As Boeing Global Services prepares for its third year of operation starting on July 1, expect to see more vertical integration, as evidenced by Boeing’s June 14 announcement to buy interiors supplier EnCore Group.
Also expect two vertical integration projects in the avionics arena this year, as well others deployed across its portfolio this year and next--including on the MQ-25 unmanned aircraft and T-X military trainer, as well as on the New Midsize Airplane (NMA), says Stan Deal, Boeing Global Services president and CEO. The NMA is advancing as Boeing “builds a robust business case,” he says.
Vertical integration is adding to Boeing’s portfolio “in a way that is creating more value for customers, given the way that we’re doing it to change the acquisition side of the cost equation and the lifecycle side,” he says. As the company implements these vertical integration plays, “we’re doing it with the front-end cost acquisition in mind as well as lifecycle costs—so working both of those equations to have better value,” he says.
On the backend, Boeing is about half way finished with implementing SAP across its parts ecosystem--including Aviall, its commercial and government proprietary parts businesses and the former KLX Aerospace Solutions (now branded Boeing Distribution Services)-- to “eliminate redundancies and rationalizing capacity across the global footprint,” says Deal. This should also reduce repair times, which along with costs, were areas Boeing could improve, according to the 2019 Airline Aftermarket Customer Satisfaction Survey While Boeing placed first in this aftermarket support survey, Deal acknowledges that customers want Boeing to “improve cycle times and production costs,” as well as provide choices. “They do like the notion of one-stop shopping, as long as it stays competitive,” he says.
As Boeing Global Services starts its third year of operation on July 1, Deal forecasts “steady growth,” as evidenced by its 17% year of year growth. “We continue to drive where the market is today, but we've put the right amount of investment where the market could end up in 10, 20, 30 years,” says Deal. “That’s a key ingredient.”