Page 1 - Welcome Page 2 - Update Page 3 - News Page 4 - Brief lines |
* Welcome * Welcome to 2PLM, an e-zine distributed about every two weeks. This issue includes :
Dick Bourke Gaining and sustaining executive commitment for a successful Product Lifecycle Management (PLM) initiative is one of the most presented, most discussed and most written-about subjects in the PLM spectrum. Executive commitment is rightfully regarded as a "must have" for a successful PLM initiative. However, it could be a fatal assumption that executive commitment, by itself, will resolve organizational resistance to a proposed PLM initiative. Therefore, gaining and sustaining executive commitment demands a critical role for PLM Evangelists - functioning as effective change agents - both technically and culturally. My key premise - and the emphasis in this article - is that a successful PLM initiative will be as dependent on the cultural skills of the PLM Evangelists as the technology skills - perhaps more so. Countless experienced implementers can attest to this essential premise. Interestingly, this message has resonated in all manufacturing systems sectors for years, but still warrants constant reinforcement in connection with PLM implementations. More than dazzling PowerPoint presentations, the process of affecting change relies on a key selling principle: personnel at all levels will willingly accept solutions - only if they first recognize, understand, believe and internalize the problem(s) to be solved by implementing a PLM system. The PLM Evangelists need to address problems at two levels:
When encountering objections, the ability to recognize the motivations of individuals in different functional organizations is important, also. Consider the different motivations of engineering personnel as compared to manufacturing personnel, for example. 
When establishing the right time to gain executive commitment, PLM Evangelists should consider whether they have first gained the support of future users who must be willing to be responsible for achieving the benefits of PLM, defined in the company's business case - a solid Return on Investment analysis. Indeed, legislating participation of the "soon-to-be-affected" PLM users by top-down edicts from the executive committee may not have the intended effect. Moreover, enthusiasm is certainly a valued trait. Yet, a caution: over-enthusiasm may generate hidden FUDs, for instance, an unspoken "what's his/her hidden agenda?" Clearly, the moral is to adjust enthusiasm accordingly - to avoid unnecessary and unintended resistance. Finally, to summarize - technology, while an essential element in a PLM initiative, should not be the only focus. Now is the time to catalyze change through thoughtful selling - with cultural considerations clearly in mind. The good news is that there is a wealth of available educational sources. In addition to the publications listed elsewhere in 2PLM, consider "10 Best Practices for Successful PLM Evaluations" (details). Other sources might be the company's Human Relations department and the body of knowledge from the American Society for Training and Development. Dick Bourke of Bourke Consulting Associates can be contacted at dickb@bourkeconsulting.com. * Airbus A380 Development Cost, IRR, Breakeven Point * Further to the details of A380 schedule changes in the November 3 issue, readers asked for similar details about costs and returns. Not surprisingly, people in many companies are using the A380 experience to help communicate the need for PLM to their executives, and they are looking for detailed information to support their presentations and reports. It's always more difficult to give details about costs and Internal Rate of Return (IRR) because they depend on the way that a particular company decides about the figures for costs and IRR calculation. There are different ways to address items such as: discounts for lead customers; liability payments for late delivery; inventory cost of Work In Progress; interest payments for delayed purchases; cross-border payments; costs for shared parts, equipment and facilities; management expenses; discount rates for future inflation; exchange rate changes, etc. However, the following information has been published about the A380 programme. 1. From an EADS document, "Annual Report and Reference Document 2003": "The cost of developing the A380 programme, which Management estimates at U.S. $10.7 billion, covers both R&D expenses and tooling for various versions of the A380. This estimate does not include certain infrastructure elements or general and administrative expenses." "When deciding to launch the programme, Management set itself a 20% pre-tax internal rate of return target, together with a project break-even point of approximately 250 aircraft." Details 2. From another EADS document, "Airbus Financial Update" from Andreas Sperl, Airbus Chief Financial Officer, at North America Investor Forum - New York - March 13th, 2006: "2000 Launch Business Case: - IRR Target: 20% - Breakeven point: 250 a/c - Expected deliveries: 751 a/c" "2005 updated Business Case: - IRR outlook : 19% +/- 1% - Breakeven outlook: 270 a/c +/- 20 a/c - Expected deliveries: 751 a/c" Details The price of an A380 is about 225 to 250 million euros, so a breakeven point of 250 aircraft in 2000 might, depending on how various sales incentives are accounted for, have corresponded to a breakeven sales target of about 50 billion euros, and expected delivery sales of about 150 billion euros. 