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October 2011 / Big Planes Ind. INTERNAL Presented by Evaluation Group Presented by Evaluation Group Bunting, T. Bunting, T. Ezell, W. Ezell, W. Kaser, D. Kaser, D. Price, A. Price, A. Wierzbicki, J. Wierzbicki, J. October 6, 2011 RPF Evaluation Group Project for Central Michigan University Dr. Patricia Kelley MSA 604

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Page 1: Evaluation group project (v 1.0a)

October 2011 / Big Planes Ind. INTERNAL

Presented by Evaluation GroupPresented by Evaluation Group Bunting, T. Bunting, T. Ezell, W. Ezell, W. Kaser, D. Kaser, D. Price, A. Price, A. Wierzbicki, J. Wierzbicki, J.

October 6, 2011RPF Evaluation Group Project for Central Michigan UniversityDr. Patricia KelleyMSA 604

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October 2011 / Big Planes Ind. INTERNAL

Manufacturing Operations Manufacturing Operations Expansion StrategyExpansion StrategyRFP Review and Results

October 2011

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Agenda

• Big Planes Overview

• Mexico

• Brazil

• China

• India • RFP Result

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Customer footprint overlay to market viewBig Planes Industries 2011

Sales orders are spread among 49 customers and 22 countries on five continents and have accumulated more than 4.5 million flight hours.

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Big Planes- RFP requirements to support Multi-year plan

Overview:Big Planes is considering a contract to build plane parts to reduce cost of components, establish supply chain that is reliable to meet production schedules, maintain existing standards, and reduce risk by finding a location that would be suitable for disaster recovery as well as to establish new market for aircraft.

Facility and human resource specifications:

• RFP submission from countries that can provide a facility with 60,000 sq. ft.

• the ability to employ a competent staff 150 employees on all levels

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Big Planes- RFP requirements(Continued)

For success Big Planes is looking for:

– Available workforce to pull a competent and educated staff, particularly people with degrees and advanced degrees in engineering and technology fields

– Availability to expand business in both the private (commercial airline industry) as well as the defense/security sector

– Staffing ability to achieve high standards in customer service. Customer Service is of the utmost importance in order to provide round-the-clock customer support, maintenance, modification of aircraft, and informational services

– Staffing for a financial division at any location (off-shore or on-shore) so Big Planes can offer financing for merchandise (big airplanes)

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Big Planes- RFP Review

Mexico AdvantagesDisadvantagesRankings (Grading against rubric)

Brazil AdvantagesDisadvantagesRankings (Grading against rubric)

China AdvantagesDisadvantagesRankings (Grading against rubric)

India AdvantagesDisadvantagesRankings (Grading against rubric)

RFP Winner

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Advantages

Disadvantages

Rankings (Grading against rubric)

Mexico- Overview

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Mexico- HighlightsAdvantages• Mexico ended 2010 with just over 12% of the U.S. import market, its

largest share to date

• Chinese workers, whose wages are rising, are leading more companies to build factories in Mexico

• During the first 11 months of 2010 and for the first time since China entered the World Trade Organization in 2001 and became an exporting superpower, Mexico posted a bigger gain in U.S. market share than its Asian rival

• Foreign direct investment in Mexico is growing and Mexico's government estimates FDI could be up to US $22-billion in 2011

Disadvantages:• Due to the exportation of jobs to Mexico, U.S. wages were suppressed and

U.S. jobs were lost

• Mexico’s employee pool is lacking in terms of education and training

• High turnover/attrition rate, which adds costs to our Operating Plan

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Mexico: Ranking/graded 64– Understanding of the requirement (10%): 6%

Did not discuss high quality standards or brand name recognition.

– Country suitability, stability, and business-friendliness (20%): 16% NAFTA makes it a trade friendly nation, but concerns about recent violence are not addressed and not enough explanation of "ghost unions“.

– Proposed location and workforce capabilities (25%): 18%Manufacturing employees available, but no real data suggesting high end engineers or technical staff available.

– Cultural suitability and compatibility (25%): 5% Last paragraph of their RFC basically talks themselves out of being culturally compatible.

– Cost (20%): 19%Wages are cheaper and NAFTA assists in making import/export of products cheaper.

