Boeing CEO Dennis Muilenburg’s Moonshot

Dennis Muilenburg speaks at Chief Executive’s 5th annual Smart Manufacturing Summit, May 2017, co-hosted by Boeing.

If anyone thinks U.S. manufacturing is in decline, have them talk to Dennis Muilenburg. After serving as Boeing’s COO, the Iowa native and aerospace engineer took over the top job from Jim McNerney in 2015, and he has been on a tear ever since, driving the nation’s leading aerospace and defense company—and America’s biggest exporter—to find another gear to compete in an increasingly complex, global and interconnected world.

The reason is simple: Opportunity. The growth in commercial airplanes has been paced by worldwide passenger growth of 5 percent to 6 percent a year. But in places like China and India traffic growth runs as much as 15 percent a year. Every year in Asia, 100 million people fly for the first time on an airplane, and estimates are that barely 20 percent of the world’s population has ever flown in a commercial airplane. This is a big, high-scale growing manufacturing sector that companies like Boeing need to fuel for the future. It’s about a $7.5 trillion marketplace over the next 10 years.

“To compete in this environment,” says Muilenburg, “we cannot continue to just improve incrementally. Incremental productivity improvements of 1 percent to 4 percent a year will not allow us to compete in the future. We are focused on step-function improvements that are measured in 20 percent, 50 percent, 70 percent to 90 percent increments in some of our key value chains inside of our factories.”

Getting there won’t be easy. Boeing’s scale is almost unimaginable. From its headquarters in Chicago, the $94.6 billion juggernaut employs more than 140,000 people across the U.S. and in more than 65 countries. In the U.S. alone, Boeing employs 50,000 factory workers and 45,000 engineers.

Muilenburg’s ambitions obviously have big implications for the rest of American manufacturing as well. While the prevailing narrative is that nothing can be done to stop the continuing decline of U.S. industry at the hands of cheap global labor and disruptive technology, Muilenburg is staking his company’s future on technology unlocking productivity gains and on finding growth in new parts of the value chain.

It’s a playbook worth reviewing as manufacturers across the U.S. seek to find and hone advantages to win in an ever-more competitive world. According to recent analysis of current industry trends and performance, the McKinsey Global Institute finds that the U.S. could boost annual manufacturing value-added by up to $530 billion (20 percent) over current trends by 2025.

Four Keys to Transformation
The key, of course, is productivity, and Muilenburg has been pushing this hard using a variety of tools: 3D printing, digital throughputs, selective automation. For example, production speed has been rising steadily in its Renton, Washington, facility, where the company builds its 737s—among the most widely used passenger aircrafts in the world today. In 2016, it was building 737s at a rate of 42 a month in the same space that was originally created to build 17 a month.

At the end of 2016, it ramped up that line to 47 a month and is on track to begin producing 52 a month this year, then 57 a month in 2019. Soon the facility will be building roughly two 737s each day—the highest production rate the company has ever had in commercial airplanes.

Muilenburg outlines 4 big ideas that are yielding transformative steps.

1. Driving Modularity. This involves bringing commonality into Boeing’s manufacturing systems in terms of major subsystem assemblies and integrated subsystems coming in from one’s supply chain. A good example is flight deck commonality and parts interchangeability across various product lines, such as common flight system displays in a 737 that are also used in advanced defense aircraft like the KC-46 tanker for the military.

2. Value-added Automation. Introducing automation will streamline supply chains inside factory spaces. For example, the 787 Dreamliner built in Boeing’s Charleston, South Carolina, features something the company refers to as a “quodbot,” an automated device that drills holes and places thousands of fasteners that previously had been done manually. What once took five days is now down to little over a one-day process. Step-change improvements in flow time also produce significant improvements in quality and safety. “These are the kind of automation advances that not only reduce cycle and flow time, but reduce cost,” says Muilenburg.

3. On-Demand Customization. Using 3D-printed parts, Boeing offers customers specific features that can uniquely differentiate aircraft for customers. Customization that previously would have disrupted its production lines is now widely embraced in its factories and is a part of its overall manufacturing capability.

4. Digitizing Manufacturing Operations. Using data analytic engines to monitor and guide operations on the plant floor boosts efficiency. The idea is to tie all operations in an end-to-end lifecycle value chain all the way from engineering to manufacturing to support. “We’re seeing these digital threads creating advancements of 70 percent to 90 percent improvement in flow time, significant improvements in first-time quality,” Muilenburg says. “This will have a dramatic step-change improvement in how we build and compete for the future. These four big ideas are things that we’re driving across the entire company and our supply chain as part of our manufacturing transformation.”

A Conversation
At Chief Executive’s Smart Manufacturing Summit in Seattle (May 2017), Muilenburg advised the 200 or so CEOs in attendance to think about manufacturing transformation in terms of end-to-end lifecycle transformation of how products are designed, built and supported. In his view, this is “smart globalization” that goes hand-in-hand with smart manufacturing. It’s not about moving manufacturing assembly to take advantage of labor arbitrage, but improving manufacturing capability around the world to grow the pie and add jobs globally to increase competitive advantage.

For example, although Boeing has about 80 percent of its supply chain jobs here in the U.S. the company continues to grow its supply chain presence overseas. It builds parts in Melbourne, Australia for the 787 and manufactures Apache attack helicopter fuselages through a joint venture in India. A finishing center in Zhouzhuang, China, takes delivery of 737s from the Renton factory and provides seats and paint for delivery to Chinese customers.

