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ightglobal.com 10-16 April 2018 | Flight International | 17
Netherlands reveals
plan for long-term
spending increase
Defence PA less visible part of the business, Boeing already has one of the industry’s largest service operationsBoeingThe AnalytX data division recently passed the $1 billion sales mark
Boeingwhereas many of those suppliers
only have to sell once, and that’s
in the aftermarket,” Deal says.
Since standing up the business
on 1 July last year, BGS has
moved quickly into one new
market. The unit acquired a Boe-
ing 777 to “part-out”, or strip the
useable parts to sell to airlines at
a discount compared with facto-
ry-built spares, Deal says.
FASTER TEMPO
Boeing Commercial Airplanes’
(BCA) headquarters is in Seattle,
Washington, and the defence
business is based in St Louis,
Missouri: each with a tempo for
making decisions on new invest-
ments measured in months. The
newly established BGS head-
quarters in Plano operates on a
different tempo. A leadership
team meets every two weeks to
make decisions about investment
in new products or new markets,
Deal says.
“We’re not making bets like a
new [737] Max, [New Mid-mar-
ket Airplane] or new T-X [train-
er]. These are much smaller in-
vestment bets: a software update,
a 737 converted freighter with a
two-year development cycle,” he
says. “As we organised we came
forward with a much flatter or-
ganisation than our two business-
es. It increases the velocity of de-
cision-making. Speed in this
business is very important.”
As Boeing makes bets on new
investments, achieving the “aspi-
rational target” of $50 billion in
annual revenues remains part of
the plan. But the company has
softened the timeline for achiev-
ing that target. In November
2016, Muilenburg set the date as
2025, but now the company talks
about a five- to 10-year window.
The opportunities for growth
over that period are significant.
Boeing AnalytX, more than any
other division, represents the po-
tential of BGS. The division has
recently surpassed $1 billion in
annual sales from a portfolio of
data services, including analys-
ing fleet performance and relia-
bility, as well as supply chain
and inventory optimisation. The
$1 billion annual sales total is im-pressive for a new business, but
BGS believes it can grow by an
order of magnitude over time,
Deal says.
Another option to drive
growth is the newly consolidated
Supply Chain Management
group, which accounts for the
largest share of the BGS unit’s
overall revenues. At the heart of
this is Aviall, the parts distribu-
tion company that Boeing ac-
quired in 2006. Boeing does not
disclose Aviall’s annual revenues,
but confirms that overall sales
have grown more than 300%
over the last 12 years. In 2017
alone, Aviall revenues increased
by about 20%, Boeing says.
Aviall’s recent growth has been
fuelled partly by another of
Muilenburg’s strategic initiatives
with suppliers. In the first round
of the Partnership for Success
campaign that began in 2011,
Boeing focused on reducing sup-
plier pricing across the board.
The second round of the cam-
paign, which is ongoing, has
taken a broader approach, includ-
ing encouraging suppliers to out-source parts distribution on Boe-
ing commercial aircraft
programmes to Aviall.
“When we negotiate now as
Boeing in Partnering for Success,
we’re negotiating as all three busi-
nesses – not BCA or BDS [Boeing
Defense, Space & Security] only,”
Deal says. “We’re putting into
trade with our suppliers every di-
mension of our business, as well
as they’re putting in trade every
dimension of their business.”PARTS TOGETHER
To support further growth, Boe-
ing plans to integrate its three
separate parts distribution units- Aviall, BCA and BDS – on to
the same SAP-based enterprise
resource planning (ERP) plat-
form. Aviall adopted a SAP plat-
form four years ago, and a similar
version was activated for BCA
last October. As with many tran-
sitions to an ERP platform, BCA
has struggled with the transition,
with deliveries of spare parts to
airlines getting delayed in some
cases.
“There are very few cases
where we have impacted custom-
er operations,” says Richard Teza,
vice-president of business devel-
opment and global product strat-
egy for Aviall. “There are cases
though where we’ve made it
more challenging than it needed
to be for our customers. We’re
working hard to get that back so
we make it a lot easier for our
customers to operate.” ■
“These are much
smaller investment
bets: a software
update, a 737
converted freighter”
Stan Deal
Chief executive, Boeing Global Services