3. Towards the end of 2004, a cost overrun was announced. The following text was datelined December 15, 2004: "Planemaker Airbus's A380 superjumbo project is running 1.45 billion euros ($1.93 billion) over budget because of work to improve the efficiency and weight of the aircraft, the co-head of parent company EADS said. Total costs for the mammoth doubledecker are currently estimated at over 12 billion euros." "An EADS spokesman said on Dec. 7 that the A380 was on track for entry into service in 2006 and that the overall programme would achieve a target of an internal rate of return of 20 percent -- despite acknowledging possible cost overruns." Details However, if the costs increase by about 15%, one would expect the IRR and the breakeven point to change. And, in the '2005 updated Business Case' given above, they have changed, with the IRR down to 19% and the breakeven up to 270 aircraft. 4. In June 2006 and October 2006, as mentioned in the previous issue of 2PLM, (details) Airbus announced delivery delays. 5. The following text was datelined October 20, 2006: "EADS warned investors on Thursday that the long delays and mounting costs of the Airbus A380 superjumbo programme meant that the group would have to produce 55 per cent more aircraft to reach break-even. In a presentation to investors in Hamburg, Andreas Sperl, Airbus chief financial officer, said that the group would need to deliver 420 of the 555-seat giant aircraft for the programme to break even compared with the total of 270 aircraft forecast in the 2005 updated business case." "Originally, when the A380 programme was approved by the EADS board at the end of 2000, Airbus said that the break-even level would be reached with the delivery of only 250 aircraft." "Mr Sperl said that the internal rate of return calculated by Airbus on the A380 programme had dropped from 19 per cent in the 2005 business case to only 13 per cent in the updated 2006 business case." Details That source does not give a figure for the "mounting costs", but if the breakeven is now expected to be 420 aircraft, the expected costs could now be over 16 billion euros. * PLM Maturity - Where are we going? * by Roger Tempest Massive amounts of time and money are spent in learning about, planning for, and implementing PLM. Despite this, and despite the years of experience that have been gained since PLM first came to the fore, there is still no clear target to aim for. At what point can a company say: "Our PLM implementation is finished. It is fully operational, and we can now move on to something else."? It is unlikely, of course, that there will ever be such a fixed point. PLM is a methodology of continuous improvement, and the tools and knowledge that are available also develop with time. But there should still be some clear and agreed targets to aim for. In any other business undertaking you would expect there to be an exact definition of what the end position will be, and some metrics to tell you how far you have progressed towards it. You would also expect not to have to set these targets and metrics in isolation. It is all too easy to set low targets, achieve them, and think you are being competitive. You need to know how well you are doing in comparison to other companies, both in overview and in detail. The overview gives you a guide to your general performance, and the detail may highlight areas you have overlooked, but which other companies have made progress with. So if there is no fixed end point, there needs to be a scale of Maturity by which PLM can be assessed. We all know what the "child" stages would be, but when does a PLM implementation mature into "adulthood"? Are there different stages within adulthood, and does adulthood mean different things in different industries, for different sizes of company, or for different positions in the product chain? Does PLM start to age, and are there successive generations? To put this into a practical framework that is useful to industry there needs to be collaboration between experienced PLM practitioners, based on the real experiences they have gained, leading to an industry standard Reference Model for PLM Maturity. A PLM Maturity Reference Model would help PLM managers to assess their progress and see where they should be going in the future. It would illustrate to senior directors and VPs what other companies have achieved, thus helping them understand and support their own PLM implementation; and it would help vendors, integrators and new adopters work with each other by showing everyone where they are on the path to PLM. The Launch of the PLM Maturity Reference Model (MRM) begins with a 3-day workshop hosted by PSA Peugeot Citroen in Paris, on 05-07 December. This industry-based event will enable participants to combine their PLM experiences and position them in an agreed context of PLM Maturity. The Workshop will deliver a Version 1 PLM Maturity Reference Document, and participants will receive updates from other MRM workshops in the series. More information about the Maturity Reference Model and how to participate in the Paris Workshop is available on the PLMIG's web site or by email. * Airbus : Root Cause of the Problem * According to a 3 October 2006 Airbus Press Release, "In June, the amount of work to be done to finalise the installation of the electrical harnesses into the forward and rear section of the fuselage had been underestimated. Beyond the complexity of the cable installation, the root cause of the problem is the fact that the 3D Digital Mock up, which facilitates the design of the electrical harnesses installation, was implemented late and that the people working on it were in their learning curve. Under the leadership of the new Airbus President and CEO Christian Streiff, strong measures have been taken, which, in addition to management changes, include the implementation of the same proven tools on all sites, as well as the creation of multi-national teams to better use the best skills