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Part 1:

Understanding the Supply Chain Management best

practices in the Aerospace

industry

Tuteur industriel : M. Emmanuel Soler International Supply Manager – Airbus France

Tuteur enseignant : Dr. Samuel Bassetto

Projet de Fin d’Etudeprésenté pour obtenir le grade

d’Ingénieur en Génie Industrielpar

Quirino BARBOSA

Analyse des risques de la chaîne d’approvisionnements

Supply Network risks analysis



December 2007

Description

The purpose of this project was to implement tools and frameworks to manage supply

network risks at Airbus France procurement division.

We succeed to describe a common supply chain framework based on the MRP II1 philosophy

and to provide a risk management tool: a FMEA2. This procurement division is moving from

a reactive suppliers’ management philosophy to a proactive suppliers’ managementphilosophy.

Key words:

Supply Chain Management

Risk Management

FMEA

MRPII

Lean and Agile Management



December 2007

Table of contents

1. ACKNOWLEDGEMENTS...................................................... ............................................................... ... 6

2. RECOMMANDATIONS.......................................................... ............................................................... ... 7

Chapter1: Understanding the Supply Chain Management best practices in the Aerospaceindustry 3. INTRODUCTION.......................................................... ............................................................... .............. 9

4. INDUSTRY ANALYSIS.......................................................... ................................................................ . 10

4.1. INDUSTRY ANALYSIS: A COMPETITIVE DUOPOLY .......................................................... ...................... 10 4.1.1. Major players in the commercial aircraft industry ........................................................... ............ 10

4.1.2. Industry character istics........................... ................................................................ ...................... 11 4.2. INDUSTRY DYNAMICS ........................................................ ................................................................ . 12 4.2.1. Description of the main product innovations.......................................................... ...................... 12 4.2.2. Theoretical approach of innovation.............................................................. ................................ 14

5. COMPARATIVE ANALYSIS OF SUPPLY CHAIN MANAGEMENT STRATEGIES................... 19

5.1. SUPPLY CHAIN FRAMEWORK THROUGHOUT THE MAIN STAKEHOLDERS PERSPECTIVE........................ 19 5.1.1. Suppliers’ network in the aerospace industry ......................................................... ...................... 20 5.1.2. Original Equipment Manufacturer.......................................... ...................................................... 20

5.1.3. Customers...................................................................... .............................................................. .. 24 5.2. COMPARATIVE ANALYSIS BETWEEN AIRBUS AND BOEING’S SUPPLY CHAIN AND TRENDS IN THE

AEROSPACE INDUSTRY ........................................................... ............................................................... ............ 26 5.2.1. Similar Supply Chain Management Practices.................................... ........................................... 26 5.2.2. Supply Chain comparison of the A380 and the 787 programs........................................ .............. 26 5.2.3. Outsourcing strategy............................................................... ...................................................... 28 5.2.4. New trends in Supply Chain Management .............................................................. ...................... 28

6. CONCLUSION............................................................... ................................................................ ........... 30

Chapter 2 State of the art: Building tools and frameworks to manage Supply Chain Risks

7. INTRODUCTION.......................................................... ............................................................... ............ 32

8. SUPPLY CHAIN MANAGEMENT ............................................................. ........................................... 33



December 20079.3.1. Overview of risk management definitions ............................................................... ...................... 45 9.3.2. Risk Management processes............................................................................................... ........... 46

9.4. AN ONGOING DEBATE: SUBJECTIVE VS. OBJECTIVE RISK ......................................................... ........... 50 10. SUPPLY CHAIN RISK MANAGEMENT (SCRM) .............................................................. ........... 51

10.1. WHY SUPPLY CHAIN RISK MANAGEMENT IS BECOMING AN IMPORTANT ISSUE? ................................ 51 10.2. STATE OF THE ART SCRM DEFINITIONS............................................................. ................................. 52

10.2.1. Origin of the SCRM theory.................. ............................................................... ...................... 52 10.2.2. Some definitions….............................................................................................. ...................... 53

10.3. SUPPLY CHAIN RISK MANAGEMENT PROCESSES .......................................................... ...................... 55 10.3.1. Supply Chain Risk Sources and Risk consequences ...................................................... ........... 55 10.3.2.

