transformation in procurement global aircraft industry · pdf filetransformation in...

Transformation in Procurement

– Challenges for the

Global Aircraft Industry

October 2014 HAL Executives

HAL Executives Presentation

Toulouse, October 13, 2014

Albert Varenne Airbus

© AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.

Agenda


Business Situation and Supply Chain Challenges

Procurement Transformation

Transformation of the Supply Base


05.11.2014

…at a glance: € 59 bn. revenues, 144.000 employees

€ 40 bn. revenues 79.000 employees



Airbus Group Procurement

Airbus27,5

65%

Cassidian*3.1

7%

Eurocopter3,7

9%

Astrium3,0

7%

Airbus Military

1,33%

Other BUs3,2

8%

HQs0,5

1%

42,3

59,3

External Sourcing Turnover Revenues

Sourcing Turnover is more than 2/3 of Sales

2013

Bn€

Sourcing Turnover 2/3 by Airbus



The world flies

Airbus Aircraft

A320 family A take-off or landing every 2.5 seconds,

Over 7 billion passengers carried since EIS ‘88

A330 family A take-off or landing every 25 seconds,

More than 800 A330s sold since 787 launch

A350 XWB First flight mid 2013

Over 600 firm orders from 35 customers

A380 Takes-off or lands approx. every 6.5 minutes

125 flights per day and 1.5 million pax per month

Airbus product portfolio and headline figures


8,608 delivered

401 operators

25,000 daily flights

7,912 in operation

14,520 sold

End July 2014

EIS – Entry into Service


Air travel remains a growth market

0

2

4

6

8

10

12

14

1971 1981 1991 2001 2011 2021 2031

Air traffic has doubled

every 15 years

Air traffic will double

in the next 15 years

20-year world annual traffic growth

4.7%

Airbus

GMF 2012

ICAO

total traffic

2011-2021

5.1%

2021-2031

4.4%

Source: ICAO, Airbus

World annual RPK (trillion)

October 2014 HAL Executive s

RPK – Revenue passenger kilometers


2013

- 1,619 new aircraft

orders

626 deliveries

14,500 Airbus orders, over 8,600 deliveries

At end July, 2014

,0

2000,0

4000,0

6000,0

8000,0

10000,0

12000,0

14000,0

1970 1975 1980 1985 1990 1995 2000 2005 2010

1970: Airbus founded

2010:

10,000

orders

Orders

Deliveries

Airbus orders and deliveries



Challenges


Business Growth

• Overall production rates

• Ramp-up A350

• Transition A320 ceo/neo

• Globalization

Industrialization

• Robustness

• Competitiveness

• Globalisation

• Innovation


Agenda






Contracting domain Operational domain

Procurement organizational set-up

Airbus Procurement

HR

Finance

Quality

Procurement Compliance

A350XWB

Procurement

Series Programmes

Procurement

Aerostructure

Material & Parts

Propulsion Sys.

Procurement

Operations

Gen. Procurement

Dedicated Procurement

governance and support functions

Overall responsibility for

business with suppliers (TCO)

End-to-end supply chain operations

management

Cross-functional/division.

activities & links

P Strategy

Equipment & Sys.

Cabin



The MFT is a cornerstone of the P organization

Engineering

Purchasing

Programs

Supply

Chain Costing

Finance Customer

Services

“Multi-functional team”

(MFT):

• Aligned purchasing

policies

• Cost optimization

• Improved supplier

reliability

• Responsiveness to

customers



Agenda






Consolidate the Supply Chain: Bigger & Fewer

April 2014 Airbus Procurement Presentation

Raw Materials

Make-to-print Parts and Assemblies

Large-scale Integration

Platform Assembly

Value-added Parts and Assemblies

Today

• Fewer, but still many

direct partners

• Limited role for

“integrators”

Past

• Many direct partners

• No real role for

“integrators”

• Design to print of parts

and sub-assemblies

• Far fewer large direct risk sharing

partners with whom to build strong

ties and who can share capital

expenditure, development costs and

risk

• A real global extended enterprise

• Extensive role for “integrators”

• Design to functional specifications of

large main components or sub-

assemblies

TIER 1

RSP

Airbus System Integrators

The “New Airbus”


NEO

Mai 2014 Berliner Forum Zukunft

Challenges for the Supply Chain: Short-term



Route to EIS / Ramp-up

• Ramp-up gates to be secured

(supply chain!)

