By Tanzeel Iqbal. Airbus A3380 Boeing 777 Boeing 747 Tanzeel Iqbal.
Airbus and Boeing
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Transcript of Airbus and Boeing
Comparative analysis of Airbus and Boeing’s
Supply Chainupon
collaborative risk management
Group A11Bharat Subramony PGP/16/012
Deepak Kumar PGP/16/016Priyank Bavishi PGP/16/037
Shashank Shekhar PGP/16/045
1. Traditional v/s Lean Production Supply Chain2. Supply Chain Integration and Collaboration3. Airbus 380 program4. Boeing 787 Dreamliner program5. Global Outsourcing in Boeing – Japan and
China6. Global Outsourcing in Airbus – Japan and China7. Why is Risk so devastating?8. How to achieve collaborative risk
management
Agenda
1. Traditional v/s Lean Production Supply
Chain
Widely practiced by Western Auto majors like Saab and GM
Majority of components produced in-house Fear of loss of intellectual property, important components in-
house Push-based rather than pull-based production
Higher inventory handling Production flexibility lost, thus leading to partial oursourcing
Traditional Mass Production SRM
Suppliers Manufacturer
Darwinian Price CompetitionLow Price – sometimes below costHigher quality and delivery promisesShort-term contracts without extension
Arm’s length, short-term, transactionalLack of trust, no open communicationLow involvement in product designZero-sum game of profit sharing
Tiered supplier network structure, with long-term relationship
Tier-1 : Equipped with technological capabilities, design whole systems
Tier-2 : Suppliers to Tier-1, handle component, partial tech capabilities
Tier-3 : Suppliers to Tier-2, do-as-directed, no tech capabilities Early involvement in product development cycle
Every tier focuses on their individual core competencies
Lean Production SRM
Suppliers Manufacturer
Fairness of pricing, negotiationsLong-term relationship promiseMultiple suppliers for same componentOpen communication, and frequent
Customer specific tech investmentHigh risk complemented by closer linksOpen-ended contracts, based on trustLow Demand Improved S.C. Efficiency
2. Supply Chain Integration and
Collaboration
To tackle severely dynamic nature of competitive marketplace
E-Business speeds up the rate of decision-making Strategic alliance and partnerships with suppliers Way to enhanced supply chain coordination
Lack of information visibility and the failure of coordination across the supplier network are the main reasons contributing to the bullwhip effect
Objectives of supply chain integration1. Minimizing the bullwhip effect2. Maximizing the efficiency of conducting activities along the supply chain3. Minimizing inventories along the supply chain4. Minimizing cycle times along the supply chain5. Achieving an acceptable level of quality along the supply chain6. Achieving better product design
S.C. Integration and Collaboration
3. Airbus 380 Program
555-seat double deck A380 most ambitious civil aircraft program Airbus’s ambition in terminating Boeing’s long-term dominance in the
long-haul jumbo jet Designed for a hub-and-spoke airline route system Airbus expected the passenger traffic to increase at staggering rate But most Airlines are restricted by limited runway space available A380 has 35% more capacity than the largest currently operated
plane A380 operated in three models
1. 555-seat A380-800 in a three-class configuration2. Up to 853 passengers in a single-class economy configuration3. A380-800F, a 590-ton MTOW aircraft with a range of 10,410km (5620nm)
that will be able to carry a 150-ton payload (Logistics Purpose Only)
Airbus 380 Program
Airbus A380 v/s Boeing 747
A380 Supply Chain
Prime Contractors from France, Germany, U.K. and Spain Component suppliers are from Australia, Austria, Belgium,
Canada, Finland, Italy, Japan, South Korea, Malaysia, Netherlands, Sweden, Switzerland and the United States
The largest Suppliers by value1. Rolls-Royce2. SAFRAN3. United Technologies4. General Electric5. Good-Rich
Final Assembly takes place in Toulouse, France and then flown to Hamburg for delivery
A380 Customers
As in August 2006, 16 customers had committed firm offers for 159 A380s, with an additional 75 optional orders
1. Singapore Airlines (the launch customer with an order for 10 aircraft2. Lufthansa (15)3. Emirates (41)4. Air France (10)5. Qantas (12)6. Malaysian Airlines (6)7. Virgin Atlantic (6)8. International Lease Finance (10)9. Kingfisher Airlines (5)10. Qatar Airways (2)11. Federal Express (10),12. Korean Air (5)13. Thai Airways (6), 14. Etihad Airways (4),15. China Southern Airlines (5) and United Parcels Service
Challenges facing Airbus A380
Technological Issues The wake of A380 creates much more turbulence in air, requiring
other flights trailing it, to stay twice the normal distance away from it
Greater aircraft separation would take up two landing slots and largely reduce the frequency of aircraft landings
Severe impact on landing slots during peak periods Production Delay
Excessive complexities in the wiring of various customised components
Electronic systems are highly integrated, even a small change would cascade down through the whole system
Singapore Airlines reported to have demanded compensation 26% drop in Airbus’s parent EADS Stock price
Airbus has embraced partnerships since its inception among
the core national “champions” in the respective European countries
Brought together under the Airbus umbrella in the early 1970s The core technologies related to complex or key airframe
components have typically been in-house within the core respective companies
This model has remained essentially unchanged despite outsourcing several components of-late
Eg: Airbus has its own international joint design team located in Wichita (U.S) and Filton (U.K.), working together to design a large A380 wing component, while Airbus’ Korean suppliers are manufacturing the wing panel according to the engineering design specifications handed down by Airbus.
