Leveraging Supply Chain to Mitigate Product Development Cost in Large Manufacturing Projects Rev 2 Study material For Educational Purposes Only. Material from information derived from available Public domain. RB/2019_SCM_Case Study/ CS2
Leveraging Supply Chain to Mitigate Product Development Cost in Large Manufacturing Projects Invention & Innovation Invention is defined as the creation of a product or the first time introduction of a process Innovation, on the other hand, occurs if someone improves on or makes a significant contribution to an existing product, process or service. Innovation creates value Value that is useful and satisfies consumers’ needs . What made Apple innovative was that it combined all elements — design, ergonomics and ease of use — in a single device “IPOD”, apple created a platform and tied into it directly, the ability to effortlessly keep the device updated with music. Inventor & Innovation If invention is a pebble tossed in the pond, innovation is the rippling effect that pebble causes. Someone has to toss the pebble - That’s the inventor. Someone has to recognize the ripple will eventually become a wave - That’s the entrepreneur. Shared thinking and informal collaborations as a key component of problem solving and accelerating change and to bring in Innovation. Which now stretches beyond corporate & geographic boundaries . Some of the most successful and celebrated innovations of the past decade center primarily on a new approach or a new way of using resources – internal or External . RB/2019_SCM_Case Study/ CS2
Leveraging Supply Chain to Mitigate Product Development Cost in Large Manufacturing Projects Creativity & Innovation “… creativity is the production of novel and useful ideas by an Ms. Teresa Amabile who teaches individual or a small group of individuals working together . Entrepreneurial Management at HBS This definition includes both the production of new ideas and affirms that creativity arises at the the process of transformation of these ideas in useful confluence of three fluxes: knowledge, products, services, processes, methods, procedures, etc. creative thinking and motivation The knowledge contributes Ability to combine different + the technical expertise to creativity through its two elements in a new way branches • Technical expertise could be a skill formed by the accumulated The influence of knowledge on the in‐depth experience in an organization over a period of time. creativity leads to the necessity of • Or an acquired expertise, rendered through a specialist agency an interdisciplinary approach for • Or could be a right combination of both of the above. each problem More and more innovation spring, not from particular industries or disciplines, but rather across them – the so called Medici Effect . "When you step into an intersection of fields, disciplines, or cultures, you can combine existing concepts into a large number of extraordinary new ideas" RB/2019_SCM_Case Study/ CS2
CASE STUDY - S UPPLY C HAIN TO AID NEW P RODUCT D EVELOPMENT P ROJECT – B OEING 787 Study material For Educational Purposes Only. Material from information derived from available Public domain. RB/2019_SCM_Case Study/ CS2
CASE STUDY - S UPPLY C HAIN TO AID NEW The 787 Dreamliner story - Concept P RODUCT D EVELOPMENT P ROJECT – B OEING 787 After losing market share to Airbus (owned by EADS) in the late 1990s, U.S. commercial aircraft manufacturers faced major competition from European companies. Boeing was under pressure to decide between two basic competitive strategies: • reduce costs (and the selling prices) of existing types of aircraft or • develop a new aircraft to raise revenues through value creation . Boeing needed something different to break away and create an innovative model – away from normally what it normally does. In 2003, Boeing decided to focus on developing an innovative 787 Dreamliner : • To create additional value for its customers (airlines & their passengers) and • To stimulate revenue growth & market response Boeing decided its acquired technical expertise over the years of building aircrafts, incorporating path-breaking innovation , with a motivation to be the leader in the pack. Boeing decided to introduce 787 Dreamliner – • incorporating the technical expertise it acquired over years of aircraft manufacturing, • to introduce certain revolutionary concepts to enhance travel experience for passengers, • through redesigning the aircraft and • offering improvements in comfort & benefit operators in increased haulage Boeing decided on a composite-intensive design RB/2019_SCM_Case Study/ CS2
