# Presentation: 421247

## State of the Union

**July 18, 2001**

## Agenda

**  **
**     **
**  ****State of the Industry**
**  ****AIA Issues**
**  ****What Suppliers Face**
**  ****AIA Response/Support**
**  ****Quality Issues**

## U.S. Aerospace Industry Sales

**NASA/Other**
**Gov’t**
**8%**

**Other**
**15%**

**Exports**
**27%**

**DoD**
** ****50%**

**NASA/Other**
**Gov’t**
**7%**

**Other**
**23%**

**Exports**
**42%**

**DoD**
** ****28%**

**19****8****9**
** ****($121B)**

**19****9****9****p**
** ****($155B)**

**Military**
**5%**

**Military**
**8%**

## U.S. Aerospace Industry Sales

**2000p ($144B)**

**Exports**

**41.0%**

**Defense **

**Dept**

**31.6%**

**NASA**

**etc**

**9.0%**

**Other**

**18.4%**

**1990 ($134B)**

**NASA**

**etc**

**8.3%**

**Other**

**17.6%**

**Exports**

**29.1%**

**Defense **

**Dept**

**45.0%**

**U.S. Aerospace Industry Sales**

**Notes:**
No longer dominated by defense
Importance of foreign trade

## Trade Balance by Industry, 1998

**Transportation Equipment Excl. Aerospace**

**Electronic Equipment Except Computers**

**Apparel and Related Products**

**Agriculture, Forestry and Fishing**

**Chemicals and Allied Products**

**Aerospace**

**Billions of Dollars**

**Miscellaneous Manufacturing Industries**

**Mining**

**Food and Kindred Products**

**Instruments et al**

**Tobacco Products**

## Slide 6

## U.S. Aerospace Industry Sales

**U.S. Aerospace Industry Sales**

**$8.0**

**$7.6**

**$8.0**

**$8.7**

**$30.8**

**$32.3**

**$31.1**

**$32.6**

**$33.4**

**$34.1**

**$35.8**

**$37.5**

**$21.9**

**$24.7**

**$25.9**

**$24.9**

**$37.4**

**$49.8**

**$54.5**

**$45.7**

**0**

**10**

**20**

**30**

**40**

**50**

**60**

**70**

**80**

**90**

**100**

**110**

**120**

**130**

**140**

**150**

**160**

**170**

**1997**

**1998**

**1999p**

**2000e**

**Billions Of Dollars**

**Civil Aircraft**

**Related Products**

**Military Aircraft**

**Space**

**Missiles**

**$149**

**$155**

**$148**

**$132**

## Slide 8

## Change In Business Base

**Primes**

**Suppliers**

**Pre-Cold War/Cold War **
**Integrator/Leader = DoD**

**Post-Cold War**
**Integrator/Leader = AIA**

_**Aerospace Industry Sales**_

_**Aerospace Industry Sales**_

**Commercial **

**Space**

**4.6%**

**Civil**** **

**Aircraft**

**35.1%**

**Civil **

**Aircraft**

**18.2%**

**Commercial **

**Space**

**1.3%**

## Aerospace Share Of National R&D Funding

**0%**

**5%**

**10%**

**15%**

**20%**

**25%**

**1977**

**1980**

**1984**

**1988**

**1992**

**1996**

**$83 Billion**

**$56 Billion**

**Aero%, Total Funding**

**Aerospace Share Of National R&D Funding**

## Today’s Trends in Aerospace Industry

**  ****Increasing civil/military integration**
**  ****Consolidation of companies at multiple levels driven by**
**    ****market, world economic situation, need to compete with**
**    ****American giants**
**  ****Emergence of competing sectors for capital**
**  ****Strong erosion of government-sponsored research**
**  ****Misconception regarding the government’s ability **
**    ****to implement reform**
**  ****Primes become systems designers, integrators, final**
**    ****assemblers and after-market supporters**

## Agenda

**  **
**     **
**  ****State of the Industry**
**  ****AIA Issues**
**  ****What Suppliers Face**
**  ****AIA Response/Support**

## AIA 2001 Top Ten Issues 

**  **

**  **

** ****Support the Presidential Commission on the Future of the U.S. Aerospace Industry **
**Support Global Implementation of Commercial Aviation Safety Team Recommendations **
**Establish International Consensus to Reduce Airplane Noise and Emissions Through ICAO **
**Continue Reform of Export Laws, Regulations, & Their Administration**
**Adequately Fund Aerospace Procurement and R&D**
**Continue Reform of Government/Industry Business Practices**
**Facilitate an Integrated E-Business Environment Among Suppliers, Customers, and Business Partners**
**Examine Multilateral Actions to Reduce Offsets**
**Develop a National Plan to Support the Commercial Space Industry**
**Reduce United States/European Union Aerospace Trade Tensions**

**AIA 2001 Top Ten Issues **

## SMC Input Into the Process

- Acquisition Reform for Suppliers
- Electronic Commerce
- Engineering/Tech Talent Attraction & Retention

## Commission

- Purpose:  	Make recommendations to help
- 			maintain a “Robust” aerospace industry
- R&D funding
- general acquisition process
- government pay policy for contracts
- trade regulation & export controls
- tax laws on international competitiveness
- national space launch infrastructure
- loss of technical talent in science & engineering

## Agenda

**  **
**     **
**  ****State of the Industry**
**  ****AIA Issues**
**  ****What Suppliers Face**
**  ****AIA Response/Support**

