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Aviation History
2000
2000 - 1547.PDF
E-COMMHtC* chief executive. Boeing et al say die overall cost saving is a "complex cal culation" to make, declining to value it, but adding: "There is no question that these systems will save you a lot of money." Boeing and its partners are looking to put $71 billion in annual procurement out lays through the exchange. "This trading exchange can deliver enor mous buy and sell-side efficiencies to our industry," says Condit. "By using a single e-marketplace, all of us - manufacturers, suppliers, air line and government customers and service providers - can significantly lower transaction costs and deliver more value," he adds. A global aerospace and defence exchange will improve cost efficien cies on the buying and selling sides. Procurement will gain from direct and indirect efficiencies, sales benefits and channel efficiencies. Sales advantages include reduced transaction costs, lower customer acquisition costs and enhanced transparency of the supply chain, says Boeing. The exchange's own ers will benefit in revenues from user and transaction fees, advertis ing, and content subscriptions, with more rev enue once the ventures float, as a fiscal plan. But that's not all, B2B advocates believe. "There's going to be a lot of value added from collaboration," says Nils Herzberg of software solutions provider SAP. He predicts that the first wave of e-commerce development won't bring many price reductions, but benefits will instead come from reduced transaction times and advantages from suppliers and buyers working together. On the procurement side, SAP believes aerospace companies could even tually achieve transaction reductions of 30-70% and see 10-30% cycle time reductions through bidding and collaborative engineering. "Web technology means getting there faster," says Dr Linda Capuano, vice-president business integration at Honeywell, which will launch its myAircraft.com exchange this quar ter in conjunction with United Technologies and i2 Technologies this quarter. Competitor aerospan.com, to be launched mid-year by airline communication specialist SITA and aviation supply chain management company AAR, also sees wider benefits than cost savings. "We are not trying to quantify in dollars what an airline will be able to save. We're focusing on improved pricing, utilisation, lower procurement prices and reducing the supply chain side," says Timothy Romenesko, AAR chief financial officer and aerospan.com director. Aerospace and defence companies have been dabbling with Internet-based solutions for some time and gaining early benefits. Many already offer parts ordering sendees and techni cal assistance online. Boeing, for example, launched its Part Page web-based ordering sys tem for commercial aircraft parts in 1996. In 1999, Boeing generated more than $400 mil lion in online sales, says Condit. In December 1998, 59% of Boeing parts were sold on the web, rising to 7 7 % by August last year, says Carl Jones, Boeing's director, enterprise communi cation services. REAPING THE BENEFITS Companies in other industries have already reaped benefits from Internet-based solutions. "E-business has some pretty powerful pay backs," says Phil Hanson, consulting principal at IBM Consulting Group. Since 1993, IBM's e- business initiatives have saved it $3.6 billion in materials acquisition costs, cut overall logistics costs by 2 4%, reduced annual IT costs by 45 %, shortened die delivery cycle time by 55% and improved inventory turnover by 44%, he says. The opportunity for e-procurement is signif icant for the aerospace/defence industry, says Hanson, with sourcing of products at the origi nal equipment manufacturer (OEM) level nor mally making up over 60% of the bill of material, purchasing controlling 30-70% of revenue, a purchase order costing $75-175 and 80% of purchasing agents' time being spent Growth of e-commerce in the aerospace industry 250 r •~ 200 S> 150 100 - 50 2000 • Total year sales Transactions conducted online 2004 FLIGHT GARETH BURGESS 00 on only 20% of die spend. The new Internet-based way of business will provide the aerospace/defence industry with much more than web-based parts ordering ser vices. The types of aerospace and defence prod ucts, services and technical data provided over the new exchanges will be limitless, believes Boeing. "We're creating something that we don't fully understand ourselves," says Harry Stonecipher, president and chief operating officer. The first offerings by die Boeing-led venture, which is aiming for a mid-year launch, will be an online auction, procurement services whereby supply chains are managed electronically and a supplier catalogue, while furdier value-added services will include technical publications, financial services and logistics. "The scope of what we could offer is absolutely remarkable," says John Weston, BAE chief executive. Aerospan.com partners SITA and AAR are also looking at a phased approach to its summer launch. Phase one will include an electronic marketplace focusing on spares, including a list ing service and auction function, and a capabil ity listing for overhauls. Phase two, at die end of die year, will add archive, market intelligence and data mining capabilities, says Romenesko. Developments will be guided by the recently established advisory board, primarily compris ing airlines, which Romenesko hopes will be die early adopters ofaerospan.com services. Honeywell/UTC's myAircraft.com, mean while, splits its product offerings into four major categories - supply chain management, includ ing forecasting tools, inventory planning tools and customer/supplier collaboration; trad- ing/e-procurement dirough catalogue listings, order placement and tracking, auction (offer to sell), reverse auction (offer to buy) and elec tronic billing; technical publications, including manuals, service bulletins and access to OEM technical experts; and community interest - bulletins, discussion forums and job postings. Four distinct types of e-business solutions are emerging, says Ludo van Vooren, vice-presi dent business development at PartsBase.com, which has already signed up more dian 3,000 subscribers for its marketplace. It offers part searches and auction capability and is due to add an online transaction capability this quarter. According to van Vooren, diere are the manufacturer-led ventures, including the Boeing/Lockheed Martin/BAE Systems/ Raytheon exchange and Honeywell/UTC's myAircraft.com; the parts brokers, including SITA/AARs' aerospan.com; die "super portals" such as mySAP.com, established by dot.com companies "who have heard that us guys buy and sell expensive stuff; and the "indepen dents", such as Skyfish.com, PartsBase.com and aviationX, which have "dot.com blood in an aerospace body". These companies are targeting die "27% market inefficiencies" which exist in die $100- $700 billion aerospace market, says van Vooren. 32 FLIGHT INTERNATIONAL 16 - 22 May 2000
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