At SMS, we talked to Muilenburg to learn more about his key concepts, and how he was transforming Boeing. Here are excerpts from that conversation.

In your assembly of aircraft, a complex undertaking, which set of tools—3D printing, Internet of Things or cloud computing—has most improved your operations?
No single technology or technique is the key to success. It’s digitally connecting all of these approaches. When you think about an airplane, it’s about a million parts flying in close formation. It has to work every time. Digitally designing and connecting it is a big powerful idea for us because it not only improves flowtime but improves quality and safety at the same time.

This idea of 3D printing is particularly critical as we get into more composite parts in on-demand customization, because in the past variability in our manufacturing lines has been difficult to handle. Now, we can create purposeful variability in our production lines that adds value for customers. This represents a big shift in how we design and manufacture.

So you’ve moved beyond prototyping?
We’re well beyond prototyping. We are moving directly into implementation. Advanced manufacturing capabilities don’t become real until you put them into the factory. And the people who know how to make this work are the people who build airplanes. They have the best ideas; they know what works and what’s theoretical. Put them into the hands of our mechanics and they surprise us every time with how much they can do.

But not every supplier is at the same level.
They’re all at very different levels, which is why we have people to tailor our digitization approach for different company sizes. We spend a lot of time and investment in training and building capacity in our small business space because often we find the best ideas are in small businesses. We have a value-engineering project where we encourage our supply chain to bring ideas to us about things we could change inside of Boeing. That pipeline has a little over 2,000 ideas in it right now that we’re just moving our way through and implementing.

What advice would you give to a small or mid-size manufacturer who wants to supply Boeing?
Obviously, competitiveness is a big deal to us, so cost and quality are important. The ability to deliver reliably is also critical. Because we crank out airplanes when we say we’re going to deliver them our supply chain must be synchronized. We’re also looking for teammates willing to make targeted investments in digital transformation in a way that’s good for them and good for Boeing.

Also, the most important competitive challenge we face is building the future talent pipeline for aerospace manufacturing jobs of the future. We need kids who are interested in manufacturing and can see the advanced nature of those jobs. Our small business suppliers are great ways to attract and inspire and build that pipeline for the future.

How are you addressing the talent gap?
The STEM talent pipeline in the U.S. is woefully short of what we need. Not only for aerospace but for big industrial STEM generally. The global competition for talent is more severe than ever. We need to train future engineers and manufacturers on these leading-edge techniques, the digital threading, which is a different manufacturing job than what much of our workforce was originally trained in. We’re engaged at the front end of the pipeline all the way down to the grade school level now. That’s a big investment we make that involves hands-on learning and vocational training. We use our aerospace school in the Puget Sound region to drive vocational training, machining skills and aerospace manufacturing skills to create a pipeline for the future, as well as internship programs with colleges, early career rotation programs and continuous training for our in-house workforce.

We treat this as a total lifecycle investment. In our employee base, we talk about it as our long-range people plan. I’m a firm believer that the most important investment we make is in our people. That’s why I call it our “People First” strategy, because it enables our future.

AT&T uses massive online courses to reskill people. Does Boeing offer something similar?
We’re doing quite a bit of that. For example, we just recently ran one on what we called Model-based Systems Engineering. The idea is to retrain our engineers. Thousands of engineers are taking online classes and the feedback is fantastic because they love the learning. We’re doing it in a virtual way that’s affordable and enables cross-learning within the enterprise because it’s connecting different sites and constituencies that might not have been connected in the past.

“no single technology or technique is the key to success. it’s digitally connecting all these approaches.”

What differences in how Boeing manufactures will we see five years from today?
You will see new advanced manufacturing techniques, including heavy use of composite materials. For example, we’re opening a new composite wing center up in Everett that is building the wings for the 777X. It will be the largest composite wing ever built. You will also see greater customization in our factories through the use of additive manufacturing throughout the value chain, both in the factory and out in the field where we do support including spare part generation. Expect to see greater automation. Instead of all-robotic factories, we feel the future will see greater integration of people and robots working together.

What are the returns on artificial intelligence? What kind of future vision do you see as to the role of AI?
Some of our AI work goes hand in hand with automation. The key is to look for AI implementation where it adds value. For example, the intersection of AI with data analytics clearly optimizes operations. This helps in growing our services business. One of the biggest AI applications is identifying value-added services that build data-rich airplanes to optimize flight profiles, such as optimized fuel burn or whatever value proposition is most valuable to a customer.

What will likely be the next big innovation in travel? For example, 20 years from now will we be loading aircraft differently?
That could certainly be part of it. When you consider end-to-end optimization of the customer experience, the ground segment is important. How do you get to the airport? How do you process through the airport and get on the airplane? How do you deal with security? I expect to see changes in the technology of travel itself. It’s difficult to predict how fast the technology will evolve, but you can bet that with the amount of capital investment it will happen. We’ll see revolutions in propulsion technology, electrically powered airplanes and maybe flying taxis.

High-speed transportation will become more economical and offer the capability to go anywhere in the world in one to two hours on supersonic, hypersonic aircraft. That business model still needs some work, but the technology is moving fast enough that that will happen. We anticipate that a low-earth-orbit space travel business ecosystem will develop as access to space becomes more affordable. Also, low-gravity manufacturing in space will eventually become practical, and there will be a transportation network to do low earth orbit. I’ve always been a fan of deep space exploration—that will happen too. Before 2030 we’ll put the first person on Mars—and he or she will get there on a Boeing rocket.

J.P. Donlon :J.P. Donlon is Editor Emeritus of Chief Executive magazine.