Boeing in Australia
Boeing Australia Limited was formed in the late 1996. During this time, it was a relatively new company that was globally extended from the US firm, The Boeing Company. It developed several capabilities in the areas of communications and space, maintenance and upgrade of aircraft and equipment of military, and site management. BAL and the legacy information system grew as both use internal communication and external dealings with customers. However, BAL faced difficult decisions as it sought to upgrade its procurement systems and processes that will improve the operations. In 1999, Russell Menere was recruited as a new National Procurement Manager of BAL, whose task was to look for the possible gains in productivity by ensuring there is an improvement in procurement processes through cost savings. He initiated a number of short term improvements so as to meet his objectives. These include rationalization of a large number of BAL’s suppliers; introduction of credit card purchasing system for low value, improving BAL’s relationship with its key suppliers, adoption of electronic ordering processes with BAL’s larger suppliers, and large volume consumables.
In 2002, Russell was supposed to decide what BAL’s next step should be having new opportunities available through e-business technology. He was supposed to invest in a new system which would simplify the procurement process across many different divisions and support complex interfaces with suppliers. Russell figured out several alternatives that would lead BAL to the next step. The first alternative was to recommend BAL to continue to sit on the fence and seek short-term improvement tools that are used for integration with its existing legacy system. Secondly, assess if BAL could afford to wait for the process to end, given that the main obligation of its major customer (ADF) was timely information in support of military readiness and the national security of Australia. For Russell to achieve his objectives, it was necessary to map the company’s existing procurement system, in which it is done by use of Materials Management Process Council (MMPC).
BAL was started in the year 1937, when the Commonwealth Aircraft Corporation, an Australian group, was licensed to build the NA-33 training aircraft for Northern American Aviation Incorporated. Rockwell Systems Australia developed capabilities in the areas of ship systems and electronics, modification, aircraft production and servicing became good extensions to its business by the year 1995. It was officially formed on the 6th December 1996, when Boeing acquired defense business and Rockwell’s aerospace, which included most of its Australian operations. In 1998, it relocates its head office from Sydney, New South Wales, to Brisbane, Queensland. It had 400 employees who were engaged in central administration, purchasing, finance, logistics, engineering, management information systems, and project management functions. There are four keys divisions that made up the organizations:
- The military aerospace support division
It provides engineering services in the areas of development, design, integration and testing of modifications to aircraft for the ADF as well as engineering support to the scientists and researchers of the Defense Science, Technology Organization’s Aeronautical and Maritime Research Library.
- The commercial aviation service division
A unit of Boeing USA, in conjunction with Boeing Airplane Services developed Commercial Aviation Services so that to provide integrated Fleet management within the Australia, South Pacific, New Zealand, Asia region and centre of Excellence Training Facility.
- The knowledge systems division
This is a department that provides innovative solutions for ground based control and command, intelligence, communications, surveillance and reconnaissance capabilities for the customers.
- The space and communication service division
This provides new ways of communication supports for customers, in designing the advanced defense satellite communication solutions and other design and research to develop information management and decision making tools so that to enhance the business of BAL’s commercial customers.
Relocating these four divisions under one roof allowed BAL to achieve synergies through more standardized operations and centralized, and also it allowed employees to feel part of single, larger team asserts. However, these four divisions were still autonomous in many different ways. They found out and removed their own work, and reported the same measuring criteria that were used in project performance and product quality terms, financial dollars, as well as a range of other measures required by BAL’s balanced scorecard. By the year 2002, BAL had over 3000 employees. Additionally, they had 12 different locations of its major customers, the ADF.
The major customer of BAL’s was the Australian Defense Force, which included the Royal Australian Navy (RAN), Royal Australian Air Force (RAAF), and the Australian Army. The number of personnel whom the ADF employed was approximately 51,500 full time employees. The amount estimated by the government which the ADF spent was approximately 12 billion dollars annually so that to meet it’s the most important objective, which was to ensure the security and defense of Australia. Some of the services which the customers required included:
- Military sites management and maintenance on behalf of the ADF.
- Upgrading and modification of projects such as F/A-18A/B Weapon System Hornet Upgrade Project at Williamstown, New South Wales.
- Ensuring they provide the RAAF with an Airborne Early Warning and Control systems that are based on the Boeing 737-700 aircraft.
- Providing two new ground-based air defense, control, command, and communication systems at RAAF Tindal in the Northern Territory and at RAAF Williamstown, NSW.
The legacy systems of all military organizations are unique. So that to populate these systems with necessary data, which enable the military to monitor the status of the Aircraft or submarines, they required BAL. Additionally, they required BAL so as to continually update the readiness of its military systems. The expectation of the commonwealth suppliers was certified; hence BAL needed to closely monitor any procurement activities that support the provision of services to the ADF. The information systems of Boeings help us to execute the core business beyond their customer expectations and using that to influence new business which is the key to their growth and profitable future. The business system of Boeing with their people and processes is the key element of their capability and strategic advantage.
The site of BAL had a combination of touch labor that consists of engineering staff and administrative people. The function of the BAL was to provide a standard suite of business applications, desktop and engineering applications, which were configured to the requirements of individuals within the organization. The main strategy of Boeing was to develop a corporate suite of integrated business applications which are specifically tailored so as to support the specialized process that is required of the aerospace industry. The system has being made available to their employees online at all sites and are used every day as a productivity tools in contract execution and as a source of information for decision making and business performance management.
The top-down management which BAL employed was compared with a pyramid where the board or the senior executives arrived at a vision for the company and set overarching objectives and targets. As a result, the next layer in the pyramid, more functional and central units, looked at the overall targets and objectives so that to align what they will do so that to achieve them. Despite being a private company, its values and visions were influenced by its parents company in the United States. BAL programmed the interfacing between the applications so that to further enhance their functionality and automate some of the processes. This will enable BAL to have more accurate and timely information and indirectly helped BAL to enhance its productivity.
There are three short term improvements to the procurement process and system. They are:
1. Rationalization and management of suppliers
This includes leveraging off the bargaining power of a particular group. This is a process where BAL has the opportunity to benefit from supply deals that are negotiated through Boeing. The second step includes rationalization of suppliers. This is the process where BAL verifies whether its suppliers were authorized and qualified to produce the necessary parts. The third step was to manage supplier relationships. This was done by establishing strong relationships with suppliers who were critical to BAL’s business and those larger ones who were tactically very important to BALL.
2. Introducing credit card purchasing
BAL places its orders electronically because of the demand of the large suppliers. This orders where characterized by high volumes but relatively low values. Therefore, the suppliers established the Web-based tools which enable BAL to order online, thus reducing order to delivery cycle times. The credit card system enabled BAL to purchase stuff to pick up transactions electronically and to make purchases, hence process them electronically through their application systems and then make payments via the banking system.
3. Formation of the materials management process council
The main objective of the MMPC was to examine BAL’s total supply chain and to study procurement processes that are used at the different sites.
In conclusion, Boeing Company has developed capabilities in the areas of communications and space, management site, and maintenance and upgrade of military aircraft and equipment. This has enabled them to be customer focused and help their customers to improve their business. BAL’s business system, together with their processes and people, has become a major component of their capability and strategic advantage.