Tom Gentile, president and CEO of Spirit AeroSystems, discusses high-rate commercial aircraft production and lessons for military programs, increasing manufacturing rates and military mobilization with Defense & Aerospace Report Editor Vago Muradian at the Reagan National Defense Forum at the Ronald Reagan Presidential Library in Simi Valley, Calif. Our coverage was sponsored by L3 Technologies and Leonardo DRS.
Tom Gentile
President and CEO, SpiritAeroSystems
Reagan National Defense Forum
November 2018
Vago Muradian: Welcome to the Defense and Aerospace Report. I’m Vago Muradian here at the Reagan National Defense Forum, America’s premier defense conference that happens every year here at the Ronald Reagan Presidential Library in Simi Valley, California. Our coverage here is sponsored by Leonardo DRS and L3 Technologies.
We have with us Tom Gentile who is the President and CEO of Spirit, basically the company that makes sure that the entire global commercial and defense aerospace aerostructures business operates. Tom, thanks very much for joining us.
Mr. Tom Gentile: Vago, thank you. It’s a pleasure to be here. And earlier today Mac Thornberry, Chairman Mac Thornberry who chairs this forum called it the Davos of Defense, so we’re really pleased to be here.
Mr. Muradian: Exactly, and it’s fantastic and if I’m correct, you’re one of the sponsors of the event as well.
Mr. Gentile: Yes, we’re a silver sponsor.
Mr. Muradian: And so aside from the fact that I’ve always been a defense guy, I’m also a commercial aerospace guy, and I think that what you guys do in terms of 737 and so many other commercial airplane programs is just unbelievable. You’re going I think to 57 rate on the MAX-737, if I’m correct?
Mr. Gentile: That’s correct. We’re right now at 52 and we’re
at 57 on the A-320, but the MAX is going to 57 and next year the A-320 is going to 60.
Mr. Muradian: That is just unbelievable, and it’s an unprecedented time for commercial aerospace. People try to compare this to right after World War II, but we’re at run rates that have never been seen before in the industry.
Talk to us a little bit about how you guys are leveraging innovation to be able to not only get these production rates, but also you guys are doing some incredible engineering, incredible materials, incredible processes in order to be able to drive down costs, but also increase production rate, and also increase quality and the performance of the product.
Mr. Gentile: I’ll start with process and I’ll use 737 as the example. A couple of year, 2016, we were building 42 a month. We had two production lines each building 21 per month, and each day one unit came off of each line. So there were two units at the end of each line. We called it one-day lines.
When we went to 47, we opened up a third line, and it was doing five per month. So it was a four-day line, and it was unbalanced.
So as we went into 52, that four-day line went to a two-day line. Next year when we go to 57, we’re going to actually make that line a one-day line. We’ll have three one-day lines, each producing 19 a month with two days of buffer. So we’ll be very balanced.
The other issue that we had is when we transitioned from the NG to the MAX we had to learn a whole new product. So in 2017 we only built about 80 MAXes. This year we’re building about 300, or 50 percent. Next year it will be more than 90 percent will be MAXes. So you can imagine as you go down that learning curve you become more efficient.
The other thing we’re looking at is we’re trying to digitize and put more analytics into the process. So we look at materials, we look at mechanics and we look at machines. So on the machine side, for example, one thing we’ve done is we’ve digitized all the machines. So we not only know when they’re up, but we also know when they’re operating at peak efficiency. That’s very important.
Another methodology we’re using, for example, is optical inspection. So we take a golden image of a very complex frame or floor beam or some other structure that has a lot of parts to it. Once we have that golden image, then we take every unit after that and we compare it to the golden image, and optically we can identify where any flaws are. It’s allowed us to reduce our escapes massively. So that’s one example of machine automation.
Another one is, if we look at our inlet on the 777 Nacelle, for example. The inside of it, we have to put some acoustic controls in it. Lots of small perforations. In fact 500,000. And what we’ve used is a series of eight robots. We call them dancing robots. What they do is, they can put about six holes per second into the acoustic panel and that enables us to do it in about four hours, which you just couldn’t do without automation. We’re also improving the automation of fastening machines.
So right now there’s about 450,000 fasteners on every 737 fuselage, and about 60-65 percent of those are automated today. That helps us go up in rate.
In terms of our mechanics, we’re trying to digitize work instructions. We’re giving them iPads and smart phones on the floor so that they can access those work instructions. We’re also having them put in their start and stop time automatically on the floor. It saves them a lot of walking back and forth to enter that information into kiosks. And by being able to measure actual duration, we can look at the variation across all the units, identify the sources of that variation, and then reduce it. It allows us to improve our flow time.
