Airbus

The Technology Integrated Supply ChainJoseph Peck

Airbus• Founded in 1970.

• Turnover of over €33.1bn.

• To date have produced over 8,000 planes, with over 15,000 ordered by their 391 customers.

• Produces both the world’s first fly by wire passenger plane (A320) and the largest passenger plane (A380).

• Boeing is the biggest rival (duopoly).

Orders

http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&optReportType=CurYrDelv

http://www.airbus.com/company/market/orders-deliveries/

EU-US airplane subsidy disputes : Airbus vs. Boeing, Stephen Shimada

Planes Produced

http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&optReportType=CurYrDelv

http://www.airbus.com/company/market/orders-deliveries/

EU-US airplane subsidy disputes : Airbus vs. Boeing, Stephen Shimada

Orders and Deliveries

http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&optReportType=CurYrDelv

http://www.airbus.com/company/market/orders-deliveries/

EU-US airplane subsidy disputes : Airbus vs. Boeing, Stephen Shimada

Opportunity• Airbus recognised that this long lead time was

an issue, and tried to reduce it.

• As a plane takes roughly 100,000 man hours to build, the actual assembly is difficult to minimise (new processes require certification before they can be used).

• Instead they tried to remove all non value adding time.

• This was done partially through outsourcing, but mainly through introducing RFID.

RFID in everyday life• Has been in general use for over 10

years

o Car ignitionso Library bookso Contactless payment

• Chips are very small - 0.4mm2 (2004) [1] down to 0.2mm2 size now (however tags this small are very expensive £5 per tag).

[1] 4. Anonymous (2004), "Micro tracker", Technology Review, Vol. 107 No. 3, p. 18.[2] TATA Motors internal part costing's, 2013

• Tags 1cm2 cost approx. 4-10p each when bought on large scale orders. [2]

How RFID Works• There is a tag and a reader.

• The tag is a small chip located on the product, the reader can be anywhere (entrance to warehouse/hand-held etc.).

• Data about the product is saved on the tag at every step of production/supply chain.

• As the tag passes near the reader, power is induced and a reflected radio wave is sent to the reader.

• This wave is detected and the data on the tag is gathered.

The Integration of RFID

• Gradually RFID is replacing traditional optical barcodes.

• In 2004 Bill Gates labelled RFID the next big thing, the biggest change to industry since plastic. [3]

[3] Microsoft (2004), "Remarks by Bill Gates, Chairman and Chief Software Architect, Microsoft Corporation, Microsoft CEO Summit 2004", Redmond, Washington, 20 May, available at:

www.microsoft.com/billgates/speeches/2004/05-20CEOSummit.asp

Airbus's Use• Boeing introduced RFID for selected internal

uses in 2004.

• Airbus introduced RFID in 2006 to all production sites and made all suppliers use it also.

• They have a central server that stores all information on site.

• It auto orders parts as needed, based upon usage, inventory and work schedule.

• They have RFID portals at the entrance to the warehouse, and on each floor to track the

movement of parts.

[4] http://www.scdigest.com/assets/newsViews/08-04-24-2.php?cid=1634

The Effects Felt• Reduction to overheads - next to no

processing cost per order.

• Reduction in overall inventory and inventory tailored to work scheduled.

• Almost no stock-outs (Airbus claim no stock-outs since early 2007). [5]

[5] Airbus Publication 2011

Conclusion• Whilst Boeing partially introduced RFID,

Airbus’s total integration of RFID helped it to gain a competitive advantage and become the market leader.

• Boeing only fully introduced RFID 2 years after Airbus but by then the market power was already shifting.

• The automatic ordering system has helped to improve efficiency without affecting quality or production cost.