Mexico- Rankings

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Advantages

Disadvantages

Rankings (Grading against rubric)

Brazil- Overview

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Brazil- Highlights

Advantages•Location

– Close to U.S. (near-shoring)

– Biggest, most industrial city in South America

– 80% of The Fortune 500 list has subsidiaries in this country

•Economy

– Stable

– Growing

– Low unemployment

•Lower wages (not included in mid-level management)

•Immense natural resources

•Strong industrial development

•Hydroelectricity (60% of all energy in Brazil)

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Brazil- Highlights

Disadvantages

•Unskilled and uneducated workforce

•Inadequate infrastructure

– Adequate air infrastructure, but that raises the question of how Big Planes will export parts from Brazil to the U.S.

•Cultural differences

– Slow pace

– Very easily offended (emotional)

– Brazilian culture dictates one has to be very detailed in giving direction of wants and needs because Brazilians will do no more than asked

•Higher cost of living

•High corporate taxes

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Brazil: Ranking/graded 76

– Understanding of the requirement (10%): 10%Intro and overview appeared to express a good understanding of Big Planes needs.

– Country suitability, stability, and business-friendliness (20%): 15% Our own research shows that Brazil is not an easy country in which to set up a business, Brazil also has a major aircraft manufacturing business with which Big Planes would have to compete .

– Proposed location and workforce capabilities (25%): 18%Sao Paulo is a decent location, but lack of qualified workforce is a concern.

– Cultural suitability and compatibility (25%): 18% Brazil does not seem like a good cultural match. Women are not a large part of the workforce, language is a barrier as the language of the country is Portuguese, and Brazilians are reportedly offended very easily.

– Cost (20%): 15%No real cost savings in salaries, no info on cost of materials for manufacturing, cost of electricity is lower due to use of hydroelectricity.

Brazil- Rankings

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Advantages

Disadvantages

Rankings (Grading against rubric)

China- Overview

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

China- Highlights Advantages

• China has easy shipping access via deep water ports

• There are low taxes and overhead

• Great infrastructure

• China has a stable government

• With access to 13 bordering countries, China is in a great location

• China is the largest goods exporter in the world

• Proposed location in a Special Economic ZoneDisadvantages

•There is a strong “relationship” business culture

•The educational environment is one of “pass the test” not “comprehend the material”, which would be a detriment to Big Planes

•All China Federation Trade Union (ACFTU) has 230 million members and considered to be low to medium for level of CBA, but unity is high to medium

•Confucianism

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

China- RankingsChina: Ranking/graded 87– Understanding of the requirement (10%): 10%

Successfully reiterated the needs of Big Planes.

– Country suitability, stability, and business-friendliness (20%): 18% Very business friendly with Special Economic Zones, but have concerns regarding unrest that is a result of change from the old economic system of the past to the new market system.

– Proposed location and workforce capabilities (25%): 23%China has a well-educated workforce in order to staff the engineering and technical aspects of aircraft manufacturing addressing quality and productivity needs of Big Planes, Inc.

– Cultural suitability and compatibility (25%): 18%Concern over relationship based business practices, concern regarding gender issues which were not discussed.

– Cost (20%): 18%Cost does appear to be less with regards to salaries and less local taxes (SEZ).

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Advantages

Disadvantages

Rankings (Grading against rubric)

India- Overview

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

India- HighlightsAdvantages•Staffing & Workforce

• India’s labor force is growing at roughly 2.5% per year so Big Planes will not have issues finding workers

• Mumbai’s labor force consists of around 6.2 million total workers

•Facility –Special Economic Zone• Navi SEZ (NMSEZ) have multiple facilities already constructed that

meet these requirements (60,000 – 85,000 sq. ft.), so no turnaround time would be required.

• Pricing ranges widely and includes various options, including leasing for a minimal of 10 year terms.

•Shipping

•IT support

Disadvantages

•Mumbai has an attrition rate of 50-55%, which is VERY high and Big Planes will need mitigation plans as the cost to hire is a loss to knowledge capital.

