Boeing Does More With Less

The News Tribune (Tacoma WA) ^ | 18 May 2006 | John Gillie

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It’s taken five years of careful cultivation and sacrifice, but The Boeing Co.’s lean production initiative is yielding impressive results, the leader of Boeing’s commercial airplane unit told Wall Street analysts Wednesday. Alan Mulally, president of the aircraft maker’s Commercial Airplanes Group, said the productivity improvements have prepared Boeing to handle the growing demand for new airliners without the wasteful mass hirings that have marred previous demand swings. In short: The company makes more airplanes with fewer people.

The proof of Mulally’s assertions is in the numbers:

• Boeing’s commercial airplanes operation has slashed its number of suppliers by 68 percent, simplifying ordering and management of parts and cutting overhead.

• The time between an airline ordering a new aircraft and its delivery has been reduced from 14 months to 10 months if there’s still a production slot available. In the next few years, Boeing wants to cut that to six months.

The company’s efforts to reduce the amount of custom features it will permit on its aircraft has helped reduce the complexity and re-engineering needed to build each plane.

• At the end of the last boom cycle in 1998, Boeing Commercial Airplanes employed 209 workers for every plane it produced that year. This year, the number of workers per plane likely will be just over 130.

The company has accomplished this reduction by outsourcing more parts production and improving the methods of assembly. Boeing, for instance, now uses what’s called a “moving line” assembly process to build most of its airliners.

That method eliminates the necessity of repositioning airliners periodically as they moved closer to completion. Now the partially completed planes continually move toward the hangar door and completion.

• The Commercial Airplane Group’s employment, which once stood at more than 119,000, has been reduced to a little more than 50,000, and Mulally expects it to rise only slightly as Boeing raises its production pace. The company expects to produce about 395 planes this year and about 445 next year.

• Boeing has reduced the length of time to build a typical airliner by 50 percent. The company expects to be able to do final assembly on its new 787 in three days.

• Production rate increases, the bane of the company’s existence in the late ’90s, are being carried out without major problems. Boeing last year upped its production rate – the number of planes it produces per month – six times. Already it increased production three times this year and has two more rate increases scheduled.

• The company has trimmed back on its facilities needed to produce aircraft. In 1998, it occupied 71 million square feet of space. This year, it occupies just 38 million square feet.

The company soon will have shut down all of the former McDonnell Douglas commercial airplanes factory in Long Beach, Calif. It has begun converting that site into a multifamily residential area and office park. In the Puget Sound area, the company shut down its former 757 production line and sold a portion of its Renton plant parking lot for an electronics store.

In Kent, Boeing sold land at its Space Center to commercial developers who are building warehouses and offices.

The productivity improvements would be empty achievements if the company’s finances hadn’t improved because of them.

At the commercial airplane operation, financial results have clearly enjoyed a boost, Mulally said.

Revenues are up from $21 billion in 2004 to an estimated $29.5 billion to $30.5 billion in 2007. Profit margins have risen in step with those better revenues, he noted.

In 2004, the company enjoyed yields of just 3.6 percent on its commercial airplanes operation. In 2007, the margin in commercial airplanes is expected to exceed 10 percent, Mulally said.

In the meanwhile, order activity has been brisk. The company’s airliner backlog now amounts to about $132 billion compared with less than half that figure in 2003.