Airbus A380 in brief
4. Boeing
787 Dreamliner Project
787 Dreamliner
787 was Boeing’s response to the greater demand for a cheaper aircraft to operate and maintain
Targeted at rapid, direct, point-to-point connections with capacity of only 250 passengers (middle of the market)
787 would thus be a high speed, fuel efficient competition for the newly popular A330 from Airbus
Offered in three variants1. 787-8 Dreamliner will carry 217 passengers in a three-class
configuration with a range of up to 8,500 nautical miles (15,700 kilometers)
2. 787-3 Dreamliner will carry 289 passengers in a two-class configuration with a range up to 3,500 nautical miles (6,500 kilometers)
3. 787-9 Dreamliner will carry 257 passengers in three classes, with a range of 8,300 nautical miles (15,400 kilometers)
787 Supply Chain & Customers
Majority of the systems and assemblies are designed, developed and tested by principal industrial partners in the USA, Japan and Europe
Boeing responsible for only about one-third of the overall production of the entire aircraft
The final assembly process complete in three days
Launch customer All-Nippon Airways with 50 units 32 customers, including Monarch, have logged 420 orders and
commitments Of these, 377 are firm orders valued at $59 billion at current
list prices The most successful commercial airplane launch in history
Risk sharing in Boeing 787
Partnering suppliers to carry all of the non-recurring costs But in return gives back to the suppliers the intellectual
property (IP) rights on the components and systems they provide
This marks a reversal of earlier practices Suppliers taking more responsibility in design and
development
But Boeing slowly moving to what is “Systems Integration” Model All major components and systems, to be given to risk-sharing partners
Risk sharing in Boeing 787
Boeing delegates entire system production to tier-1 suppliers/partnersJapan’s Fuji Heavy
IndustriesCenter wing box and installation of the wells
Mitsubishi Heavy Industries
Wing box
Kawasaki Heavy Industries
Mid forward section of the fuselage, fixed section of the wings and the landing gear
Global Aeronautica Mid section and rear section of the fuselage including the tail-plane
French Latecoere Passenger doors Goodrich Nacelles and thrust reverser BOEING ~ 33% - 35% of total components• Reduced final assembly down to three
days• Boeing adopted a higher-level of
integration at the supplier level• Reduced the number of parts and
components, subassemblies/sections in final assembly stage
Example of Close-linking of
Partner Major supplier partners would be given additional
responsibilities to help them synergise their tech capabilities for efficiency
Hamilton Sundstrand1. Environmental control system2. Electrical system3. Cabin pressurization4. Auxiliary power unit5. Ram air turbine and the other systems
The wide scope of the contracts allows it to subcontract the design work within each work package and across its divisions
This means that the first-tier suppliers are moving upward in the value chain and assuming more the role of the system integrator
787 Supply Chain in few words…
Build to Design
Modify and Build
Design, Develop,
Build
First-tier suppliers can offer more integrated and interconnected solution
Decreasing the number of the components comprising the airplane
First-tier partnering suppliers are also given full control of their own lower-tier supplier networks
First time ever when a first-tier supplier is given control of the selection of second and third-tier suppliers in a Boeing commercial aircraft program
5. Global Outsourcing in Boeing – Japan and
China
Global Outsourcing - Boeing
Foreign content of the Boeing program In 1960s was only 2 percent for 727 In 1990s was 30 percent for 777 In 2006, it might jump to as high as 70 percent for 787
Boeing 787
Japan
China
Rest of World
Boeing – Japan
Boeing depends greatly on Japanese airframe and composite tech
Long-standing, mutually-beneficial relationships with the Japanese aerospace and aviation industries
Boeing and Japanese aerospace collaboration started in the 1970s
Japanese aerospace manufacturers are partners supplying about 20 percent of the 777 airframe, including fuselage panels and doors, the wing center section, the wing-to-body fairing and the wing inspar ribs
Government of Japan, Japan Developmental Bank and Export-Import Bank provided loans to Boeing
Boeing – Japan for 787
Japanese partners take up a significant percentage of the work, about 35%, in designing and manufacturing airframe structures
Formal contract for research and development on composites for 787 Dreamliner project
Japanese govt will be subsidizing the 787 program up to $3 billion
