4/28/2016
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`Gamechanger: How Pratt & Whitney Transformed Itself To Lead A Revolu ion In Jet Propulsion
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`Gamechanger: How Pratt & Whitney Transformed Itself To
`Lead A Revolution In Jet Propulsion
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`On Wednesday, Airbus delivered the first aircraft in its upgraded family of A320neo narrow body jetliners
`to Lufthansa. News that a European aircraft maker is delivering planes to a German carrier might not
`sound like a breakthrough for American technology, but in this case it is. That’s because the “neo”
`designation of the Airbus family stands for “new engine option,” and the planes Lufthansa has bought
`will be equipped with a revolutionary “geared turbofan” engine made by United Technologies unit Pratt &
`Whitney.
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`Pratt has spent $10 billion and 20 years developing the geared turbofan, which it is marketing in multiple
`variants as the PurePower family of high-bypass engines. To say the PW1100G engines built specially
`for the A320neo are a breakthrough is a bit of an understatement. The engines will reduce fuel
`consumption 15%, extending the plane’s range by 500 nautical miles. They will reduce environmental
`emissions by 50%. They will reduce noise by 75%. And that’s just for starters – the fuel savings will
`grow to 20% by 2020 as the engine technology is refined, and Airbus is projecting major savings on
`aircraft maintenance.
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`The key to the gains is a reduction gearbox built into the engine that allows each of its sections to spin at
`optimum speed. It’s an idea that has been around for some time, but was devilishly difficult to
`develop into the kind of engines a next-generation narrow body required. The clearest indication Pratt &
`Whitney has succeeded is that 7,000 of the engines have been ordered before the first commercial flight
`even occurred. Most of the aircraft makers adopting Pratt’s PurePower line plan to make it the sole
`propulsion offering on their new jets.
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`Airbus will offer two options on the neo — including an upgraded conventional turbofan from GE — but
`there isn’t any doubt which engine will be quieter, more fuel efficient, or more environmentally friendly. It
`will be Pratt’s geared turbofan, which has already disrupted business as usual in the short-to-
`medium haul segment of the market to such a degree that every aircraft and engine maker has been
`forced to respond with new product offerings. Unfortunately for Pratt’s competitors, there is no way they
`can catch up with the Connecticut-based company’s lead in new technology anytime soon — which is
`one reason why Pratt expects engine production to double through the end of the decade.
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`http://www.forbes.com/sites/lorenthompson/2016/01/21/gamechanger-how-pratt-whitney-transformed-itself-to-lead-a-revolu ion-in-jet-propulsion/print/
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`Gamechanger: How Pratt & Whitney Transformed Itself To Lead A Revolu ion In Jet Propulsion
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`Prattt & Whitney’s PurePower faff mily of geared turbofaff n engines is revolutioniz ng jet propulsion, and in the process
`disrupting business as usual in the commercial transport sector. But gettt ing to this point requ red Pratttt to transfoff rm its
`business culture, including relying much more heavily on a rigorously managed supply chain. (Retrieved from United
`TeTT chnologies)
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`The other reason is the F135 engines it is building for Lockheed Martin’s F-35 fighter, a program that will
`deliver over 3,000 stealthy tactical aircraft to three U.S. military services and a dozen overseas allies.
`That program is ramping up too as the price of engines and airframes falls in each successive
`production lot, headed toward a price-tag per plane similar to that of the Cold War fighters the F-35 will
`replace. Pratt is the exclusive supplier of engines for the F-35, which means both the military and
`commercial parts of its business are looking bullish for decades to come (much of its profits come from
`the aftermarket, supporting fielded engines during multi-decade service lives).
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`But it is the geared turbofan that I want to focus on here, because the PurePower family is emblematic of
`what U.S. manufacturers can accomplish in global commercial markets when they have a vision of the
`future, coupled with the discipline and skills required to make that vision real. Pratt generates 90% of
`the PurePower family’s content by value within U.S. borders, even though 80% of the engines are sold
`overseas (the engines already have 70 customers in 30 countries). It is an amazing feat to have
`accomplished this with a manufacturing base concentrated in the high-wage, high-tax, heavily-regulated
`state of Connecticut.
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`I go into it in greater detail in a report I released today. United Technologies has been a contributor to
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`http://www.forbes.com/sites/lorenthompson/2016/01/21/gamechanger-how-pratt-whitney-transformed-itself-to-lead-a-revolu ion-in-jet-propulsion/print/
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`my think tank for some time; I have been able to closely follow Pratt & Whitney’s efforts to best its
`competitors for the better part of a decade. When I first encountered the unit, it was struggling to keep
`up with competitors in both the military and commercial segments of the engine market. Now it looks to
`be pulling ahead, and what my report illuminates is the steps Pratt had to take beyond
`developing revolutionary technology to achieve the success it is experiencing today.
