processes, the more complicated the rollout of the solution. Companies generally take the opportunity to redesign business processes and change management when introducing a new ERP system like SAP. The delays in rollout generally occur when companies make changes to current business processes which result in reworking modules that were already rolled out. It’s rare for a SAP rollout to be completed on time because of these change processes and the workforce receiving timely training and eventually acceptance of the new way of doing things.

  2. I can’t believe what I’m reading here. The rest of the world has been doing this for 20 years or so.

    • Of course they have been using ERP solutions over their sites for decades.
      The difference this time is they want to be using the single vendor -SAP and its covers all their divisions and locations AND its extended not only Boeings own manufacturing processes but even back to the raw material supply chain and then to the parts tracking for suppliers and then the parts as they arrive at Boeings plants
      Some divisions have made the migration like Global Services and the major suppliers
      This describes the process. In a few words they want the ERP to cover ‘the mine to final assembly line’

    • I thought Boeing purchased McDonald Douglass to get hold of Harry Stoneciphers software yet here we are putting in commercial system. SAP are an amazing company, they’re sales team seem to come in at board level bypassing general management.

      • That was 20 yrs plus ago and the software even older. Do you think current state of art software is going to be a lot better , especially when you want to integrate with your suppliers and their supply chains.

        • What I remember about SAP was that their maintenance planning module was a cumbersome black hole which provided no useful information but that replaced a user friendly specialised systems that were effective as executive management forced it down. Probably shut down a few companies. SAPs ERP however is the one ring that takes over all. SAPs Emergency Management for Public Sector Software is also amazing. Any government without something similar is likely to fail disaster relief.

      • Harry “Stoneciphers” ~translates to “hewn in stone”, doesn’t it?
        That was good enough for the Old Testament
        but for today is probably magnitudes below optimal.

        • Looked it up.

          stonecipher seems to be the anglicized form of “Steinsei(n)fer” ~= “stonewasher”
          ~= job description relating to post-processing ore before it went into smelter.

  3. Excerpt from Boeing’s PR guidebook:

    … the Jedi mind trick only works if you keep your audience fixated on some shiny irrelevant thing. Whatever you do, don’t mention EASA, trim forces or wiring. Then say firmly “Those are not the issues you are looking for..”

    Works every time™

    • Or as my generation might say, “Pay no attention to the man behind the curtain’.

    • This could be like how Boeing supposedly adopted Lean, or the Toyota Production System. Clearly they’ve not done that properly, otherwise we’d not hear the stories in the press that we do (MAX, engineers who raise issues benig fired, etc).

      Change is hard, and Boeing seemingly are in a bad place to start embracing it, necessary though it is.

  4. “”I think one of the things that that we learned is, when a fuselage is a day late, it makes a big difference.””

    Who wouldn’t have thought that, but Smith only thinks to have learnt.
    It’s not science, even an alcoholic has enough fuel at home.
    Now it makes sense that they take faulty parts out of the garbage bin and assemble them back into planes.

    Hey, it’s monday, good to start with a rant … makes me think of Renton

    • “Hey, it’s monday, good to start with a rant … makes me think of Renton”
      Place will be renamed to RantOn :-))

    • Of course a fuselage a day late has an effect…but Boeing what’s to find out what the original hold up was ..3 months back.
      Was it materials for a contractor to a contractor for Spirit or just a production bottleneck from say a factory flood in the Midwest or an earthquake in Japan which stopped production for a week.
      They want their newest ERP which is SAP brand to be better than the previous software and reach further back in the supply chain to the most minor part and the places where the their alloys and carbon fiber materials originate from.

  5. Our company (in Germany) has been transitioning to SAP for a few years now. Am not certain when the hard start date was. We are having all sorts of issues as well, but I sometimes suspect part of the problem is the stubbornness of people here to adapt, something which needs to be done when one is buying off the shelf products. Theoretically we will be ceasing to use the old system in July of this year. Am curious to see if that is the last move to the right!

    I believe SAP will be extremely good for my company in the long run, but they need to learn that their old program (a self created monster out of the 90s), despite some advantages, is an 0ld, obsolescent and cumbersome monster with other, more serious limitations.

    My wife’s company has been using SAP since before she started over 10 years ago and they seem to be having no issues with it. Having said that, they are a jewelry company with a somewhat smaller parts list content, albeit a far larger assortment of products.

    I can imagine Boeing having a very difficult time of transitioning to SAP. It is a big job, and as noted, there seems to be holdouts among the Boeing employees who absolutely refuse to work with the new system. Maybe they have a point but it seems to me a far cry from the “we can make this work” attitude I saw there when I worked there in 2001-2002. That had truly impressed me, especially after I started working in Germany a year after that and was constantly exposed to the “that won’t work at all” mentality.

  6. No matter what ERP or supply chain planning system you use, a change to SAP for a company that wants to build 52 aircraft/ month with 300,000 pieces of hardware each, is a hard task. Let alone the fact that The Boeing Co does not have an integrated ERP process across all aircraft assembly lines (let’s remember the supply chain issues with 737/MMA/P-8 and then the 787-7-8-9-10 evolution, and the St Louis/Philadelphia and legacy sites), and the different taste and brands of components that the airlines want on their aircraft. Once you have a complete and well defined and priced Bill of Materiel (BOM) you can then start to “kit” the aircraft in the sections on how the aircraft assembly process is defined. For a hardware planning manager, the new software needs to comply with 1. the assembly process and parts flow and 2. all BOMs and aircraft kits need to be built into the SAP database. You need to stop the line and try out the build process with several prototypes section and subsection builds down to the component list before going full board. Once it is in process, great savings to inventory and storage and just in time hardware arrivals can materialize. Not easy and it takes an entire team to do it.

