The B2B Market as an Enabler to Integration in Aerospace Industry

2, Chen Yuan 1, Wang Guoshun 1 1 Business School, Central-South University, Changsha, Hunan 410083, P.R.China School of Economics & management, Guangdong University of Technology, Guangzhou, 510520, Guangdong, P. R. China The B2B Market as an Enabler to Integration in Aerospace Industry Abstract There s a trend in the world that many of the core enterprise in the manufacturing supply chain now extend their business to be an integrator and service provider who make the system integration and information technology service as their high-speed developed business. B2B markets as an enabler to integration are more and more frequently used in aerospace industry. Based on the analysis of current B2B markets conducted in the world aerospace industry, this paper tries to locate where the B2B markets will exert the integration function in an aerospace manufacturer s business flow, and then sets up an Integration Model based on internet information share mechanism. Key words B2B market, Enabler, Integration, Aerospace Industry 1 Introduction Business-to-business (B2B) is a term that refers to commerce between companies conducted over the Internet. It can be described as the leveraging of Internet-based technologies and infrastructure, both internally and through collaborative linkages with trading partners, providing streamlined ordering capability and providing relevant business services, to enable business process efficiencies in all aspects of enterprise and inter-enterprise activities. The scope of B2B reaches from customer relationship management (CRM) and supply chain management (SCM) to procurement and e-marketplaces. Additionally, it relates to the underlying integration, infrastructure and business strategy considerations. Early in November 1999, Goldman Sachs evaluated the size of B2B for the Aerospace/ Defense electronics industry to total $76.6 billion in 2004, representing an estimated 35% of the industry s total business transactions [1]. Adjusting Goldman Sachs s estimates with GartnerGroup s latest B2B projections gives an increased evaluation of approximately $300billion for B2B transactions in the Aerospace industry in 2004. Current aerospace industry is frequently use internet to conduct business, and to be a typical example that uses B2B market as an enabler to integrate its supply chain and value chain. 2 B2B Markets in Aerospace Industry B2B markets in aerospace industry are the kind of industry-sponsored exchanges who base their strategy on the idea that the most important asset of an intermediary is the business of its key buyers and seller. When we takes a closely look at aerospace industry and their utilization of B2B markets, they now more focus on high value integration, i.e., facilitating the production of specific product or service offerings like aircraft, product repair and maintenance by integrating value contributions from multiple sources. In table 1, we choose five B2B markets that seem to be more successful and remain active till now in the arena which are mentioned frequently on various databases for business publications. Table 1 Aerospace B2B Markets B2B Market Product/Service Offering 1 Avexus Online exchange for Airline parts, suppliers, solutions and services to companies that own, operate, manufacture, supply, maintain, repair, and overhaul complex, high value assets. Its solution framework combines reporting, analytics, workflow, logic and data integration, enabling solutions that deliver improved visibility, process management, collaborative decision-making and profitability throughout the lifecycle of complex assets including product build, operation, maintenance, repair and overhaul[2]. 2 Myboeingfleet A web portal designed to deliver information (e.g. parts catalog, new service bulletins by airplane model, technical media tracking, airplane loadable software information, fleet reliability statistics) and service (e.g. portable maintenance aid, data / document storage 1273

service provider space hosted Customer Content, spare parts online ordering system, fleet team digest and resolution process) related to Boeing-delivered aircraft which is available to airplane owners, operators, MRO and other third parties[3]. 3 Exostar Transaction services-managed content, automated transaction support, selling services, indirect and direct procurement, and aftermarket spares auctions; Collaborative supply chain integration-electronic supply chain execution and management, integrated supply chain solutions for the world s largest aerospace and defense manufacturers; Collaborative Project & Design-Online business collaboration solutions between manufacturers and suppliers to gain visibility, control and integration of critical business processes; Others-Central supplier data base, technical data management, community services, elearning, in-service support, and etc.[4] 4 Aeroxchange 5 Partsbase An open, neutral, real time marketplace to all participants and all tiers for commerce in the aviation supply chain. AOG service, commercial procurement, consignment & repair management (including Service Order, Logistics, Repair Status and Exception, Trace-and-Trace Capture and Analysis functionality), Strategic sourcing and Technical Procurement for the buyer;aog listing services and LBTS Functionality, commercial procurement listing and PO management, consignment & repair, capabilities listing, strategic sourcing, technical listing services for the seller[5]. A parts and overhaul capabilities locator service and government logistics data provider served for distributors, OEMs, Airlines, MRO, Government contractors, Corporate flight departments, FBOs, Charter Services, Brokers, and Flight Training Facilities. Information include parts catalog, selling inventory, sourcing/locating inventory, purchasing records, referencing data for part numbers, technical characteristics, vendor contact information, and etc[6]. From the description of the above five B2B markets in aerospace, we can find that they all have the following characteristics: (1) The B2B markets are hierarchical. They have a leader who takes responsibility for product selection and controls the content of the value proposition, the pricing, and the flow of transactions. (2) The B2B markets focus on high value integration, i.e., facilitating the production of specific product or service offering (like aircraft, product repair and maintenance) by integrating value contributions from multiple sources. They not only aggregate online catalogs from different tiers producers, but also provide a basket of choice of integrated solutions and manage part or the holistic aerospace supply chain. Myboeingfleet even treat customers as co-developers. (3) The B2B markets all adopt innovative direct business model and help aerospace industry to achieve its Lean goals and principles through developing a trustful business environment, keep continuous customer focus, and seeking the standard status and leverage community effects. Figure 1 is a bird s eye roadmap illustrating the interactions as well as the flows of information and products among the various stakeholders of an aerospace manufacturing company. When we takes a more closely look at aerospace industry and their utilization of B2B markets, we find that most B2B markets are located between Produce Product and Suppliers and SCM, as well as between Support Product Service and External Customer except to acquire business from the external customers (Showed in black circles in Figure 1). Currently their services are extending to nearly every joint in the value stream map (Showed in grey circles in Figure 1). 1274