available. Simultaneously, training is being organised to swiftly bring the employees using those tools to the optimum level. With the right tools, the right people, the right training and the right oversight and management being put in place, the issue is now addressed at its root, although it will take time until these measures bear fruit." Details * Airbus : Other Problems and Causes * According to other reports, other problems were caused by engineers in Germany and Spain using CATIA Version 4, while those in the UK and France used Version 5 (details), and leadership at the top levels of Airbus (details). And, according to an Airbus Press Release of 13 June 2006, "As testing and development advances, as well as customisation specifications from airlines are integrated, modifications of electrical systems and reworks have been necessary at section level, progressively disturbing the final assembly flow." Details * Airbus Aircraft History * In 1970, Airbus Industrie was created. It brought together, in a loose partnership, a French state-owned aircraft manufacturer, a German aerospace consortium, and CASA (a Spanish aircraft manufacturer). The first aircraft, the A300, flew in 1972. It has 2 aisles and 2 engines. About 800 have been delivered. Production is expected to stop in the near future. The 1 aisle, 2 engine A320 aircraft family is the most successful Airbus family. It includes the A318, A319, A320 and A321. More than 2900 have been delivered. The programme was launched in about 1984 and first deliveries were in 1988. Of the 508 aircraft for which Airbus received orders between January 2006 and October 2006, 467 were for aircraft in the A320 family. During this time period, no A300s were ordered. Of the other aircraft ordered, 25 were in the A330 family, 3 were in the A340 family and 13 were in the A350 family. In the same period, deliveries per family were 276 A320, 8 A300, 52 A330 and 17 A340. Very approximately, the price of an A340 family aircraft is about 3/4 that of an A380, that of an A330 about 1/2, and that of an A320 about 1/4. The longer-range A330 (2 aisle, 2 engine) and A340 (2 aisle, 4 engine) are larger aircraft - typically 250 to 400 seats. The A330 and A340 programmes were launched in about 1987 and first deliveries were in 1993. About 700 have been delivered. EADS was set up in July 2000. Major shareholders were the Lagardere Group and the French state (30%), DaimlerChrysler (30%) and the Spanish SEPI (5.5%). In September 2000, the European Commission gave a multinational Airbus consortium permission to become an integrated company. In 2001, BAE Systems and EADS formed Airbus S.A.S., the Airbus Integrated Company, 80% owned by EADS and 20% by BAE Systems. Airbus production facility locations included Filton and Broughton (UK); Nordenham, Varel, Bremen, Stade and Hamburg (Germany); Toulouse, Saint Nazaire, Nantes, Saint Eloi and Meaulte (France); and Getafe, Illescas and Puerto Real (Spain). The A380 is Airbus's planned long range, high capacity model with, for example, 555 to 800 seats. It is 2-aisle, 4-engine, double-deck. There's market demand for a fuel-efficient, long-range, medium capacity, wide-body aircraft. Boeing's planned 787 would be similar to the A330 but should have lower operating costs. The 787 programme was launched in 2004 with first delivery planned for 2008. Airbus also wanted to respond to this market need and the A350 family was proposed - medium capacity, long range, wide-body, twin-engine. But should it be an entirely new design or a modification of an existing product (the A330)? Initially, the choice was for a modified design - an existing A330 fuselage with new wings and engines. The cost was expected to be about Euros 3.5bn. However, few airlines showed interest and, in July 2006, a new A350, based on a completely new design, was announced. Due to the problems with the A380, the A350's future is not clear. * Assessment of the Performance of the Board of Directors * The following is from the Corporate Governance section of the EADS website: "Last year's self-evaluation was conducted as from December 2005 by the Chairmen of the Board of Directors, based upon responses of members of the Board of Directors to a questionnaire. The Chairmen jointly evaluated the feedback of the members of Board of Directors and led a discussion of the results at the following Board of Directors meeting." "The findings of the first self-assessment concluded that the overall performance of the Board of Directors is very satisfactory." Details * Other EADS and A380-related Information * 08 November 2006 : EADS announced results for the first nine months of 2006. From January to September 2006, EADS increased its revenues by 17 percent to Euro 27.5 billion. The EADS Board of Directors is preparing to make a decision with respect to the future of the A350 XWB aircraft family in the weeks to come. Details November 07, 2006 : FedEx Express notified Airbus that it has cancelled its order for 10 A380-800Fs. Details 30 March 2006 : Transactions in EADS securities : Directors' Dealings Details 02 July 2006 : The EADS Board of Directors accepted the resignation of Noel Forgeard as EADS CEO, and the resignation of Gustav Humbert as Airbus CEO. Christian Streiff was nominated as Airbus CEO. Details 09 October 2006 : EADS announced the resignation of Christian Streiff as Airbus CEO. Details 31 October 2006 : Andreas Sperl, CFO of Airbus, will move to another operational function within the EADS Group. Details * PLM : Pondering the Hem of a Skirt * 'PLM Takes Center Stage At Enterprises', a recent article by Jennifer McAdams in VARBusiness, starts "Executives at a major New York fashion house are sitting at a conference table pondering the hem of a skirt." Details |