Supply Chain Risk Drivers and Risk Mitigating Strategies ...................................................... 57

11. HOW DO LEAN, AGILE AND “LEAGILE” SUPPLY CHAIN STRATEGIES AFFECTSUPPLY CHAIN RISK MANAGEMENT?.......................................................... ........................................... 59

11.1. LITERATURE REVIEW......................................................... ................................................................ . 59 11.1.1. Lean philosophy ....................................................... ............................................................... . 59 11.1.2. Agile philosophy ....................................................... ............................................................... . 65 11.1.3. Leagile philosophy ............................................................. ...................................................... 65

11.2. WHAT ARE THE IMPLICATIONS OF THE SUBJECTIVE-OBJECTIVE DEBATE REGARDING THE NATURE FOR

DEVELOPMENT OF TOOLS AND FRAMEWORKS FOR (LEAN, AGILE AND LEAGILE) SUPPLY CHAIN RISK

MANAGEMENT?........................................................... ................................................................ ...................... 66

12. CONCLUSION .......................................................... ................................................................ ........... 69

Chapter 3: Case Study: Building tools and Frameworks to manage Supply Chain Risks at anaircraft manufacturer: Implementation of a FMEA

13. INTRODUCTION ............................................................... ................................................................ . 71

14. A PROJECT TO IMPLEMENT PROACTIVE MANAGEMENT PRACTICES ......................... 71

14.1. A380 PROJECT DELAYS: AN EVIDENCE OF THE NECESSITY TO BUILD A PROACTIVESUPPLY CHAIN

MANAGEMENT PHILOSOPHY ............................................................ ................................................................ . 72 14.2. A TEAM FOCUSED ON BUILDING STRONG SUPPLIER RELATIONSHIPS: THE SUPPLIER DEVELOPMENT

TEAM 73 14.3. OBJECTIVE: BUILDING TOOLS AND FRAMEWORKS TO MANAGE SUPPLY CHAIN RISKS........................ 74

15. METHODOLOGY ............................................................... ............................................................... . 75

15.1. INTEGRATION PHASE INTO THESUPPLIER DEVELOPMENTTEAM ................................................... ..... 75 15.1.1. Supplier Development processes............................................................. ................................. 76 15.1.2. An example of an industrial Diagnosis.................................................................................... . 77

15.2. UNDERSTANDING THE CLIENTS NEEDS OF THE PROJECT........................................................... ........... 77 15.3. THEORETICAL APPROACH TO HAVE A DEEP UNDERSTANDING OF THE PROJECT................................... 77

15.3.1. Theoretical approach ......................................................... ...................................................... 78 15.3.2. Define a common supply chain framework ........................................................ ...................... 79



December 200720.1. APPENDIX 1: STATE OF THE ART DEFINITIONS............................................................... ...................... 93

APPENDIX 1....................................................... ............................................................... ................................. 95

20.2. APPENDIX: SUPPLY CHAIN FRAMEWORK. IDEF MODEL.......................................................... ........... 99



December 2007

1. Acknowledgements

First, I would like to thank all the Supplier Development Team: Myriam BARATTE-

AREMON, who spent time with me to share relevant knowledge about risk management

issues and also who convince me during the world-cup that rugby is a fascinating sport;

Marion SMEYERS, who gave me constantly good directions to conduct my project and who

made several jokes per day; Emmanuel SOLER, who helps me to get a highly-structuredvision on supplier relationships management and who gives me strong insights in civil

engineering too! The experience of working with this team has been tremendously

educational and inspiring.

I would like to thank also Laure FUENTES, Marie-christine SEMPE-RAUFAST, Marcel

BEI, Daniel TROY, Jean-claude BOIJOUT, Stephanie COROND, Jean-marc CASTERA,Jacques MILLON, Christelle OLALDE, Sebastien DARNIS and Guillaume VAYSSE.

Finally, I would like to thank Samuel BASSETTO, who helps me a lot concerning research

topics. Thanks to his generosity and trust, I have had the opportunity to conduct an interesting

research project. Unfortunately, when he came to visit me at Toulouse, we hadn’t succeededto find time to visit this beautiful city. Next time…



December 2007

2. Recommandations

Risk management is not an easy task. The key of this project is that risk management issues

must be strongly supported by an operation management philosophy based on proactive

approaches. Lean manufacturing is the best practice that the organization must implement in

order to be competitive and proactive.

