Since 2001, The Boeing Company has been stuck in the No. 2 slot behind Airbus. However, the company has recently adopted some very unique approaches to both its manufacturing and supply chain processes in its development of the new 787 line of jets that it hopes will knock European-based Airbus back down the competitive ladder. Among the powerful new tools in the Boeing arsenal is a collaborative supply chain platform that empowers a step advance in supply chain management.

What makes this all the more special is that the platform extends into a broad network beyond just Boeing’s roster of suppliers and customers. Indeed, the aerospace sector is at the forefront in the development of something that has long been discussed and awaited—collaborative sector-wide supply chain management platforms.

Boeing is using Exostar, the collaborative platform for aerospace and defense contractors, to assist with supply chain management in its race to get the 787 in the air. According to an AMR Research report on Boeing released last May, entitled The Boeing 787: Demand-Driven Strategies Take Flight, the airline manufacturer utilizes Exostar to “manage the complete order lifecycle and returns process across multiple tiers and to track consumption and replenishment for Boeing’s Partner Managed Inventory program.”

Exostar allows the aerospace giant and its partners to issue purchase orders, track purchase order changes, exchange advance ship notification information, manage returns, and track shipments across multiple tiers of its supply network. The system monitors events and process exceptions against the master schedule using synchronized time-sequenced demand signals for all partners, according to AMR analyst, Lora Cecere, report author.

“Everything is in place,” says Lora Cecere. “Now it’s just up to Boeing to execute and get the 787 in the air by summer 2008.”

Lora Cerere, author of the AMR Research report called The Boeing 787: Demand-Driven Strategies Take Flight.

Founded in 2000 “during the wild, wild West of e-collaborative,” Exostar represents the culmination of a vision shared by five of the aerospace and defense (A&D) industry’s leading companies—BAE Systems, Boeing, Lockheed Martin, Raytheon and Rolls-Royce—to establish an open and secure network connecting manufacturers, and A&D companies all over the world, says Peter Scott, Exostar Vice President of Marketing and Corporate Development, in Herndon, Virginia.

Although Exostar has no competitors in A&D, says Kevin Reale, Automotive and Research Director at AMR Research in Boston, Massachusetts, it is part of a wider trend towards creating collaborative platforms to either handle the work of shipping or, as in this case, provide a basis for competitors to collaborate on work processes. In trucking there’s Transplace, for example, which provides shipping and logistics services.

The ocean industry has a variety of portals or platforms. Like Exostar, INTTRA was founded by its industry in 2000. From five of the largest ocean carriers in the world it’s grown to a 22-carrier global network helping facilitate shipments between carriers and their customers. Also industry-driven, GT Nexus is an e-logistics software provider that similarly provides a portal, though software is its focus. And CargoSmart, another ocean portal, aims to provide core booking and tracking facilities in what officials call a complete solution.

Like Exostar, all these platforms are built on the principle that collaboration—whether standardizing and streamlining shipping, trading, design and procurement—results in real-world gains in productivity, efficiency and cost savings. In Exostar’s case, it strives to serve buyers and suppliers with solutions that address everything from secure Internet connectivity to complex back-end system integration, according to company officials. As of this summer, Exostar had connected over 300 procurement systems in 20 different countries, and had registered more than 16,000 trading partners worldwide. More than 100 companies are actively using Exostar’s online business-to-business collaboration and distributed product development solutions.

One of those is Raytheon, a defense contractor (and Exostar co-founder) located in Waltham, Massachusetts. Before the inception of Exostar, says Jim Newman, Director of Enterprise Supply Chain Technology, Raytheon “had already developed experience and appreciation for e-business by use of tools developed in-house, based on its experience with ordering of Maintenance, Repair and Operating Supplies and electronic reverse auctions. We had recognized the difficulty of achieving scale, of getting enough suppliers connected to achieve the benefits we sought via e-business.”

So, by 1999 Raytheon was “very interested in the concept of Exostar and the vision of a community of networked suppliers who serve the aerospace and defense industry. We viewed connectivity with a broad network of suppliers as a key to development of the full potential of e-business,” he said.

