Boeing’s OAIC strengthens Australian SMEs

Boeing’s commitment to help small to medium enterprises (SMEs) break into global aerospace supply chains through the Office of Australian Industry Capability (OAIC) has gone from test case to best practice in three short years. Boeing tells Asia Pacific Defence Reporter the story behind OAIC’s success.

Over the past three decades, Boeing has worked with government and industry in Australia on several significant defence-related procurements. These procurements have traditionally included large volumes of offset-related activity.

It has been argued by some that offsets rarely deliver long-term benefits for local industries beyond the period during which the offset is being completed. Once the offset has been completed the associated work can disappear and the skills and facilities also created with it frequently fall idle.

Australian industry already plays a major role – worth some $4 billion over the next 20 years – on the 787 Dreamliner program, but a new approach was needed to boost defence-related industries.

About three years ago, a dramatic shift in thinking occurred around defence policy. “It was a sign of the maturity of the relationship – which is more akin to the partnership – between Government, Defence and industry,” Wes Field, Boeing Senior Manager of Industrial Participation, said. “What this partnership began to realise was that the best way of maintaining a sustainable Australian aerospace and defence industry was to start helping the smaller companies win work on a competitive basis from the global supply chains.”

Subsequently, in 2007, the government decided to remove its historical requirement for compulsory offsets on major defence procurements. This policy change redirected the efforts of prime contractors, including Boeing, towards providing competitive procurement opportunities for Australian industry, with the emphasis shifting towards locally-owned small-medium enterprises (SMEs).

The end goal was to create an environment that would lead to a sustainable aerospace and defence industry in Australia – an industry to support the needs of the Australian Defence Force but not solely dependant upon Commonwealth defence-related procurements for sustaining their operations.

The test case

The same year, Boeing became the first company to respond to the new defence policy with the establishment of an Office of Australian Industry Capability (OAIC) in Seattle, Washington. The OAIC began operating under three-year trial period with support from the Defence Materiel Organisation (DMO).

Its aim was two-fold:

• To identify opportunities for Australian aerospace companies to competitively bid on work packages in support of commercial aerospace and defence programs across Boeing and throughout its extended supply base, and

• To provide training and mentoring programs to Australian aerospace and defence companies, primarily focused on SMEs, to help such companies become more globally competitive, and ultimately more successful in winning the bid opportunities they pursue.

“When we talk about the Boeing OAIC initiative, we refer to it as our effort to help Australian industry grow and strengthen its business base,” said Field, who leads the OAIC team within Boeing’s industrial participation organisation.
“We give them access to a new set of potential customers and access to new skills intended to make them more competitive and more successful in their pursuit of those new customers.”

In just three short years, the Boeing OAIC successfully assisted 14 Australian companies secure firm contracts within its global supply chain valued at just under US$18 million. The awarded contracts contain options that could increase the realised value of work to US$30 million over the next few years based on good execution of the initial work awarded.

In addition to the contracts already awarded, the Boeing OAIC team has helped identify and position eight SMEs to compete for an additional
US$250 million in Boeing subcontracts, which are currently going through the source selection process.

Success stories

Among some of the recent OAIC success stories are SMEs Mincham Aviation, Ferra Engineering and Production Parts.

Mincham Aviation, a SME based in South Australia, won a contract earlier this year to manufacture four assembly-spare-part sets for Boeing’s CH-47 Chinook helicopter. Managing Director, Daryll Mincham, said the contract “is the first step in what we hope will be a long-term relationship with Boeing”. “We initially approached the OAIC with the intention of achieving a contract within three years, so gaining a contract in less than 12 months is well beyond our expectations,” he said.

Brisbane-based Ferra Engineering Managing Director Mike Scherer added that the benefits of the OAIC are really beginning to pay-off for Australian industry. The firm successfully competed against 20 global suppliers to provide parts for The Boeing Company’s 747-400 Material Services Business, and it was awarded a five-year build-to-order contract for 50 unique machined components. “Through our involvement with OAIC, we have been able to effectively market our aerospace manufacturing capability to Boeing and its supply chain. As a result, we’ve been able to bid on several new Boeing programs,” he said.

