Given supply chain bottlenecks around the world, we explore why Boeing is expanding its distribution business in Germany and what it means for its wider operation.
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Rush transcript
Lee Ann Shay:
Welcome to Aviation Week's MRO Podcast. I'm Lee Anne Shay, Aviation Week's Executive Editor for MRO and Business Aviation. I'm here with James Pozzi, Aviation Week's MRO Editor for Europe, Middle East and Africa. Welcome James.
James Pozzi:
Hi Lee Ann.
Lee Ann Shay:
Now, to set this up. Supply chain challenges come up in almost every industry conversation that I have lately, and the issue spans from raw materials to labor. Boeing manages a massive supply chain for its internal operations, as well as millions of parts for its customers. In October, I visited Boeing's Dallas Distribution Center and you visited the company's new Chemical Distribution Center, in Germany.
When I was speaking in Dallas, with William Ampofo, who's the senior VP of Part Supply Chain and Distribution, at Boeing Global Services. He said chemicals for things such as sealants, adhesives, paint, and lubricants, is part of BGS's growth strategy, both from a distribution standpoint, but also as a service to manage them for customers. And this was the first step, it was expanding it in North America, and then he wanted to expand chemical distribution, beyond Dallas to Europe more broadly. What's your takeaway from why Boeing set up that facility in Germany, which is just north of Hamburg?
James Pozzi:
The facility in Henstedt-Ulzburg, which is about 30 kilometers out of Hamburg, is very vast in size, with a volume of around 200,000 square feet. According to Boeing, its main purpose is for the distribution of chemicals and specialist materials, so everything from the aforementioned chemicals, to specific parts on an aircraft, everything from say bits of carpet, for example, to parts for the aircraft.
And this is for not just Europe, but also Asia Pacific too. Obviously two regions where these parts and chemicals will be in great demands. The site will serve more than 6,000 airlines suppliers and component manufacturers from Hamburg, with around 40,000 spots in the warehouse for parts. So, that gives you a real indication, of the size of the operation. The focus is very much on being able to ship parts when needed, whether that's customer orders or even in the event of an AOG for an airline.
Boeing started building the center in March 2021 and COVID caused disruption in areas during that time, such as the supply chain. But Boeing says deliveries are now resuming and things are back on track. And of course, after the opening occurred in late October, in the ceremony attended by Boeing Global Services executives, including Stephanie Pope, they're pretty bullish about kind of where the recovery is and moving forward now, with this new distribution center.
Lee Ann Shay:
Boeing says this new facility, which sounds really big, is one of the most technologically advanced, and part of that is being green. It's pursuing the German Sustainable Building Council's Gold certification. What's your impression of the facility? What does it look like?
James Pozzi:
It's very much a modern warehouse, and that's easily identified in the way it uses some of its technologies. For example, robotics is something that really stands out when you're looking around the site. Boeing has adopted a lot of automation to move parts around the warehouse, predominantly. There are little controlled robots, which can react to parts requirements and requests, via tablet, operated by staff, and it is taken away. And then they can transport the said part from the warehouse to the operator.
Since the building's completion, there are some operational aspects still being finalized. These include the rollout of the new SAP system, which is coming very soon, apparently. And from the environmental aspect, there's some interesting stuff going on there, too. There's the pretty common occurrence of solar panels being installed. That's currently taking place with the facility, but there's also other stuff maybe on the human side, for example, they're exploring staff schemes, such as electric vehicle programs, where it'll set up charging points for electronic cars kind of around the facility. So, a lot of consideration going into that, as well and how they're going about approaching that. But yes, very much a modern warehouse and very much something of today.
Lee Ann Shay:
Thanks. And I think we need to stress, that it's not just a warehouse for distribution, but it also is providing more services around them. Can you give us some examples of what you saw?
James Pozzi:
Yeah, one thing there that kind of stood out, was I got to view the cooling room and the freezer room for the chemicals. The cooling room contained mostly ceiling materials, which were being stored at, I think six degrees, in line with the regulatory requirements on that day. And then next door, in the freezer, which I must say a lot of the assembled media team weren't so keen to stand in for any great amount of time, they keep special materials that need to be cooled up to minus 20 degrees in temperature. That's in Celsius, by the way. Obviously being from the UK, I go with Celsius rather than Fahrenheit.