Figure 1 Aerospace manufacturing company (Company X) value stream map 3 B2B as an Enabler to Integrate Procurement transactions and collaboration activities account for almost all the value that B2B markets will help create. B2B markets also offer commerce services such as finance and logistics. As companies are realizing, the sophisticated collaboration activities that B2B markets make possible and support will be the pot of gold. They include services that will allow multiple companies to manage inventories, link engineering design systems to design products jointly, and manage projects in concert much more effectively. The B2B markets now deal with enterprise product and information flow, stakeholder and organization issues as well as process and program management. Develop a trustful environment is a crucial component of B2B markets and clearly reinforces the concept of relationships based on mutual trust. Based on HTML, WAP and XML, many B2B markets furnish a flexible environment for multiple integration (as shown in Figure 2). Figure 2 B2B markets furnish environment for integration In this integrative and collaborative environment, customers are included and value stream is customer-pull and perfection result form customer/supplier partnerships. Flow is optimized in an information technology environment. The integration of aerospace industry need to achieve some objects, such as responsiveness to change, waste elimination, effective relationships with the value stream, optimal first delivered unit quantity, seamless information flow, continuous focus on the customer, decisions making at lowest possible level and etc.. One of the most obvious impacts of B2B markets is that they improve seamless information flows. It is no doubt that B2B markets can help aerospace industry to reach its goal. This is an incentive for the enterprises to use B2B market to vertically integrate. Vertically integrated firms engage in substantial internal sales and procurement activities. With B2B markets, such vertically integrated companies might reorganize to outsource production of goods and services that were previously produced internally, as well as outsourcing of the management of these transactions. The vertical integration then expands to the whole supply chain. Industries are all subject to change. B2B markets provide a fundamentally dynamic environment whose information enable companies have the responsiveness to change within the budget constraint. In B2B markets, all the suppliers watch the same information to coordinate their value creating efforts, like the musicians of an orchestra observing precisely the conductor to adjust their play. Emphasis is placed on the both the end-customer and the next tier supplier. Of course both internal and external customers have their importance. No supplier would venture to neglect its most direct customer and only 1275

focus on the end-customer. Co-developer is a concept highlighted by the Boeing-conducted B2B market (Myboeingfleet). This is reflected in the Enabling Practice delegate or share responsibility for decisions throughout the value chain. In Boeing s model, this clearly involves the end-customers. The customers interact on market to define their needs and take full responsibility during this process. Customers are integrated in product development (even though not much in process development). The Enabling practice Involve all stakeholders early in the requirements definition, design and development process also reflects the need to include customers in the product development loop. In fact, Boeing started integration and Lean from its very first day of operation whereas its competitors are all dependent on their current channel resellers for sales. As a result, Boeing remains in the driver s seat for now. 4 Integration Model Based on B2B Market There s a trend in the world that many of the core enterprise (such as Boeing and Airbus) in the manufacturing supply chain now extend their business to be an integrator and service provider who make the system integration and information technology service as their high-speed developed business. They established and conduct their own B2B market. It is time to consider how to use this trend to expedite the aerospace industry s integration on a more macro and external level. In Figure 3, we try to set an integration model based on B2B market which will help the authorities and aerospace industry leaders get a clearer foreground to impose B2B market in a right direction. Inventory Model Product Data Sales Data manipulation Customers Partners Suppliers B2B Market Portal (Concurrent interface) Buy side Sell side Services Collaborative Product Commerce Model Project Digital Concurrent Design & Manufacture Information share mechanisan Figure 3 Integration model based on B2B market The B2B markets provide the network infrastructure, data environment and various services for the aerospace integration systems by synthetically using different information technologies. As to the network infrastructure, it is in fact an aggregation of information network, contract network and knowledge network. 5 Conclusions This paper analyses five B2B market conducted by aerospace industry and their common characteristics, draw a roadmap of B2B market located in an aerospace manufacturer s value steam, and sum up B2B markets function as an enabler to the integration in aerospace industry. At the end of the 1276

paper, we try to set up a integration model based on B2B market. There are still much issues related to industry integration based on B2B market, including technology and government support. How to evaluate the effect of B2B as an enabler to integration is also waiting further discussion. References [1] Goldman Sachs Investment Research, B2B: 2B or Not 2B?, November 12, 1999, pp.38. [2] Avexus Press Release. Avexus Appoints Aviation Industry Veteran Guy Knight as Senior Director of Strategic Accounts. http://www.avexus/news/detail.php?id=67. April 14, 2005. [3] MyBoeingFleet. http://www.boeing/commercial/ aviationservices/myboeingfleet/. 2006. [4] Herndon, VA. Exostar Reaches New High in 2005: $23 Billion in Transaction Value. Exostar Press Releases. http://www.exostar/news/press_releases/pressrelease_view.asp?id=137. May 3, 2006. [5] About Aeroxchange. https://www.aeroxchange/home.jsp. 2006. [6] About us. http://www.partsbase/aboutus.asp. 2005. 1277