Since its inception in 2000, Newman says, “Exostar has done a great job of basic blocking and tackling; adding suppliers, growing transaction volume and successfully conducting e-business with a large community. They have begun in recent years to add functionality that is needed in the community, and to develop unique approaches to problems that others have struggled with in e-business. A good example of this is their security solution set, which addresses identity management issues in e-commerce.”

“In an industry unrivaled for its ability to effectively compete through collaborative solutions, Exostar came together with a vision of a single industry solution that could solve external collaboration problems, expedite and simplify procurement processes and, at the same time, save money for its global customer base,” says Scott of the Exostar model. He adds that Exostar’s “growing list of customers include a large cross-section of international companies and government agencies that buy and sell direct or indirect products and/or services in the commercial, military and government sectors. Its customer base ranges from the small and medium-size enterprises to some of the world’s largest manufacturers and A&D organizations.”

How Exostar meets A&D business needs electronically

Modifi cations on 747-400s that will transport major components of the Boeing 787 Dreamliner.

According to Scott, economics “was the first driver” for A&D competitors to create a collaborative electronic platform. With a “huge overlapping supply base” they realized if each created their own solution, used their own labor and chose separate software packages and technology standards it would mean suppliers would have to carry multiple technology systems. “This would increase the cost of labor for the overall supply chain and they didn’t want do that. As much as possible they wanted common tools and standards for data, business process, identity managements and security,” he said.

The less mature technology of the late 1990s was another inducement. “The technology at the time wasn’t going to meet the needs of the defense industry and the manufacturing sector. Back then solutions were designed for consumers, but A&D companies needed highly robust, mission-critical technology that’s highly secure so they could collaborate without risk.”

With a long history of intra-industry collaboration, the A&D sector had a head start in building a collaborative platform. “There are many cases where two companies may compete fiercely on one project, yet team together on another project, and work with a group in an enterprise like Exostar to develop and provide common service approaches for the entire industry. We are familiar and comfortable with this process of collaboration; electronic commerce and electronic marketplaces make this more seamless to all parties,” Newman said.

Scott concurs. In A&D he says “there’s a long-standing history and culture built up around program-specific competition. Unlike the automotive or electronics sectors, there’s a strong sense of doing what’s good to ensure the long-term competitiveness of the industry. Increasing supply chain and shipping costs to suppliers won’t help in the long run.”

Over the last five years, Exostar has evolved into a both a technology provider and a network that provides connectivity among trading partners up and down supply chain. Says Scott, “We host a portfolio of collaborative business applications that include design, sourcing, procurement, supply chain execution. All of that is deployed within our leading security and identify management framework.”

“What we do is basically stitch together a collaborative base between enterprises so they can be successful. For example, BAE Systems currently is using our design collaboration solution to facilitate a change review process for design and documentation. Exostar is helping to unite electronically BAE Systems staff and partner suppliers to support this process,” he adds.

In another example, Scott says Boeing, BAE Systems and Rolls Royce are using Exostar today to publish their demand forecasts. “If you can imagine a business process that has to happen from one enterprise to another, we aim to securely, efficiently enable it,” he said.

Like other platforms, Exostar spares its members from buying added technology—whether hardware and software—to get a job done. Technologies are purchased “as a variable cost service” and are included in the platform, rather than being downloaded to clients the way hosting services (ASPs) work. Software is selected to leverage community interests only, he says, not to push a product offering.

The platform also helps customers integrate with their backend ERP (enterprise resource planning) system, of which Scott says there are at least 100 types in the network. Also, many customers develop their own proprietary backend technology. Exostar now provides integration services to “over 50 integrated suppliers where their volume is great enough” to warrant the expense.

A unique approach to security

Given that many aerospace companies double as defense contractors, and all are competitors, there’s a huge need for Exostar to provide a secure platform. From its inception, Exostar has involved chief security officers of all founders to help develop a secure system. According to Scott, “back in 2000 they drew up a list of 87 different requirements that we would need to meet for a multi-enterprise collaboration platform. We weren’t smart enough to realize they were trying to say no,” he laughs.

