2005 Computerworld Honors Program

	Supplier Relationship Management Solution The Boeing Company Long Beach, California USA Year: 2002 Status: Laureate Category: Manufacturing Nominating Company: i2 Technologies
	The same parts management system that engineers search to assure that they do not design a new part when one of a half million existing parts can be reused, is also used by purchasing professionals to help maintain assurance that the company always pays "similar prices for similar parts.
	The Boeing Company’s acquisition of many companies over the years created massive challenges related to the assimilation of different corporate cultures and practices. Specifically, various business groups were using different part numbering schemes and intentionally duplicating efforts to document, qualify sources, and procure the same commercial parts. This diversity of part numbers was hiding the opportunities our supplier management community needed to strategically manage their supply base and leverage their enterprise-level spending in certain commodities. As a result, some divisions of the company were unknowingly paying the same supplier as much as ten times more or less than other divisions for the same or highly similar parts. At the same time, new designs, prototyping, continuous product improvements, and changes brought on by new customer introductions create a demand for 15,000 new engineering releases each month with a non-recurring cost of US $5000 each. If the company is able to reduce these new design releases by a mere five percent, the company could achieve a $45 million annual reduction in costs. One of appealing methods, proven successful in other industries to achieve this type of reduction, was the concept of Design Reuse. However, the company had no way of retrieving, comparing, or communicating sufficient detailed technical data on different products to design teams in other divisions in other cities working on other products. The inherited diversity of part numbering schemes is inexorably attached to government (FAA, NASA, and the Department of Defense) oversight of product configurations and is further solidified by the extraordinary long life cycles for aircraft and other aerospace products. Indeed, all the processes and systems for new part development and release were configured to support product-level part numbering schemes. It was much easier to reinvent design solutions than it is to identify and reuse existing parts developed for other applications (including applications on the same Boeing product). Using object-relational database technology developed and licensed by i2 Technologies, the Boeing Company created a massive data warehouse of 500,00 part numbers fully described by technical features (called CPIMS – the Common Parts Information Management System) that became an enabling tool around which to develop break-through performance processes to optimize our supply base and facilitate the reuse of design solutions across divisions. This warehouse of data is complimented by neural network technologies developed by Boeing to identify similar parts based on comparison of geometric models. Since the construction of this data warehouse, teams of engineers now work with teams of procurement managers to provide analysis in support of target pricing and increased leverage of the company’s enterprise-level demand and spending on similar items. In some cases, duplicate parts are eliminated from the inventory base. Additionally these teams are able to influence the identification of a strategic baseline of suppliers used to support a preferred list of reusable, multiple-application parts that engineering can use as a foundation for programs to implement the Design Reuse philosophy. After one year of successful pilot programs, the Design Reuse team has a goal of achieving savings and cost avoidance of US$1 billion by then end of 2004.
	The Design Reuse project always had two sets of target customers with different business needs: supplier managers needed to pay less for the parts they already buy, and engineers needed to design as necessary for safety, quality, and cost, but to design or purchase new parts, tools, or materials only after researching reusable solutions available throughout the company. Both customers are now reaping the benefits from the system. Originally, the concept was to build a database to identify duplicate parts, and then use engineering to consolidate and renumber the items into a smaller baseline. Unfortunately as time went on the company discovered that the instances of exact duplicates were small and the cost to implement the changes were high compared with the value of the opportunity and the cost to create the database. Fortunately the collaboration among engineering and supplier managers yielded an unexpected alternate approach that exceeded the original savings projections while virtually eliminating the need for costly engineering changes to capture the benefits. The new idea is called “similar prices for similar parts.” The CPIMS database is used to provide reports that cluster parts that are substantially similar – especially with regards to features or properties that drive costs at the manufacturer. These reports are used by engineering to provide pricing targets to supplier managers. Supplier managers can enter into negotiations armed with better more attractive bidding packages (the chance to bid on the enterprise-wide national demand for a family of parts) and more information to see where the supplier’s cost drivers are across the package and the historical cost data across that part family. Pilot projects are seeing a 15 percent price reduction over the previous year. Using a ten-year Net Present Value calculation, the Design Reuse commodity teams realized a $350,000 benefit in the first year. With an annual spend of $2 billion per year for common aircraft commodities, the team is confident that they will easily exceed their original goal of $1 billion by the end of 2004. The benefits of the database as a reusable parts catalog are difficult to measure (as there are other initiatives aiming at reducing the number of new parts released), but enthusiasm for using the system is high, growing to over 800 users at 25 different facilities. Several key programs are expressing commitments to the project, including the Apache helicopter, the rocket engines for the next generation Space Shuttle, and an electronics design facility in Anaheim California by requiring their design teams to prove that they researched the database before they are allowed to introduce new parts. Once accepted as an operating norm, the use of the data in CPIMS signals two major cultural improvements in our business. First, that engineering participation in the supplier management negotiations process is valuable and desirable. Second, that design teams will be able to exercise processes supported by this valuable new data allowing them to understand and avoid the costs associated with the release of new designs. No longer will their creativity be measured by their ability to proliferate new designs, but rather by their ability to create cost effective designs that meet the application requirements.