Then in materials, some of the ways that we are automating our materials is, for example, we’re developing what we call a Global Digital Logistics Center, so it’s a highly automated warehouse of sorts, but seven stories tall with automated picking and storing. And we’re able to handle two million parts a day by putting in this automation.
So we’ve consolidated about 500,000 square feet of warehousing space on our campus in Wichita to about 150,000 square feet. It’s opened up room for more rate, but it’s also helping us ramp up and manage all of the different parts as rates go up.
So you can see the digitization cuts across materials, mechanics and machines, and it allows us to be a lot more productive and a lot more balanced in our manufacturing process.
Mr. Muradian: Even for things as complicated as Nacelles, which is really an art and a science all to its own. And what’s amazing is, you know, if you go to the Renton facility where the 737 comes out of, it’s a very, very small line. If you look at pictures in the 1960s and ‘70s given all these great airplanes that came out of that factory was, on both sides of it, right now they have the wing side and it’s actually half of the factory that they’re using. But it’s because so much of the airplane comes complete from you guys that it’s very easy for them to have a very, very high throughput through the factory.
Mr. Gentile: We make about 70 percent of the structure on the 737. But it’s interesting. Renton and Wichita have been tied at the hip since 1941. They were both built at the same time, and in fact the exact same design by the Air Force. So they truly are a partnership and we work very closely with Boeing. We treat it almost like one production system so that we can maximize the productivity. They know where every fuselage is at every point in our production process from the time it leaves our factory all the way until it arrives at Renton.
Mr. Muradian: You guys had a small passenger service module issue which did disrupt production just a little bit, but talk to us a little bit about how much more elasticity is there in the system, right? Every time there’s a new run rate that’s created, people go like, can’t imagine like wow, we’re going to get to that number, and then you guys surpass it and then you go into the next higher number. How much more upside space is there? I know that’s not a decision that you’re going to be making, but if Boeing does take that decision you’re going to end up delivering on it.
How much more upside is there in terms of how much higher production rates you think can go reasonably, given that the global supply, the entire system is now running at full tilt?
Mr. Gentile: Back in 2005 when Spirit split off from Boeing, the rate on 737 production was 21 per month. Today it’s 52 per month, and next year it’s going to 57 per month. And we’re all tooled for that, we have all the capital, all the infrastructure. We’ve actually hired 95 percent of the staff already for that production rate. We can go higher.
But one of the things we’re doing is we have what we call Plant 2 in Wichita which is our main production facility for the 737. If you go back 10-15 years ago it also included a lot of production for 767, 777, 747. We’ve actually moved all of that out. We’ve also simplified some of the assembly operations in Plant 2 so that we freed it up for the final assembly of the fuselage.
So we can go up to 57. Of course we can go up beyond that. It depends on what Boeing decides. We have the infrastructure to do it.
Then we’ve also started to put all the tooling and the machining capacity in place as well. For 57, we’re all set. If we need to go higher, there may be some extensions to a couple of the buildings that we’ll need to do, but we can certainly do it on the campus in Wichita, to go up to whatever rate Boeing needs to go.
Mr. Muradian: Let me go to defense programs. Talk to us a little bit about how much of the commercial innovation you guys are making. Obviously CH-53K, you know, that is a very, very important infrastructure that you, aerostructure that you guys make for Lockheed’s Sikorsky Unit. Obviously the Marine Corps’ next big combat helicopter.
Walk us through some of the lessons on the commercial side that are having direct applicability across your military portfolio as you continue to apply these lessons and refine processes and actually deliver better product more quickly.
Mr. Gentile: Well one thing about Spirit is we are 100 percent focused on structures. So those could be tier one, tier two, they could be composite or metallic, military or commercial. So we try to take the lessons that we’ve learned from our high rate commercial production and apply those to the military. Particularly in terms of composite fabrication.
So the CH-53K which you mentioned is a composite fuselage. So we make the forward part of that fuselage, GTN makes the aft part. They ship it to us, and then we put it together. But we take all of the lessons learned from composite fabrication on the 787 and also on the A-350 and we’ve applied those to the CH-53K.
So we think in terms of not only the layout of the unit and the autoclave, how do we maximize that? The trim and drill. We leverage some of the same tooling for that. Then as we do things like non-destructive inspection, we apply all of the lessons learned from high rate commercial production to the much lower rate defense production. But in some cases it’s a more complex product.
So as we develop the build strategy for each of the defense units, we really leverage our commercial legacy and knowledge and expertise and apply that to the defense products.