The resulting solution is called ForumPass, which was recently upgraded. One of the key capabilities the founders requested was to control access to the data not just for users, but also for Exostar employees running the platform. After a great deal of effort, Scott says Exostar and its founders developed a special form of “end-to-end encryption” that won them a Computer World innovation award in 2004. Data that is uploaded to the desktop of an authorized user can “only become decrypted when an authorized engineer downloads it. So literally, Exostar can’t access the data,” Scott said.

Employees and partners also must use a series of “digital certificates” to get into system, he adds. “So, if I’m an engineer and a company paid for me to have a set on this environment, then Exostar creates a process of authentification and issues a digital certificate. This goes beyond user name/password or key word, et cetera…”

Without these security measures “you would have a hard time taking external collaboration to the next level, particularly with all sorts of Department of Defense (DoD) requirements and liability issues. And then there are export controls that don’t allow our customers to export sensitive data such as design documents because that’s as sensitive as sending the actual items,” he added.

In fact, Scott says that the (DoD) and its strict contracting process and evolving systems (see box) has helped “shape Exostar.” Although Exostar started with an emphasis on the commercial side of the business, this year it has started to work more closely with DoD, the U.S. Office of Homeland Security, as well as defense agencies in the United Kingdom, on both supply chain and security initiatives.

The move to defense contracting means overcoming the natural distrust that data can be protected in electronic formats, says Scott. Identity management is one approach Exostar is addressing to ensure that the person involved in a transaction “is who they say they are.”

“From a market standpoint, we’re looking at engaging more closely with the government customer in partnership with prime in industry. Also, we’re looking at extending security and identity management—which tends to be horizontal—to verticals like financial services,” Scott said.

As for what Exostar could do to improve its offerings, Newman of Raytheon says organizations “can always improve. The business of electronic commerce changes very rapidly; just staying aware of developments takes significant effort. Exostar,” he said, “needs to stay very close to emerging trends in e-commerce, capability needs of their customers (both buyers and sellers), and their vision of what e-commerce can become in the future.”

Sidebar: Exostar Gears Up to Manage Defense Department’s ‘Performance-Based’ Logistics

As it ventures into the defense world, Exostar is gearing up to be able to handle the shift in the United States from the Department of Defense (DoD) services purchasing intact products to contracting third parties to build and then maintain their assets.

Called performance-based logistics or contracting (PBL), Kevin Reale, research director for aerospace and automotive sectors at AMR Research in Boston, says that it’s one of the most significant supply chain developments taking place right now. While Exostar has already filled a void by providing a platform for business-to-business collaboration, it’s in the realm of PBL where the platform holds even more promise.

“On the defense side we’re seeing the transition from companies like Lockheed, Boeing and Grumman selling just assets—which is more of a service-level agreement—to where they now are being asked to ensure that the asset is available and running at a high level,” said Reale. “It’s now the contractor’s responsibility to provide proper training, maintenance and other services.” The Department of Defense used to handle these services on their own.

“Exostar’s whole concept enables them to be able to support performance-based logistics. The interesting thing is that everyone is still trying to figure out how to support this,” he added.

Peter Scott, Exostar Vice President of Marketing and Corporate Development, in Herndon, Virgina, explains PBL this way: “Today the government buys an asset like a fighter jet and has its own maintenance crews, which take the over responsibility of keeping the plane up and running. In the future, the government is considering industry taking on the responsibility. It won’t buy a fighter jet, per se, but will purchase combat sorties.”

As PBL gets more fully implemented, Scott sees Exostar as a natural fit. Exostar already connects to over 23,000 aerospace, defense suppliers and logistics companies “and can stitch together a multi-tier system and engage more directly with DoD. For every contract conducted in this manner they’ll create new supply chain activity. Putting a neutral, security supply chain platform in the middle then it makes sense,” he said.