Entire manufacturing process for the final assembly of the wing will be created by 1. Mitsubishi Heavy Industries2. Fuji Heavy Industries and3. Kawasaki Heavy Industry
FIRST TIME EVER WING MFG & ASSEMBLY TO JAPAN Japanese aerospace manufacturers are thus playing a
significant role
Boeing – Japan for 787
Airframe 727 767 777 787 Wing US US US Japan
Center Wing Box US Japan Japan Japan
Front Fuselage US Japan Japan Japan/US
After Fuselage US Japan Japan Italy
Empennage US US Foreign Italy/US Nose US US US US
Boeing – China for 787
Beginning of the Boeing-China relationship in 1972 Boeing has provided 565, or about 61 percent of the 924
commercial jetliners operating in China while only 251 or 27 % of them have been provided by Airbus
Recent supplier contracts signed in Beijing are worth $600 million including work in the 737, 777 and 787 programs
Active supplier contracts between Boeing & China’s aerospace suppliers are valued at $1.6 billion in total
Chengdu Aircraft Industries the single source for the rudder Shenyang Aircraft Industries the vertical fin leading edge Hafei Aircraft Industries upper & lower wing-to-body fairing
panels
Boeing – China for 737
Boeing – China for 787
Boeing – Investments in China
Since 1993, transferring its technical expertise and operational experience to China’s aviation industry Regulatory authority
Aimed at improving flight safety, reliability and efficiency Production quality control initiatives to help improve product
quality A resident team in China, offering direct technical
assistance/support to the Chinese factories Continued to expand its training facilities in order to address
the needs of the growing Chinese aviation professions.
6. Global Outsourcing in Airbus – Japan and
China
Airbus – Japan and China
In 2001, Airbus set up a Japanese subsidiary Mitsubishi, Fuji and Japan Aircraft Manufacturing Co., were
contracted as suppliers of airframe assemblies Despite its efforts, Airbus is encountering tremendous
difficulties 1. No Japanese airline has placed any order for the Airbus A3802. Aerospace manufacturers have so far declined Airbus’ contract
offers 3. Claim their production capacity is fully committed to the 787
program Staggering economic growth and Olympics in 2008, boost for
Airbus Airbus A380 could be seen as a great choice for airlines to
operate on routes connecting mega-hub cities China’s commitment to more orders came at
Intensified cooperation signing contracts worth $300 mn Double its procurement of local content from local suppliers to
$120 mn
Airbus – Japan and China
Airbus announced that Tianjin will be the site for Airbus’ first final assembly plant outside Europe
The plant is exclusively dedicated to the manufacturing the A320 aircraft and is expected to roll out assembled airplanes by 2008
7. Why is Risk so
devastating?
Risk-Management
No one link in the supply chain has all the information necessary to identify and monitor risk comprehensively
They cannot see many risks that are emerging and changing
Following risks need to be carefully evaluated, and taken into perspective1. Financial2. Geopolitical3. Regulatory4. Operational
Risk-Management
Inventory Turnover for supplier tiers
8. How to achieve collaborative risk
management
Collaborative Risk Management
1. Treat all suppliers as critical members of program team Must encourage innovation across industry Must be prepared to accept and share risk Any prime contractor is only as good as its supply chain and each
member in that chain is as important as the last
2. Bring the best minds to supply chain risk identification Too many contractors do not know all the links in their supply
chain How can they know where the risks lie ? Map the entire supply chain, assess risk by supplier, & then start
managing A collaborative partnership with suppliers involving personnel
from all suppliers and cross-functional
Collaborative Risk Management
3. Seek out early warning signs Systematically filter and communicate supply chain information Better visibility into the fabricator’s levels of resource allocation,
numbers of internal corrective actions, and aging might provide an early warning and allowed an earlier, less costly intervention.
4. Create a culture of proactive risk reporting Primes paying, subcontractors delivering according to price,
quality, and schedule estimates in old transactional model Each side tried to minimize its liability for execution failures, and
subcontractors took sole responsibility for their own suppliers Shift away from fine-print supplier agreements to solid,
transparent policies with accountability and sufficient support for training
Thank You