	The Boeing Company’s success story with the Design Reuse project is built on the implementation of processes that were impossible to do without the development of supporting information technology and data. Fortunately, the project team was able to use existing commercial off-the-shelf software from i2 Technologies for the CPIMS database. The challenges in making CPIMS a successful enabler for breakthrough improvements were: developing a data model schema and taxonomy that was universal across the entire Boeing enterprise, gathering bills of material lists from 15 different sites, analyzing those lists to allow the team to gather the published specification sheets on each part, accurately converting paper-published part specifications to database field data on over 500,000 part records (containing an average of more than 20 database fields per each part record), and developing custom reports to identify clusters of similar parts. Further benefits are expected by integrating the data warehouse with bill of material development and release systems to ensure that new part introductions are carefully managed, controlling the proliferation of unnecessary parts and preserving the integrity of clean and accurate bill of material releases. This phase of the project development is underway in 2002. The application of this technology to this type of engineering data is exceedingly more retrievable and useful than the traditional part family-based specification or data sheet. Already major business partners like Bell Helicopter and Lockheed Martin are evaluating CPIMS as a collaboration resource. Similarly the company is considering the database as an important utility in the eCommerce procurement of the commodities described within it. The futurists at Boeing even see it as one of the ways that the company can transition away from paper-based product definition to an all digital environment. An enterprise common system helps the company simplify their design tools to universal suite allowing the easy movement of design and fabrication work anywhere in the world.
	Although i2 Technologies has several Aerospace and Defense industry customers who are using this technology for delivery of catalogs for preferred parts, none of these businesses has attempted the approach taken by the Boeing company, strategically managing the supply base at an enterprise level for the benefit of the users of the parts at the lowest level. Additionally impressive is the fact that the Boeing company is the largest aerospace company in the world, finding ways to leverage diverse business units developing satellites, space launch systems, the Space Shuttles, the International Space Station, commercial aircraft, military cargo aircraft, jet fighters, helicopters, and missile systems. It is happening today on the largest scale possible in that industry. The Boeing Company was recognized at the Aspect Summit on Commodity and Supplier Management in April 1999 for Leadership in vision and scope of the project, undertaken shortly after the merger of the Boeing Company with the McDonnell Douglas Corporation. In October 2001, the Boeing Design Reuse team received the i2 Technologies Ken Sharma Award for Excellence in the category of Value Tracking Methodology, based on the proven value captured by the team. In the early 1990s most of the aerospace industry entered into the business of using parametric databases as new part selection catalogs for design teams. Among them were Rockwell Electronic Systems, McDonnell Douglas, and Hughes Satellite Systems. A few years later, they were all part of the Boeing Company. In order to simplify investment in similar systems, the CPIMS project was first envisioned as a cost saver to combine multiple databases into one. Management soon realized that their plans to control costs by consolidating systems was insignificant to the business value that could be achieved by extending the database across the enterprise and using it to allow the company a way to strategically manage our supply base in selected commodities. On that day, the Boeing company proved why they are the industry leaders, stepping up to take on this challenge at a scale unachievable (and still unattempted) by their competitors.
	The CPIMS database and the Design Reuse commodity teams are in their early days as production systems, converting officially to the production and maintenance environment in January 2002. The goals of the project cover a span of years ($1 billion saved or avoided by 2004). To convince management to transition the project from development to production, the team took on small pilot projects as evidence that the technology was ready to deploy and proven to work in a production environment. In the first twelve months of just test pilot efforts, the team was able to prove $350,000 in savings, far exceeding anyone’s expectations. Some of the trade studies conducted so far are identifying potential savings of 15 percent across the $2billion spend in common aircraft commodities. What started out as a common catalog tool for six sites is now in use at 25 sites, with calls coming in for continued training for expansion to a larger group. Over 800 people at Boeing now have accounts to access the database. Feedback from training sessions and user questionnaires is very positive and enthusiastic. After having a taste of good data to carry into supplier negotiations, the supplier manager community has become the team’s strongest advocate, even up to the level where the Chief Procurement Officer regularly lobbies the Chief Technical Officer and the Engineering Process Council (Chief Engineers Council) for continued support and funding. Since 1998 CPIMS has been one of the top six internal development initiatives in the Boeing Company. Looking ahead, teams at Boeing are currently working supplier projects in four commodity families. As mentioned earlier, CPIMS is being integrated with Bill of Material management systems to ensure the control over the new part introduction process, developing preferred parts lists that optimize the supply base while providing technical excellence, and continuing to attack the $2 billion/year procurement of common aerospace commodities.
	In order to secure buy-in throughout the subject matter expert community across the enterprise, the Design Reuse team decided to coordinate the universal data model as a consensus activity, inviting experts from every Boeing site to participate. This stretched out the time it took to reach firm agreement, but the final acceptance was worth the wait. The most difficult (and costly) part of the job was gathering all the data needed for the system, auditing it, and re-writing it until it could be proven to be at least 95% accurate. Some of the data sheets were very old and practically illegible. Data entry clerks had to consult daily with engineering specialists to get interpretations allowing them to load the database accurately. Strict audits forced the team to reconstruct data as many as three times to get it perfect. Funding for the project involved “creative financing.” They were able get one organization to pay for the software licenses and IT support. Another organization provided the funding for database content development. Another group agreed to fund the pilot teams needed to harvest the savings. Now that the development phase is over, the system is now maintained by a centralized pool called Shared Services Group.