## It's a FACT...

**Certified Supplier**

**Preferred Supplier**

**Long Term Supplier**

**Key Supplier**

**Strategic Partner**

**Joint Venture**

- Amount

- of

- Subcontract

- Work

**100 **%

- 0

- Supplier

- Preferred

- Joint Venture

** **_**Acquisition Reform**_

**  ****Performance Based**

**Design Team**

** ****Sustained Performance**

** ****Lean/Sigma**

** ****Reduced Cost Projections**

** ****Share Risk/Reward**

**Technology/Capital**

**Profit**

**100**

**Quality, Cost, Delivery, **
** ****Responsiveness**

**Every prime and major subcontractor is **
**reducing the supply base**

## Electronic Commerce

**Electronic Data Interchange...new technology, new business practices**

**Electronic Commerce**
**Changing the Way We Do Business**

** ****Reverse Auction**

**Extensible**
** ****Markup **
**Language**

_**Exostar.com **_
**Raytheon**
**Boeing**
**BAE**
**Lockheed Martin**

_**MyAircraft.com**_
**UTC**
**Honeywell**
**BEGoodrich**

_**Independent**_
**Avolo**
**Partsbase**
**AeroMatch**
**TradeAir**
**Rotable**
**ILSmart**
**Aerospan**

**B2B Sites**
** ****& Marketplace**
**Portals for **
**Procurement**

**Notes:**
Independent business sites and marketplace portals for procurement are generally not affiliated with specific manufacturers or systems integrators.  They try to bring supplier and customer together to sell and buy in aftermarket or commodity environments.

Manufacturers and systems integrators now have a choice to work w/these sites and portals and/or create their own such as “MyAircraft” and “Exostar.”

AIA harmonized Electronic Data Interchange Implementation Conventions (standards) uses the new Extensible Markup Language to allow electronic connectivity from the internet to company management systems w/o human re-keying of data.

If a supplier’s product needs to be inspected on delivery, EDI will be the preferred electronic procurement operation.  If product doesn’t have to be inspected on delivery, the marketplace portal will be preferred electronic procurement operation.

## Challenge...More Work Outsourced

**Suppliers**
**Move up**
**Supply**
**Chain**

**   **_**Suppliers Need**_
**  ****Add capability**
**  ****Be acquired**
**  ****Go out of business**

**1970s**

**1980s**

**1990s**

**2000s**

**2010s**

**Notes:**
Years on graph reflect 1970’s - 2010’s

## Agenda

**  **
**     **
**  ****State of the Industry**
**  ****AIA Issues**
**  ****What Suppliers Face**
**  ****AIA Response/Support**

## Challenges of AIA’s 

**Supplier Management Council**

**  ****Continue to be a...**
**  ****Robust, effective industry forum for improving relationships**
**    ****between suppliers and customers**
**  ****Stronger voice for national consensus because...**
**  ****Suppliers’ views must be heard in venues as**
**    ****important part of industry**
**  ****Suppliers are most vulnerable to global competition**
**  ****Suppliers need access to research dollars**

***When change occurs, suppliers are the most vulnerable!***

## AIA Goal

**Supplier Access to Global Marketplace**

**  ****Foreign Airshow Support**
**  ****Farnborough**
**  ****Paris**
**  ****Participation in AIA issues**
**  ****White House meeting on export control process**
**  ****Telecon Lecture Series**
**  ****Export licensing**
**  ****Individual Member Support**
**  ****AIA action on specific issues**

## Supplier - Customer Relationship

**CUSTOMER**

**  ****DESIGN/**
**  ****SUPPLIER PLAN**

**CONTRACTS**

**DELIVER**

**MAKE**

**IPT’S/ DESIGN TEAMS**

**FLOW DOWN CLAUSES**

**EDI/EC**

**LONG TERM RELATIONSHIPS**

**ERP**

**6 ******** ****(sigma)**

**LEAN**

**SUPPLIER SPI**

**MEASURING SUPPLIER PERFORMANCE**

**Streamlined  Relationship**
**Lower Cost**
**Globally Competitive**

**GREEN MFG**

**CERTIFICATION PROGRAMS**

**QMS**

## SMC Resolutions

**SMC Resolutions**
**Working Hard For You**

***Resolve to...***

***Resolve to...***

**Implement **
**one EDI system**
** ****industry wide.**

***Resolve to...***

## Making Sense of 

**Electronic Commerce**

_**Industry**_
**B2B Exchanges**

**AIA**

**SMC EC Working Group**

_**DoD**_
**Integrated Digital **
**Environment**

**Understanding**

**Knowledge**

**IDE Working Group**

## Aerospace Suppliers

**Typical Profile**

**          **
** **_**Long Term**_** **
**  ****Cooperative**
**  ****Delegates**
**  ****Benchmarks**
**  ****External awareness**
**  ****Strategic thinker**
**  ****Expands business & capability**
**  ****Leverages resources/information**
**  ****Acts quickly when external awareness,**
**    ****benchmarking, cooperation, strategic **
**    ****thinking dictate**

_**Typical**_
**  ****Entrepreneurial**
**  ****Hard to delegate**
**  ****Not invented here**
**  ****Internal focus**
**  ****Tactical thinker**
**  ****Quid Pro Quo**
**  ****Resource limited**
**  ****Cautious**

## Advanced Quality

-   ISO 9001:2000
-      DOD
-      NASA
-      Customer Companies
-   Process Audits
-     NADCAP
-   Survey-Reduction of QMS
-   ISO vs AS
-   AAQG & IAQG Ties & Cooperation

## AIA

- SMC