• Rate readiness assessments

• Transformation plans, JIP’s

A350 global rate

Cost convergence

• Joint Airbus / supplier initiatives

• Technical optimization (DtC), supply

chain improvements

RC base risks potentials

RC cost-down project:

Supply Chain contribution!


EIS – Entry into Service

JIP – Joint Improvement Program

RC – Recurring Cost

DtC – Design to Cost


A320 CEO/NEO transition

“Legacy”A320 ramp-up

(25 years)

A320neo ramp-up

(30 months)

A320 Family ramp-up evolution (rate)

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

40

42

44

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Rate

1st A321

1st A319

1st A318

1st A320


A320 CEO – classic engine option

A320 neo – new engine option



Mid /long term challenges for the supply chain?

Innovation

Volume increase Globalisation


Structural evolution of the aviation industry

Airbus

1990

Airbus

2020

Middle size

company (strong 1st line)

illustrative

x10



from… to…

Requirements for 1st tier suppliers

“Defence legacy” “Commercial/industrial orientation”

Small size - companies

- contracts/volumes

Critical mass - companies

- contracts

Extended workbench Work package approach

Global Regional



Develop Suppliers to world class: Supply Chain Excellence


Mission “Enable Supply Chain Operations Excellence, by providing the supply base with the right

improvement framework (skills, methods and tools) to eradicate problems and increase performance

in a sustainable manner”

Worldwide Supply chain visibility and Reactivity to support a Global Supply Chain

Supplier Development Vision: From Correction to Anticipation

2013

Contain / Control

2014

Control / Develop

2015 - ……..2020

Develop / Excel

Correction

Develop-ment

Supplier Maturity

2012

Performance OTD / On Quality / COST and Increased Supply Base Maturity

T1, T2


Develop Suppliers to world class: through SPACE common approach


Supply chain Progress towards Aeronautical

Community Excellence

An innovative approach to share supplier development

resources and tools SPACE in a nutshell:

• Non-profit industrial association to

further develop industrial

performance of aerospace lower tier

suppliers

• Managed by approx. 15 aerospace

primes. These primes send experts

for supplier development to

common sub tiers

• Promotes a common tool set for

supplier development projects

• Shares resources for development

of common suppliers among

members

• Founded in 2007

• Hundred+ companies are currently

involved in improvement projects

www.space-aero.org

http://www.space-aero.org/




Optimizing supply base and cost

Co

st

co

mp

eti

tiven

ess

• Vertical integration (materials)

• Single Aisle aerostructure double sourcing

• Cabin strategy (BFE-to-SFE/ACS)


BFE – Buyer furnished equipment

SFE – Supplier furnished equipment

ACS – Airbus contracted supplies


Derivatives

eff

icie

ncy

New concepts

2050 2010

Balance between shorter- and longer-term activities

Incremental Innovation (improvement of

cost and efficiency)

Disruptive Technologies (improvement and

new needs answer)



Focus areas of supply chain innovation contributions

Inn

ovati

on

• Fuel Burn Savings, e.g. o eTaxi

o Fuel cell

o Next generation engines

• Flexible Cabin o Passenger density

o Comfort

o In-flight services/connectivity

• Business System Evolution (eg. end-to-end total maintenance packages)



Airbus regional spend profile

RoW50

2012 2020

25

+ > 500%

+ 100%

+ 50%

Value

for cost

Currency

hedging

Global Sourcing Drivers

Global Sourcing

Country Risk Management

Supply

Chain

Strategy

Market

Access

Global Sourcing Evolution




Airbus order backlog end 2013

A fin 2013

North

America

12% 20%

carnet

Previsions

Latin

America

7% 8%

Europe

& CIS

18% 24% Middle

East

10% 7%

Africa

1% 3%

Asia

Pacific

34% 38%

Lessors

17%


Thank you for your attention!



© AIRBUS (Airbus S.A.S., Airbus Operations S.A.S., Airbus Operations GmbH, Airbus Operations LDT, Airbus Opeartions SL, Airbus China LTD, Airbus (Tianjin) Final Assembly Company LTD, Airbus (Tianjin) Delivery Centre LTD). All rights reserved. Confidential and proprietary

document. This document and all information contained herein is the sole property of AIRBUS. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the

express written consent of AIRBUS S.A.S. This document and its content shall not be used for any purpose other than that for which it is supplied. The statements made herein do not constitute an offer. They are based on the mentioned assumptions and are expressed in good faith.

Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof. AIRBUS, its logo, A300, A310, A318, A319, A320, A321, A330, A340, A350, A380, A400M are registered trademarks.


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