So yeah, do the math on that into Fahrenheit, but that's very, very cold. They are bundling parts together and dispatching them. And of course, this means a lot of adherence to regulation and also, training for staff. I mean, there's a lot of training work and requirements, that they do invest in the staff with.
Lee Ann Shay:
Let's talk more about that, because chemical handling does require specific training. Tell me what you learned about the training, that's underway.
James Pozzi:
Well, on the day of the visit in the freezer, as I mentioned in the freezer room, that this is mostly composite materials, I forgot to add. And given the nature of this material, there's been a big safety emphasis. So, the training, the handling of the material, has been rigorous, and that's everything from how it's handled, to the right packaging being used. The training was very much a team effort, using multiple global Boeing sites to work with the Hamburg team. To do this, Boeing utilized people from this Dallas site, of course, where you visited, and its Miami location as well, to work with the team in Germany.
At present, on the date of visit in late October, there was around 17 people over from the US, with some staying for periods around up to three months. So, a long undertaking and a big project and a big movement of people, from one side to the other. But yeah, they thought that was the best method of implementing the right training and getting everyone in Germany up to speed, with the operation.
Lee Ann Shay:
When you were there, did you hear how much Boeing invested in this facility, including training and everything?
James Pozzi:
Yeah, there wasn't any figures disclosed to us, but it is looking to invest further in Germany. That's something that they certainly have in the plans. I spoke with Michael Heidinger, who is President of Boeing Germany, and he said, that they are looking at further investment, in some parts of the operation.
You can see why they chose Germany as well. I guess foremost, it provides sort of a stable European Union location. Obviously, one of the big economic centers of Europe, if not the biggest actually, enables easy access being in EU to the rest of Europe and even beyond to the Asia Pacific region, as well. Much of Boeing's investment will be in people, with further growth predicted in Germany. Of course, the company is in the process right now, of hiring 200 to 250 people at the site near Hamburg, and they're confident of a strong pipeline of talent coming through, maybe utilizing the traditional strengths of German industry, possibly another advantage of operating in the country.
So yeah. Here is Michael Heidinger, of course, President of Boeing Germany, telling me more about some of its future investment plans, in the country.
Michael Heidinger:
After this investment, we have defense deals that we could win. One we won already in the contract, the second one is helicopter, we want to get through next year, and that will have implications for the defense footprint here in Germany. And we'll certainly create jobs here for us, as Boeing, but also for our partners, who we team up with.
Lee Ann Shay:
Speaking of investment, it seems, at least to me, logical that Boeing Global Services would expand to Asia Pacific as the next logical step, for the chemical distribution. I know that the European facility is serving that region, at least for now. But I mean, do you agree? Did you hear anything along that line?
James Pozzi:
As it stands, that's correct, but I didn't hear anything specific about expanding to Asia Pacific, but I think it's interesting to see what Boeing does next in that region, certainly. Boeing already has a presence in that part of the world, so it seems like that could be the natural next step. And given the growth and market demand of the region, it would certainly make sense. So, I would say yeah, I think that's definitely one to watch and seeing what Boeing do over in Asia Pacific mix, after Europe and the Americas, certainly.
Lee Ann Shay:
Okay. So, if we were predicting sports, we'd both say that this is something to watch.
James Pozzi:
Absolutely. Yeah. I don't want to mention if I was a betting man or not, but I just think something to keep an eye on, definitely. Boeing's obviously always looking kind of globally and at the of main regions of the different continents, so it could be something to watch, definitely.
Lee Ann Shay:
Sounds good. Okay, stay tuned.
Well, that is a wrap for this podcast, but don't miss the next episode, by subscribing to the MRO podcast, wherever you listen to them. And one last request, if you're listening on Apple podcast and want to support this podcast, please leave us a star rating or write a review. We really appreciate it. Thank you.
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