Saturday, July 4, 2015

Somewhere Boeing Has a 787 Backlog Target

Boeing has about 800 number of 787's on the backlog line. What that causes for the sales team is a night mare. The A-330's backlog number in in the three hundreds counting its NEO's. Price and production availability are the calling cards for Airbus which causes Boeing angst, if you ask Randy Tinseth. As Boeing's Marketing VP, his main grip is customers need a slot filler sooner rather than later for fleet expansions or renewals. The A-330 a diminish aircraft in advancement then the 787, and a cheaper buy. Suites emerging and legacy carriers currently just fine until a much later time. The full conversion to the 787 product won't be complete until the A-330 dies a natural death by the 787.

So what is the answer to Boeing's dilemma? The answer is:

  • smaller backlog through production. 
  • Having a higher efficiency in production,
  • where efficiency brings lower cost gaining sales flexibility for its customers
Those points alone would kill the A-330 noise. The mere fact that Airbus can offer an A-330 within a customer's five year fleet plans makes it an attractive option fitting a customers plans. The new customer's 787 is stuck on the factory floor waiting for its work order as soon as its turn is called. All the platitudes of the 787 are lost on customers hearing, because they can plan "B" it with the A-330 NEO. 

But  :  
  • The 787 flies farther,
  • it flies more efficiently,
  • it is more passenger centered from its advanced evolutionary features,
  • and its just plain better than the A-330.
The customers turn to Boeing and says when can you deliver it, and for how much? Randy needs a earlier delivery dates to sell more 787. He needs the ability for price packaging incentives for the customer. The sales market is frozen for the 787, because of inflexibility, not because of product inferiority. Customers can buy a A-330 NEO  within a customer's five year plan and maybe get one by year three for less money.

The key comes back to Boeing's inflexibility metric, which is quite high on the 787. Metrics are cards drawn from the big game board which pleases managers. When all the metrics align within an optimal range the managers get promoted. So an arbitrary scale is made from non statistical sources since you can play with statistics and make them what you them to say (??). The scaling method most people understand. On a scale of 1-10 is the start of it all. An outcome called "1", represents optimal customer conditions and 10 represents total inflexibility and market risk. This scale is set by the customer and not the manufacturer. The customer knows its finance, its growth plans and its competitive counterparts, therefore it knows what is optimal for its own success. The manufacturer can only supply the customer what it wants when it wants and for the customers ability to pay for it. All other talking points become ancillary to the purchase issue. The A-330 NEO has only focused upon Boeing's ability to deliver the 787 and its competitive price.

Boeing knows it needs to remove those purchasing impediment of delivery timing and better pricing when it can afford to do so. The answer is given at the beginning of the blog. Boeing's backlog for the 787 must match the customer's own typical planning cycle. Statistic can be brought in at this point. It needs to sync Boeing's backlog with a typical airlines time plan.

Back to the scale. A customers Optimal timing is counted as a 1 rating. The customer's most riskiest timing is too far out for taking delivery of a 787. It looses its ability for measuring financial impact within its own five year plan projections.  This makes it a 10 for potential customers. The 787 averages about an 8 on the scale for taking on new orders (highly inflexible). The NEO averages about a "3" on the buy scale (good flexibility). A great rating of "1" was when the 787 was first offered during its first years on the order block. It has matured to an 8 rating from its  own success (of mostly inflexible), Mr. Tinseth supports the notion let's clear the production decks, and we will sell more 787. It it does, it will leave the A-330 NEO orphaned from its customers. Airbus has struck only at opportunity given by Boeing's successfully large and inflexible backlog, using the A-330 NEO as the flexible purchase option for customers.

Money always trumps uncertainty on the scale. Certain mega airline customers are wealthy, mitigating timing and risk from financial vulnerability. Those are the out lying marketing customers that Boeing will do back flips at any time. They will always have a default rating of a 5 no matter the maker or type. However, the customer who is more fragile in its nature, Boeing must reduce its backlog in an attempt to woe that customer having its own flexibility scaling for its optimal purchase and delivery cycle. The scale of a "1" for a particular customer is a fruit dropped from the tree. A scale of a 10 for a customer is fruit just forming. It is waiting for the price and backlog to drop so it can order having the lowest airline company risk, and a more favorable price.

The Backlog target Boeing may consider is between 350 and 400 unfilled 787 orders in a static range for its sales team to maximize its efforts year in and year out. Boeing then must sell its production units of about 120 each year. If Boeing did not sell another 787 for three years it would reach this optimal backlog number, Boeing is going to sell more 787 this year out of demand from airline growth. It may take Boeing ten more years to reach optimal backlog for its customers needs. The scale is a guide for how ripe the fruit maybe for Boeing. Economic climate can change the scale number quickly or it cam give the fruit a frost, as it falls off the tree as a brick.