However, as always in such an important industrial firm, the biggest difficulties doesn’t stem

from technical difficulties but rather from communication and cultural difficulties.



December 2007

Part 1:

Understanding the Supply Chain Management best

practices in the Aerospace

industry



December 2007

3. Introduction

The aim of this part is to provide a brief description of the civil aircraft industry. This industry

is presented as a duopoly where Airbus and Boeing are the main players. The purpose is to

put forth a static picture of the aircraft industry and then to study its evolution through an

innovation perspective. This evolutionary vision enables to present some of the challenges

that this duopoly has to cope with.Supply chain management is getting the cornerstone of the strategies used by Airbus and

Boeing. Therefore we will provide a comparison of the supply chain strategies used for the

last programs, the A380 program (Airbus) and the 787 program (Boeing).

The results are that the aerospace industry is getting more focused on its core competenciesand thus it has adopted a risk sharing partnership within the entire supplier network in order to

reduce costs and to enhance flexibility not only at one point of the supply chain but rather on

the entire supply network.

Moreover we tried to bring out trends in this industry based on a kind of benchmarking study.

Indeed the automotive industry is getting the reference for the supply chain management.Thus we have presented some of the methods used in the automotive industry that can be

applied in the aerospace industry.



December 2007

4. Industry analysis4.1. Industry analysis: a competitive duopoly

Nowadays, the industry can be characterized by a duopoly between Airbus Industry and the

Boeing Company. Historically, Boeing has dominated the industry since the beginning of the

aircraft industry development, thanks to a series of successful models. At that time this

industry was characterized by a monopoly. In the 1990s, the industry underwent a

transformation from primarily a monopoly by Boeing, to a competitive duopoly. In 2004,

Airbus attained the n°1 position market and delivered 35 more aircrafts than Boeing,

accounting for 53% of total deliveries that year.

4.1.1. Major players in the commercial aircraft industry

• Airbus

Headquartered in Toulouse, France and with its main aircraft assembly operations in the

same city, Airbus Industry is the largest commercial aircraft producer in Europe. Airbus

was formally established in 1970 as a consortium of French (Aérospatiale), German

(Deutsche Airbus GmbH), and later Spanish (CASA: Constructiones Aeronauticas SA)

and U.K. (BAE: British Aerospace) companies. In 2001, Airbus officially became a single

integrated company. Its major stakeholders include European Aeronautic Defense and

Space (EADS) Company with 80 percent shares of stock and BAE system with 20 percent

shares of stock. Its total revenue was about 22.3 billion euros in 2005 and 26 billion in

2006.

The main purposes of this industrial companies grouping were:

Ö To enhance their industrial strengths

Ö T b d th i t



December 2007

Washington (747, 767, 777 and 787) and Renton, Washington (737). Its total revenue was

about 61.5 billion dollars in 2006 (29.1 billion for BCA and 32.4 for IDS).

It is important to bring out the fact that we cannot compare the strategy of Airbus and the

strategy of the entire Boeing Group. Indeed we have to compare the Boeing Commercial

Airplanes division with the Airbus group, owing to the fact that Defense markets and

Commercial markets do not evolve in the same environments.

4.1.2. Industry characteristics

Before understanding the industry dynamics, it is necessary to emphasize key characteristics

of the industry as Product & Market, Cost Structure and Technology.

• Product & Market

Airlines have different needs for different routes and schedules. They also have varied

preferences for features, as well as the degree of flexibility and capability for

customization. Moreover, aircraft-manufacturing industry is constrained by long lead

times that can be very costly. The long lead-time in current production is a result of thecomplexity of manufacturing processes and highly customizable parts, which in turn stem

from a fairly heterogeneous demand.

Purchase decisions by airlines are more often impacted by the existing maintenance crew

and flight crew, as any training costs incurred often represent a significant percentage of

the operating costs. Hence, the cost of switching from one airplane manufacturer to

another can be prohibitively high, depending on the customer’s existing fleet composition.

• Cost Structure

The cost structure of commercial aircraft manufacturing can be characterized by high



December 2007

of the manufacturer’s domain, such as avionics and flight control systems. Over the past

few years, manufacturers have tried to differentiate themselves by leveraging more

significant technological advances, for instance, Boeing’s composite building materials

for its new 787 model and Airbus’ “double deck” design for its A380 and also the new

A350 composite aircraft. In the next section we will be more focused on supply chain

innovation.

