Zilvinas Sadauskas - CEO of Locatory.com

Last Friday, 14th June, 2013 a long-range, wide-body A350 successfully took off the ground for the very first time. The A350 model comes as the latest and the most technologically advanced Airbus commercial aircraft, over half of which is made up of various composite materials. However, in an attempt to save several years while developing new aircraft types, as well as introduce new materials and technologies, aircraft manufacturers are also intensively reshaping their supply chain, as well as outsourcing both component design and production. Unfortunately, more complex supply chain has proven to be fraught with additional challenges for Boeing 787 and Airbus A380 projects. Will the supply chain become an issue for the A350 as well?

Regardless of whether it is a new model or not, manufacturing an airplane has never been a ‘do-it-alone’ type of business. In the supply chain starting with raw materials and going all the way through to separate components such as engines or landing gear, aircraft manufacturers rely on hundreds of suppliers from all over the world. However, while traditionally manufacturers have been known to outsource less than a half of the work scope, in terms of the B787 Dreamliner project Boeing is reportedly to source up to 70% of the works to third-party companies thus virtually transforming from a manufacturer to an assembler.

‘With a ceaseless competition between each other, it is only natural that the American and European manufacturers are ready to try out a new philosophy which involves adhering to risk-sharing supply chain strategies. Ideally, manufacturers are expecting to cut down project development time by a couple of years, whilst at the same time motivating its suppliers to develop the best possible solutions,’ comments Zilvinas Sadauskas, the CEO of Locatory.com.

Same as Boeing, Airbus has also decided to reshape its supply chain. It is reported that more than 40% of the airframe work packages for the A380 aircraft are being outsourced. As concerns the A350, the European manufacturer sights that approx. 50% of its production is outsourced.

But not only is the scope of outsourcing increasing. Manufacturers are also changing the principles of their interaction with the supply chain. While manufacturing its B787, Boeing relies on a somewhat 40-50 Tier I suppliers. The risk-sharing strategic partnership facilitates the entire aircraft construction process as the manufacturer is focused on the development and the production of larger components (wings, fuselage, engines, landing gear, etc.) rather than wasting its resources on Tier III products and material procurement.

‘The supply chain strategies of several particular manufacturers recall a medieval rule ‘Your vassal’s vassal is not your vassal’. Despite the control and supervision of the entire process, the responsibility and risks are partially transferred to Tier I suppliers, meaning that the assembler minimizes its interference with Tier II/Tier III production. But despite one’s interaction with the supply chain and the level of outsourcing, A380 and B787 cases have shown that delays and unforeseen technical issues may appear with any new aircraft model,’ shares Z. Sadauskas.

Recalling complications with the A380 project and considering the most recent its competitor’s problems, Airbus admitted that they might just have over-outsourced the production. For instance, in his interview with Dow Jones Newswires, Fabrice Bregier, the Airbus’s COO, told that the manufacturer was experiencing some problems with its Tier II and Tier III suppliers as they were required to produce more complicated and sophisticated parts than they had ever been ordered before. As a result, the manufacturer decided not to risk with A350 project and scrutinize its control over the production line on each level.

‘In order to keep up with the A350 program’s schedule, the manufacturer has chosen to apply a ‘carrots and sticks’ approach. In some cases it deploys a team of engineers and specialists to assist and supervise the production on sight. In others it provides additional financial injections in order to support suppliers’ activity. The company’s management team was even forced to acquire some of its larger suppliers in order to avoid any disorders in the supply chain and ensure as smooth realization of the A350 project as possible. Last week’s flight might be a signal that the European manufacturer has managed to further improve its internal and external production process. The industry hopes that this will have a positive effect not only on a timely delivery of the first A350-900 to Qatar Airways, but also in terms of the development of an effective aftermarket support chain,’ concluded the CEO of Locatory.com

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