  7. I don’t know of any company I’ve dealt with that has had a smooth SAP implementation. They all turn into nightmares for the customer and front-line employees for months or years after go-live.

    • I would never sign a contract with SAP without a fixed price. Either SAP knows their business and knows what they are doing (professionals) for a fixed price or I choose other software.

      • Thats mis-understanding the complexity of the Boeing project or their scale
        It could be described as from the ‘mine to the final assembly line’ and includes all the suppliers and parts in between.

        This was the last line of the previous story , now out of paywall.

        “Boeing continues to post on its jobs website and in LinkedIn jobs for ERP/SAP, located in India.

        • “Boeing continues to post on its jobs website and in LinkedIn jobs for ERP/SAP, located in India.”

          Good luck with some hapless Indian soul finding and fixing undocumented proceedings in Seattle.

          • This, right here.

            Considering how disorganized a company Boeing is, I can’t imagine that they even know what requirements to give their programmers and SAP is not a flexible system, so if you don’t get it right then there are months of re-work.

            Combine this with Boeing’s culture of, “Everything is fine.” and you have a recipe for tens or hundreds of millions of dollars sunk into a system that takes away the business’ agility and doesn’t give a ROI for decades (long after frustration-based turnover skyrockets).

          • Boeing Commercial has been using a high level ERP since 1999… When it did cause an assembly line shutdown.
            Boeing Global Services has already migrated to SAP, so it’s likely they already know how to work through their own existing ERP and their suppliers systems to understand the migration pathway. Unlike what you think putting any commercial plane into production and having it certified are far more complex than a mere enterprise resource and decision support software suite

      • SAP_SE knows what they are doing.
        do you know what you are doing?

        The transition usually exposes the hidden secrets of your company. All the little things done without a paper trail or knowledge to management.
        My guess is the convoluted system at Boeing and their often unofficial shortcuts and the intricate interation with their unions really start to go messy if you want to mirror those in an ERP system.

        • Boeing has long had an ERP for it’s commercial airplane manufacture and so would their tier 1 suppliers.
          I don’t think you know what you are talking about either

        • “”The transition usually exposes the hidden secrets of your company. All the little things done without a paper trail or knowledge to management.””

          Yes, that might be true. Of course the hidden secrets can’t be included in the contract. Anyway, I read that one company had so massive trouble that they turned back to their old software and paid millions to SAP for nothing.

          The NHL (ice-hockey) made a deal with SAP too for the statistics and infos on the website, included infos and stats from decades ago. I think it was for a fixed price. I followed the changes they made day by day.
          I don’t like it, it was better before. It’s like you said with some hapless Indian soul who knows nothing about hockey. NHL management is bad too, kind of bean counters too.

          I think it’s better to do simple software changes and keep everything working. Better to do it step by step instead of going to the end game directly.
          It’s like the MAX, it would have been better to keep the engines lower with a smaller fan diameter and less fuel efficiency. Instead the bean counters went the macho way and still going that way till they fall.

    • Yes, normally 2 years late to get SAP R/3 running correctly after all customized “Z” transactions are debugged. Think RR and United Technologies also went thru this. The budget overshoot starts with $.5M and up to the sky. Don’t know the record in budget overshoot to implement a full SAP R/3 implementation?

  8. But guys – we do have on the globe car makers who make over 1 000 000 cars per month ! The total quantity of parts is somewhere else compared to airplane maker.
    OK, I get it the car is MUCH less complicated how ever is not simple. And all those run with SAP and all those achieve that all items arrive to the factory within minutes of plan time and they DO ARRIVE. They do process much bigger quantities of all parts and those parts are being hauled in not from 100 km away but some over the globe and still can be done with less than 1 hour tolerance. The car makers basically do not have stock – their stock space are the trucks coming in time.
    Also the cars running through the line are not the same – they have different options and those are made different already on the line.
    Even some car makers are making different models on one line and they can cope with it very effectively.
    So why it should be such a problem with lousy 52 pieces of something ?

  9. Certainly adoption of fancy software promoted as a panacea is fraught with risk, especially when the user is a bureaucracy.

    (Horror stories with governments are legion, they like Boeing are bureaucracies, as are suppliers – but a government official in OR had to sue one of the likes of Accenture, EDS, HP, and IBM for defamation as they blamed her for their own problems.
    And the BC gummint avoided a school class scheduling program developed by a local school board because they wanted a big supplier for support – yet that switch from non longer supported software was a disaster.)

    On the 787 program, Boeing wouldn’t fund training for a crucial new database, for example. (The training silo claimed not to have funding, yet management had a deadline for service introduction of the airplane.)

  10. SAP is far better than any ERP sold before … AFAIK it was developped from Comet ERP in Germany a Nixdorf then Siemens product

    I had the opportunity to work on starting SAP in 3 small companies (less than 10 000 components) it is a huge undertaking as it includes a lot of informations not present in ERP’s
    Every thing and I mean everything (volume, price, delays to get parts,minimum size of order,alternate supplier etc…) must be kown for each component built-in and suplied from outside

    Once it works, it is a marvel !! Thank you German software designer

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