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

India: Ranking/graded 93– Understanding of the requirement (10%): 10%

– Country suitability, stability, and business-friendliness (20%): 18%SEZ, stable power grids, unions and policies to improve labor productivity

– Proposed location and workforce capabilities (25%): 23%Mumbai, Maharashtra is the financial capital of the country, has SEZ, housing issues being addressed but there are issues, average age of workforce is 25, well-educated and technically trained. Ability to provide technical and engineering support very important in aircraft industry

– Cultural suitability and compatibility (25%): 24%English is the main language in schools, multi-ethnic culture like US

– Cost (20%): 18%Costs appear lower for staffing and property purchase. Also, there are multiple means of transportation to decide which is the best/most economical form (roads, planes, ships)

India- Rankings

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Global Strength and Perspective

AsiaAsia

EMEAEMEANorth AmericaNorth America

Latin Latin AmericaAmerica Australia/Australia/

New ZealandNew Zealand

New location: expand/sustain business over 5-10 years

Global Deployment

2005 2006 2007 YTD 2008

RFP Ranking

64

76

87

Mexico: Ranking/graded 64 Brazil: Ranking/graded 76 China: Ranking/graded 87

India: Ranking/graded 93 Result: India WINS the bid

EMEA25%

AP27%

LA10%

North Am38%

93

Big Planes Multi- year plan: service customers in 22 countries

Mexico Brazil China India

*Global Deployment of those customers supports the new location needs to be outside of the US

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

RFP Results- India!

Thank you everyone for all of your hard work and effort. We greatly appreciate your added effort with the additional Best and Final Offer request. After much deliberation, Big Planes Industry has decided to award our expansion contract with India.

Congratulations to India!

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Meet the Evaluation Team

Team Leader Jeaninne Wierzbicki

Area Subject Matter Experts (SME)• Company SME Terri Bunting• Mexico SME Wandella Ezell• Brazil SME Ashley Price• China SME Debra Kaser• India SME Jeaninne Wierzbicki • RFP decision Group Collaboration

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Resources

Adler, I. (1999). Let's get physical. Business Mexico , Retrieved September 9, 2011 : http://0-proquest.umi.com.catalog.lib.cmich.edu/pqdweb?index=0&did=46510591&SrchMode=2&sid=2&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1291861856&clientId=45540

Boeing. (2011). Boeing:Boeing in Brief Home. Retrieved September 6, 2011 from

http://www.boeing.com/companyoffices/aboutus/brief.html

Castillo, R. D., & Zalenski, J. (2008). Is your organization culturally competent? Nonprofit World , 26 (6), 18-21. Retrieved from: http://0-proquest.umi.com.catalog.lib.cmich.edu/pqdweb?index=0&did=1623859921&SrchMode=2&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1291861626&clientId=45540

Corella, R. (2008). Mexican Customs Labor (Vol. 12, pp.17-22). Latin American Operation

Embraer. (2011) Retrieved September 9, 2011 from http://www.embraer.com/en-US/ConhecaEmbraer/EmbraerNumeros/Pages/Home.aspx

Gannon, M. J., & Pillai, R. (2010). Understanding global cultures: Metaphorical journeys through 29 nations clusters of nations, continents, and diversity (4th ed.). Thousand Oaks: SAGE Publications, Inc.

Kaplan, S., & Cunningham, C. (2010, Summer). Eight quick tips for improving global cross-cultural communications. The Diversity Factor (Online) , 18 (2), pp. 1-6.

Lombardo, D. a. (2009, June 1). Offshore manufacturing raises industry questions. In Aviation International News. Retrieved September 8, 2011, from http://www.ainonline.com/news/single-news-page/article/offshore-manufacturing-raises-industry-questions-21027/

Oppmann, P. (2011). Boeing rolls out 787 dreamliner after years of delay. Retrieved September 9, 2011 from http://articles.cnn.com/keyword/boeing

Ortiz, R. (2007). A Division of Motor Corporation (Vol. 9, pp. 9-14). Mexico City: Speak Products

Willis, K., & Yan, F. (2011, September 7). China’s jet needs soaring: Boeing . In The Globe and Mail. Retrieved September 7, 2011, from http://www.theglobeandmail.com/report-on-business/international-news/asian-pacific/chinas-jet-needs-soaring-boeing/article2156193/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Home&utm_content=2156193

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October 2011 / Big Planes Ind. INTERNAL Manufacturing Operations Expansion Strategy- Big Planes Industries

Thank youThank you

October 6, 2011RPF EvaluationBunting, T.Ezell, W.Kaser, D.Price, A. Wierzbicki, J

Central Michigan UniversityDr. Patricia KelleyMSA 604