Production Parts of Melbourne also successfully competed for a contract to supply rudder pedals for the Boeing Super Hornet program. When Defence Materiel Minister Greg Combet announced the win in April this year he said: “This will place them [Production Parts] in a sound position to compete for more opportunities in the future.”

Making SMEs competitive

Boeing echoes the same sentiment for all SMEs achieving their first break into the global supply chain. “It is our belief the focus on inserting companies into the global supply chain will educate them on what it takes to successfully compete in that arena,” Field said. “By ‘making the grade’ internationally they should also prove to be financially stronger, more technologically capable and more competitive when called upon to compete for defence requirements in Australia.”

He added that an integral part of helping SMEs ‘make the grade’ was training and mentoring. “Getting them to a stage where they are eligible and able to compete on a global scale is essential,” he said.

Over the past three years, the OAIC has organised various introductory training courses for SMEs including:

• Introductory training on “Doing Business with Boeing”

• Essentials, such as Quality Management System requirements

• Lean+ training and mentoring – 11 SMEs took part in the most recent workshop, and six opted into mentoring and participation in onsite assessments from Boeing – with additional companies to follow. Woody Beckles, Operations Manager of Quickstep, who participated in a Lean+ workshop said: “The benefit to our business was indefinable, in terms of kick-starting our processes and our drive for success and our drive to implement Lean.”

• Specialised manufacturing and machining skills and workshops - eight companies participated in two high-speed machining techniques workshops conducted by Boeing Research and Technology; with 40 participants in a recent Geometric Dimensioning and Tolerancing workshop.

• Executive and management training offered through the Boeing Leadership Centre – nine executives from SME companies have attended the centre training alongside Boeing employees in effective Program Management skills. This afforded them a better understanding of Boeing philosophy and gave them new management skills, as well as the opportunity to network with key Boeing decision makers.

The OAIC has also brought international procurement managers and executives from Boeing and its major sub-contractors to Australia to visit machining, sheet metal, composites, processing and tooling SMEs in Adelaide, Melbourne, Sydney, Perth and Brisbane. These visits have proven extremely successful in identifying work for which these companies could compete.

SMEs have also visited Boeing and its major subcontractors’ sites across the United States and Canada – from Seattle and St. Louis, to Washington, D.C. and Philadelphia. These included suppliers such as Spirit, Goodrich, Vought, Parker Aerospace, Avcorp, L-3, LMI and Precision Machine Works.

Capability conferences have been another success. These events enable Australian SMEs to showcase their skills in areas like machining, sheet metal, composites, simulation and modeling, and cyber security, by bringing them together with potential customers.

Australian businesses have also been helped with the set up of hundreds of side meetings with Boeing and its top-tier suppliers.

Boeing itself has done its part, with OAIC initiating and completing export licences for every major defence program within the company, which helps pave the way for eligible AS9100 – a quality management system in the aerospace industry – approved Australian suppliers to bid on defence-related opportunities.

Best practice

“While Boeing was the first to establish an OAIC, the success of the initiative has since prompted similar industry initiatives,” Field said.

The DMO has since signed an Australian Industry Capability Deed with Raytheon Australia and has every intention of rolling out Australian industry deeds out to all large multinational defence companies operating in the local market based on the OAIC model.

“There is no doubt the Boeing OAIC has established a new industrial engagement model that works in addressing the current objectives of the Australian government,” Field said.

“We have helped create significant visibility for a large number of small Australian companies both at Boeing and by introducing them to a number of our first tier suppliers. We have identified competitive bid opportunities that are a good match with the industry capabilities we have identified here in Australia. We are endeavouring to transfer new management- and manufacturing-related skills and knowledge that will help improve the competitive position of Australian industry.

“An improved competitive position will bring long term value to Australia in increased defence and aerospace exports and a healthier, more capable industry serving the defence needs of the country.”

APDR at a glance