Mr. Muradian: As the Pentagon continually seeks to innovate, everybody’s talking about doing things faster. Everybody’s talking about doing things cheaper. That’s been sort of consistent throughout my almost three-decade career covering this field, is we’re going to do it better, faster and cheaper. And yet sometimes the progress we see is not as great. Whereas if you compare that with what’s happened in the commercial world, it’s just a night and day difference.
From your standpoint in the conversations you have with some of the Pentagon leadership on this, what are some things that you think are the things that should go into the whole defense system that are from the commercial world that may actually help improve not just the design, the engineering and the production of a lot of the military systems. If you will, from your standpoint as an aerostructures expert to try to inform the process to get us to a better place ultimately, whether it’s in the number of rivets we’re using or the number of components or even in the composite substructures we’re using to produce some of these end items.
Mr. Gentile: First of all, the government is just as focused on cost as any of our OEM customers. They are constantly talking to us about that and encouraging us and directing us to get better. So that’s the first thing. There’s no lack of cost focus.
But what I would say is, sometimes the process on the commercial side is a little bit more efficient in terms of lead time. So for example, material. If you can order the material sooner, you can get the process working, you can buy in bulk, you can get things delivered sooner, you can start the production process sooner. Sometimes the government contracting process creates some delays in terms of ordering those materials.
The other thing is, at least on the initial parts of the production, the production lines are at very low rates. So when you’re doing your test articles or your low rate initial production, we’re doing blocks of a few units. So you can’t plan, therefore, over many units, and you can’t order in bulk. You can’t hire and do your planning and your capital equipment purchases and your tooling knowing that you have a longer production line over which to amortize the cost.
So those would be a couple of things I think. Earlier ordering of material, and also looking at longer production runs even in the early stages of production so that you can get down the learning curve and capture those economies of scale.
Mr. Muradian: The last two questions. First. We’ve seen augmented reality, virtual reality really changing the game. You talk about using tablets on the floor in terms of work flow management or for anything else. We’re finding that there are a lot of experimental programs where once you can put something like Google Glass or an augmented reality system, it’s completely game-changing, whether it’s for form, fit, function, maintenance, checkout, as you said, optical scanning for quality control and stuff like that.
What’s the role that some of these new technologies will play in terms, as you look at the production line of the future, which isn’t really — you guys innovate so quickly that it’s almost a production line of the future, it’s sort of every other day. But as you look sort of four, five, ten years out, what are the technologies we’re going to see that are going to most shape what your business is going to look like?
Mr. Gentile: Virtual reality, I think there’s a couple of different applications. One that I’ve seen is on the factory floor where you can basically digitize work instructions and make those available not just on a tablet or a smart phone, but also on a pair of glasses, and you can use your index finger as essentially the mouse to move through it. So it’s a very convenient way to make those applicable and accessible to the mechanics.
Those are in the early stages but we’re starting to use it. Some of our suppliers are starting to use it with very good results.
Another application of virtual reality is to essentially model and simulate a production process before you actually put it into effect and experiment with it. So for example, we were looking at new material handling system in our Kinston, North Carolina factory where we do the center section for the A-350. And it was a very novel, new concept. What we did is we worked with the Wichita State University National Institute of Aviation Research, NIAR, and we completely modeled this new material handling system. We were able to experiment with it well before we ever cut any metal and put it on the floor. We identified a number of inconsistencies that we could fix in a virtual world that saved us probably a couple of million dollars later, and also got us up to productivity faster.
So as we talk about accelerated learning curves and getting down the learning curve faster, using virtual reality and simulating the factory in advance of actually industrializing it, that’s one of the ways to do it.
This is starting right now. We’ve had a couple of examples where we’ve used virtual reality to get down the learning curve. I think it’s going to become much more prevalent in the industry and much more important in terms of driving productivity.
Mr. Muradian: Let me ask about intellectual property and cyber and cyber intrusions and cyber protection. You guys pride yourself on an enormous amount of intellectual property. It’s the result of billions of dollars and decades of learning that allows you to do and add that secret sauce to what you do on a daily basis. But we’re seeing a lot of advanced persistence threats challenging not just manufacturers but obviously the department. There’s a renewed drive to sort of get our arms wrapped around cyber security in a more meaningful way. There’s a tendency of believing that well, the big companies will be okay. Well, the trouble is, you share some of your most sensitive data with smaller companies that may not have security that’s as good.