CASE STUDY - S UPPLY C HAIN TO AID NEW The 787 Dreamliner story - Concept P RODUCT D EVELOPMENT P ROJECT – B OEING 787 Weight advantage: Boeing 787 will use composite-intensive design – will offer up to 50% in weight reduction and reduces the number of fasteners required by 80% compared with the traditional aluminum structure. An example of how far polymer use in 787: Boeing 777- designed in 1990 is made up of 11% composites , predominantly in the tail section and fuselage largely of alloy Boeing 787 is made up of 50% composites which also includes an entirely polymer composite skin ( including fuselage & wing). Composites are carbon-fibre-reinforced plastics (CFRPs) which cannot be riveted in the way metal is. They are therefore held together by lock-bolts inserted through 10,000 specially drilled holes in the flanges where the sections overlap Passenger Comfort: Composites Cost-per-mile advantage: The weight advantage Maintenance allowed improved flying experience also allowed 787 Dreamliner advantage: Unlike the 787 has larger & innovative traditional aluminum to use 20% less fuel , fuselages, Composites windows, carries 210 & 330 passengers resist rust and fatigue, higher pressurization levels, Flies long range up to 8,500 nautical miles. and results in 30% higher humidity, and reduction in cost-per-seat mile is expected 10% lower than quieter engines. – due to Chevron maintenance costs. others – shared between passenger & airline. Nozzles with Serrated edges RB/2019_SCM_Case Study/ CS2
CASE STUDY - S UPPLY C HAIN TO AID NEW The 787 Dreamliner story P RODUCT D EVELOPMENT P ROJECT – B OEING 787 However, in late 2007 Boeing announced a series of delays and the market reacted negatively . To monetize rapidly, It became imperative to reduce the 787's development time from six to four years and development cost from $10 to $6 billion . Boeing decided to develop and produce the Dreamliner by using an unconventional supply chain , new to the aircraft manufacturing industry and was a break from their past practice. The r estructuring of Supply Chain of 787 was envisioned to keep manufacturing and assembly costs low , while spreading the financial risks of development to Boeing's suppliers. 787’s new supply chain is based on a tiered structure that would allow Boeing to foster partnerships with approximately 50 tier-1 strategic partners. These strategic partners serve as “ integrators ” who assemble different parts and subsystems produced by tier -2 suppliers. Here, Boeing modelled it with some changes, on the lines of Toyota's supply chain , which has enabled Toyota to develop new cars with shorter development cycle times . RB/2019_SCM_Case Study/ CS2
CASE STUDY - S UPPLY C HAIN TO AID NEW M ORE ON D REAMLINER S UPPLY C HAIN S TRATEGIES P RODUCT D EVELOPMENT P ROJECT – B OEING 787 Boeing in its unconventional Supply Chain followed the following strategies: Outsource more : They decided to introduce multi-tiered Reduction of financial risks: Tier 1 suppliers will supplier structure, modified version of Toyota Supply Chain receive payment for the development cost only on to: Boeing delivering its first 787 to its first launch customer – ANA Airlines. Increase outsourced content from 2% in its earlier 727 (1960s ) to 30% in 777 (1990s) to 70% in 787 . This contract payment term is meant to incentivize the Tier1 partners to collaborate & coordinate their Parallelly- reduce development time & cost. development efforts . Further incentives in terms of: By reducing direct supply base, Boeing could focus more • Tier 1 suppliers would be allowed to own their of its attention and resources on working with Tier-1 Intellectual Property , which allows these strategic suppliers (pre-integration stages) rather than with raw partners non-exclusive rights and can be licensed to material procurement and early component, which were other companies. left to Tier 1 and tier 2 suppliers. • production of the entire section of the plane instead They also introduced web-based tool EXOSTAR to of a small part of the plane, will enable these facilitate Coordination & Collaboration . strategic partners in future growth & increased Increase production capacity without incurring additional revenue (spare part supply etc) costs by decentralizing the manufacturing process. RB/2019_SCM_Case Study/ CS2
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