`
`Pratt & Whitney belongs to a small fraternity of American manufacturers such as Boeing and General
`Motors that have managed to remain on top since the early decades of the 20th Century (the “American
`Century”) by continuously adapting to changing markets and technology. The company finished
`developing its first aircraft engine on Christmas Eve in 1925 and still uses the East Hartford assembly
`facility it constructed four years later. But what goes on inside that plant and the rest of Pratt has
`changed continuously. In fact, successfully bringing the geared turbofan to market might not have even
`been possible without the latest transformation of Pratt’s internal culture.
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`That transformation was driven by management’s recognition that a Connecticut-based
`manufacturing enterprise would have difficulty competing in a globalized, digitized economy if it did not
`thoroughly rethink every facet of its business. Unlike many other U.S. companies that chose to move
`manufacturing offshore to low-wage locations, Pratt elected to stick with its roots in America. For
`starters, it needed the intellectual-property protection that the U.S. legal system afforded. Also, it relied
`on a complex aerospace infrastructure that would be difficult to replicate elsewhere. In addition, it
`deeply valued the quality and dependability of key suppliers with whom it had enjoyed relationships for
`decades.
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`The challenge was figuring out how to remain price-competitive as an American manufacturer while
`meeting ever-rising customer expectations for cutting-edge technology, superior quality, and timely
`delivery. The answer, as it turned out, lay in two emerging management concepts: core competencies
`and lean manufacturing. The core competencies concept argues that most enterprises can only be
`world-class at a handful of activities, and so that is where they should concentrate their efforts. Other
`activities necessary to the business should be outsourced to suppliers who are themselves world-class
`at what they do.
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`The notion of lean manufacturing evolved from processes developed in the Japanese auto industry
`aimed at minimizing waste into a management philosophy of continuous improvement. It
`stresses perfect first-time quality, smooth production flows, just-in-time deliveries and worker
`empowerment. By applying digital technologies and advanced workforce training to those goals, Pratt
`was able to accomplish major gains in efficiency. The company became highly proficient at measuring
`performance metrics such as inventory turns and worker productivity, with an eye on eliminating
`any impediments to maximizing quality and minimizing cost.
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`The enterprise that emerged from management’s efforts to transform the work culture has off-
`loaded activities better performed by outsiders while retaining the front-end of the product life cycle
`http://www.forbes.com/sites/lorenthompson/2016/01/21/gamechanger-how-pratt-whitney-transformed-itself-to-lead-a-revolu ion-in-jet-propulsion/print/
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`where engines are designed and developed, plus the back end where they are integrated and
`supported. In other words, Pratt & Whitney retains the functions where it is unsurpassed, while relying
`on a rigorously managed supply chain for inputs where others are more efficient. Thus, whereas the
`company internally generated about half the parts it needed during the last big ramp-up of engine
`production, today that share is down to around 20%.
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`Many machining jobs within the company have been lost as new processes changed the way work was
`done. But a lot of these jobs didn’t disappear, they simply moved into the supply chain where production
`could be accomplished more efficiently with no loss of quality. The top tier of Pratt & Whitney suppliers
`recognized under its “supplier gold” program achieve perfect first-time quality 99.99% of the time. Pratt
`has 450 suppliers deemed critical to its business, the vast majority of which are located in the U.S.
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`The transformation of Pratt & Whitney’s business culture thus would not be possible without highly
`accomplished suppliers such as Whitcraft, Aero Gear, J&L Machine and Polamer Precision.
`These providers of parts and components may not be household names, but they are world-class at
`what they do, and Pratt executives know it. The company invests heavily in training the workers that
`populate its key suppliers, including supporting programs at local schools. And when suppliers have
`proven themselves, they are rewarded with long-term contracts that allow them to plan with greater
`efficiency.
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`This part of the geared turbofan story tends to get lost in the daily coverage of markets and profits, but it
`is a crucial part of the reason why America remains at the forefront of the global aerospace industry.
`Companies like Pratt & Whitney recognized the importance of investing in new product and process
`technology, and of continuously adapting to new customer needs. However, the foundation of Pratt’s
`success is a disciplined workforce both inside and outside the company that delivers unparalleled,
`unprecedented quality in the products the company sells. That is why Pratt & Whitney is emerging as
`the global leader in jet propulsion, and why America has a future in manufacturing.
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`http://www.forbes.com/sites/lorenthompson/2016/01/21/gamechanger-how-pratt-whitney-transformed-itself-to-lead-a-revolu ion-in-jet-propulsion/print/
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