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PESTLE

• Political• Economics• Social• Technologi

cal• Legal• Environme

ntal

SWOT

• Strengths• Weakness

es• Opportunit

ies• Threats

Analysis

Problem Solution Implementation Finances

Analysis

China – WTO & AirbusGlobal Recession

Technological Strategic WindowSuppliers Developing Core

CompetenciesLegal Issue – Pratt & Whitney

Oil PricesEnvironmental Regulation and

ReformProblem Solution Implementation Finances

Current Supply ChainDevelopment of 787

Reliant onOUTSOURCING

PROBLEMSDelays and penaltiesThreat of IP theftTwo-tier outsourcingResponsibility vs. Accountability

- lack of control

Parts

Boeing:

35%Japan: 35%

Italy: 26%

Problem Solution Implementation Finances

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Solution

Supply Chain Management

High

Low

HighLow

Complexity of Supply Market

Imp

act

on

B

usi

ness Kraljic MatrixNon-critical

Many suppliersLow impact on

business BUT still may cause delays

StrategicFew Suppliers

High impact on business

Good relationship is key

Example: Food Service Equipment (Diethelm

Keller Aviation)

Example: Wingbox (Alenia)

Problem Solution Implementation Finances

Customer Relationship Management

“Safe Pair of Hands”

Soft ApproachFoster trust through transparency of operations

and soft-sell techniquesR Cheap, quick and easy to do

Q Repeated delays may make it difficult to believe

BUT WE RECOMMEND: Hard Approach Make a guarantee to deliver that is favourable to

the clientR Significant improvement in customer relations

Q High RiskProblem Solution Implementa

tion Finances

Leveraging the Experience

Lessons learned

• To reduce dependency on individual suppliers by:• Using multi-sourcing• Bringing them closer to us• Effectively monitor and manage suppliers• Build on supplier knowledge• Find a way to increase job security

Build-to-print and Build-to-performanceTAKE THE BEST OF BOTH WORLDS

Problem Solution Implementation Finances

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Implementation

LT Implementation Plan

Begin planning Sky Valley

Supplier management programme

2-part identification of suppliers

Non- Critical

vs.Strategic

Problem Solution Implementation Finances

LT Implementation Plan

Begin planning Sky Valley

Supplier management programme

2-part identification of suppliers

Methods used to grow Sky Valley

Develop Core Competencies

Non- Critical

vs.Strategic -Bargaining

Power &Cost Savings-Incentives to

relocate-Affiliate branch

-Acquisition

Problem Solution Implementation Finances

LT Implementation Plan

Begin planning Sky Valley

Supplier management programme

2 part identification of suppliers

Methods used to grow Sky Valley

Develop Core CompetenciesTake

Advantage of Benefits

Lower Costs- Less

inventory- Transportati

on- Transaction

Synergies-

Procurement Economies of

Scale-

Communication

- Wastage

Labour- Pool of workers

- Commitment to region: job

security

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Financials

FinancialsGrowth:• $32bn by 2013

commercial aviation• Following this – 3.2%pa

Incremental Cost of Sky Valley:• Incentives to re-locate :

~$2bn in in first 10 years until critical mass is reached• Higher salaries: more

workers in the USA – based on global wage differences and COGS growth rate

Problem Solution Implementation Finances

Benefits• Reduced penalties:

>$1bn in first 5 years • Transport cost savings:

increase as Sky Valley grows: 50% “near-sourced” by 2015• Labour Dispute

Savings: $150m annually

Qualitative• Efficiency• Communication• Synergies

Financials

Problem Solution Implementation Finances

$1bn NPV

Discount rate of 11.5%

Alternatives

Alternatives

Strategy

Do Nothing

Stop Outsourcing

Sky Valley

Feasible

R

T

R

Suitable

T

R

R

Acceptable

T

R

R

Conclusion

Conclusion