So folks are looking at improving and toughening that. But there’s going to be a financial implication for that as well, particularly for major companies. What’s the right way to think about it? And how much more is it likely to add to products at the end of the day if we get to this heightened kind of hardened cyber posture that we all need? It’s not that everybody’s not working hard to protect themselves, but there are a number of folks who talk about it’s like yeah, these guys had very good cyber protections, but then these guys actually didn’t, and that’s where the breach happened.
How do we need to think about this as an organization and a series of important organizations? And what are the potential financial implications for chief executives like you?
Mr. Gentile: Well certainly intellectual property is very important. It’s the jewels of our industry and so it’s very important to protect it. But we think of always background intellectual property as well as foreground intellectual property. So the background is the material, the ideas that we developed over a long period of time. The foreground might be intellectual property, new ideas that we develop in conjunction with a customer on a particular project. That’s usually shared. Very often it’s shared. But regardless, you have to protect it. And the risks that exist today in the cyber world are just much greater, with clouds, with all of the different networks and the connectivity. The insider threat as well as the outsider threat. There’s always the risk to lose it. So you have to invest in cyber protections.
One of the things that we’ve looked at, particularly with defense work, are the NIST controls. There’s 110 of them. They’re very prescribed. So we have been implementing those. That gives us a platform and a foundation and a standard to aspire to and to implement.
I’d say, though, that the problem with it right now is there’s a lot of inconsistency in terms of interpreting what is compliance to the NIST 110 standards and also what does real compliance mean?
So some of the OEMs and the primes have different interpretations of that. One of the things that the industry is trying to do, the Department of Defense and trade associations like the AIA, the Aerospace Industry Association, is to come up with a standard interpretation. I think that will be very important.
Everybody is spending literally tens of millions of dollars on cyber security and we want to make sure it’s effective, we want to make sure it’s consistent, and we want to make sure that it does what it’s intended to do which is protect intellectual property from getting into the wrong hands.
Mr. Muradian: Is this a major cost item or a minor cost item? I mean at the end of the day even if you — I mean to get to where it is we need, is there going to be a big impact on cost? Or do you actually think that the cost might not be as big as people think it might be?
Mr. Gentile: I think it’s going to be big. As I said, today it’s growing. We’ve increased people, we’ve increased the tools, we’re adding new software. And there’s never enough to do. Every time you get to a certain level the threat increases.
When we were first announced as one of the seven suppliers on the B-21 program, we did see an increase in attacks. We were able to thwart those, but that’s just an example of what can happen.
So no matter how much you’re spending on cyber security it’s probably not enough. We need to continue getting better.
Mr. Muradian: Let me ask you, I cheated, one last question. Mobilization. That’s been on the lips of a lot of folks. I know Chairman Dunford has talked about it. I know that it’s important to Secretary Mattis. And you channeled the World War II history of not just Boeing at the Renton facility, but you guys in Wichita in 1941. How much, when people talk about surge manufacturing, in the event of full war to open up those throttles on a lot of these defense programs, how doable is that? I think that you’re probably the best-suited person to be able to answer this question. Right?
So if we wanted to surge say manufacture of F-35s, or manufacture of 53Ks or any one of a number of these other systems, how much elasticity is there in the system? Could we do — there are folks who say hey, we could do the same thing we did in World War II again in no time flat. Is that reasonable, given that we live in a global, just-in-time supply system where things are arriving at your facilities like almost to the minute, otherwise the supplier is penalized. Is that a doable thing if we decided, hey look, in wartime we need to do a surge mobilization and a surge of production? How doable is that given the modern economy and the modern life?
Mr. Gentile: It’s really all about tradeoffs, because there’s no excess capacity. Capacity is too expensive. Nobody has open capacity sitting around. We certainly don’t. We’re fully utilized going out.
We’re fortunate we have a very long backlog, but it’s fully utilized.
So the only way you could surge would be to basically stop doing something else. So if the commercial market dropped and you converted some of the commercial capacity to military capacity, there’s a possibility. But it’s very different tooling, and it’s a somewhat different skill set.
So it would take some time. Not impossible. We certainly have the infrastructure, the skilled labor to do it, but it would definitely take some time, and you’d have to stop doing some of your commercial production because, as I said, there’s no open capacity.
Mr. Muradian: And it’s not that easy to convert an automotive production line to start doing some of this work, is it?
Mr. Gentile: Again, it just takes time. And money.
Mr. Muradian: Yeah. Tome Gentile of Spirit AeroSystems. Sir, it’s such a pleasure. Thanks very, very much. I really enjoyed it.
Mr. Gentile: Thank you, Vago. Appreciate it.
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