Logistics Support Systems: A new name for a new future

The sustainment market for defense customers is changing and growing rapidly. According to today's projections, there's about $200 billion in untapped business for providing the products and services that help customers use the systems needed to execute their missions.

Boeing, through its newly named Logistics Support Systems business, is making key changes to prepare for emerging opportunities. Pat Finneran, vice president and general manager of Logistics Support Systems, discussed the changing market and how Boeing is responding.

Q: First, what is Logistics Support Systems?

A: This organization was called Aerospace Support up until late last month. Still one of seven major business units in Integrated Defense Systems, we offer the full spectrum of support products and services to meet the sustainment needs of defense and government customers.

Q: What does "logistics" mean?

A: This is a word our customers use to define all the work we do to support their mission readiness. This includes maintenance, modifications and upgrades; supply-chain management; engineering and logistics support; and training.

We're unique in the market because we bring all of these capabilities together, offering tailored, integrated, networked solutions—not point solutions—to meet our customers' complex sustainment needs. Programs such as the C-17 Globemaster Sustainment Partnership, F/A-18E/F Integrated Readiness Support Teaming, and soon the U.K. Chinook Through-Life Customer Support program, bring all of these elements together. They also are templates for how we plan to do future work.

Q: More and more, we're hearing the words "logistics" and "sustainment." What's the difference?

A: There's a fine line between logistics and sustainment, so you're probably hearing them being used interchangeably. Sustainment is one of seven Integrated Defense Systems market segments. It can probably best be defined as a customer need, while logistics is what we provide to meet that need. For example, our U.S. Navy customer needs to sustain the F/A-18E/F Super Hornet—in other words, maintain the aircraft's mission readiness and performance. We help do that by offering various forms of logistics, such as supply chain management and field support.

Q: Why did Aerospace Support change its name to Logistics Support Systems?

A: The change goes beyond a new name. It signifies a new strategy and a new direction for our business. The Aerospace Support designation served this organization well for many years, but it doesn't describe who we are today or where we want to go in the future. Our customers' needs are changing dramatically. We're positioning ourselves to meet those emerging requirements, as well as grow the business.

Q: How are customers' needs changing?

A: Customers are transforming their approach to support and sustainment. They want the full range of logistics support, not stand-alone offerings. They're moving away from service-unique approaches to solutions that address multiple services. Their focus on platforms is shifting to a focus on systems.

Plus, the way we're being paid is changing. Traditionally, we deliver a part or system, and customers compensate us for each transaction. Now, like a true service provider, we're increasingly being rated on our performance. Customers are setting mission-critical performance parameters such as readiness rates and allowing us to put in place the right processes and tools to meet those parameters. We are rewarded when we exceed them, and penalized if we don't.

A: We have primarily supported Boeing-built domestic military aircraft, and this has been a good business. We're unique in the market, offering the full spectrum of logistics support through an integrated organization. For the past three years, this organization has achieved double-digit growth and double-digit margins. To keep growing, we need to build on our core strengths.

For example, we own a significant share of the maintenance, repair and overhaul market. However, there's a lot of room for us to expand our current training, supply chain management and engineering support offerings. We're also really excited about a market that's emerging for network-centric logistics and integrated system support. It's valued at between $150 billion to $250 billion.

Q: How prepared are you to pursue new business?

A: We're in great shape. During the past seven months, we've made significant changes to align our organization with our customers and our strategy.

Previously, we were organized by capabilities, such as training or maintenance. Since we pride ourselves on our complete range of capabilities, this was a strength we didn't want to lose. Still, we needed to work on our interface with both internal and external customers.

So we retained our market-facing units, called Business Centers, and created complementary, customer-facing Program Executives. The Program Executives focus primarily on customer satisfaction and growth. Meanwhile, the Business Centers provide capabilities that enable Boeing to offer integrated, world-class solutions.

Q: What happens to your traditional business now that you're looking to expand?

A: Our current programs remain our No. 1 priority. We're committed to those customers, and we intend to keep running a healthy core business. Retaining our core work is key not just because it is our bread and butter, but because it is the foundation for growth. By performing on existing programs, we hope to expand those programs to new customers, as well as prepare for more transformational work.

Q: What's the outlook for Boeing's role in the logistics transformation?

A: Very strong. We don't intend to be a bystander through all of this. We're going to be out front, working with our customer to lead this transformation. We've already demonstrated we can provide solutions for today's needs. By changing our strategy, we're positioning ourselves to meet the needs of the future.