4.2. Industry dynamics

In the following section we will have a theoretical approach to describe the main product

innovation conducted in this industry in the past few years. In the next section (1.3) we will

be more focused on supply chain innovation.

4.2.1. Description of the main product innovations

In order to have a good understanding of the aircraft industry evolution, we can assess the

way this duopoly manage its innovation and technology. In this part we will describe the main

product trends that exist in the aerospace industry:

Ö Airbus A380 key characteristics

Ö Airbus A350 key characteristics

Ö Boeing 787 key characteristics

• Airbus A380

The main objectives of the Airbus A380 programme are to

offer double improvements in fuel burn and operating



December 2007

several technological improvements, the A380 will provide a direct operating cost per seat

which is 15-20 per cent lower than the competitor.4

The A380 has been positioned as a desirable solution to help airlines cope with the rising air

traffic demands and enable them to improve the utilization and efficiency of their fleets

without increasing the number of flights.

• Airbus A350 Xtra Wide Body

The A350 XWB is the Airbus’ response to market demand

for a medium capacity long range wide-body family.

Available from 2013, the A350 is made of more than 60

per cent new materials and in particular, its innovative use

of all-new Carbon Fibre Reinforced Plastic (CPRF).

Moreover thanks to an improved aerodynamic design and to new efficient engines, the A350

provide a greater fuel economy in all flight regimes.

The investments for the A350 program amounts today to 10 billion euros. This investment

was initially estimated to half of this amount.

• Boeing 787

The Boeing 787 is Boeing’s newest aircraft type. It is a

mid-size widebody aircraft for medium to long ranges,

intended as the successor of the Boeing 767 and to

compete with the Airbus A330 and the future A350. The

objective of the company is to build a very fuel-efficient,

silent and clean aircraft, with maximum use of new technology.

The Rolls-Royce and General Electric turbofans will be much more fuel efficient than the



December 2007

report maintenance information to computer systems on the ground. This must help to reduce

maintenance costs 30 per cent compared to current airliners 5.

In contrast with the A380 capacity, which is designed for a “hub-and-spoke” airline route

system, the 787 is targeted at rapid, direct, point-to-point connections with capacity of 250

passengers.

To conclude, nowadays there are two main fields of improvement in the commercial aircraft

industry:

Ö Reducing acoustic nuisances

Ö Reducing fuel consumption

4.2.2. Theoretical approach of innovation

A key feature of invention is the degree of newness that the developed product will involve.

It’s not the purpose of this paper to list here all the inventions that appeared these recent years

in the aerospace industry. However we will try to analyse here two “macro” inventions that

will affect and have already affected the commercial aerospace industry:

Ö Material innovation: Key decisions in the material area concern the choice between

the uses of composite or metallic parts. Moreover the Titanium plays a prominent

place in the aerospace environment. Therefore there is also an important choice to do

between a metal alloy and a titanium alloy.

In order to take a relevant decision the main criteria are: Technological criteria

(resistance, rigidity, mechanical fatigue, corrosion) but also Design criteria

(compactness, encumbrance, procurement & manufacturing effectiveness).

Ö Ai f hi Th i f hi l i l i h i f



December 2007

achieve this objective, on the one hand we will clarify the main differences between

innovation and invention. On the other hand we will use a dynamic theory as the moving

equilibrium theory.

• Innovation vs. Invention

In this part we will describe the main innovations that affect the commercial aircraft industry.

To do this, we will use a theoretical approach developed by David Smith6. In his book

“Exploring Innovation”, he gives us a relevant framework to describe the main steps of the

“innovation” process. The three main steps are the following: Invention, Commercialization

and Diffusion. “Innovation is about commercialization of invention” in order to make them

relevant to business.

Invention Commercialization Diffusion

Innovation

Carbon Fibre

Reinforced Plastic

Titanium Technology Very Large Airlines

Figure n° 1: Difference between Invention and Innovation

Carbon Fibre Reinforced Plastic

A prominent use of Carbon Fibre Reinforced Plastic in the aerospace industry enables a gain

of weight. Therefore it enables to reduce fuel consumption. The Carbon Fibre Reinforced

Plastic material was only used in the civil aerospace industry for secondary elements as

interior fittings and so on7. This material was seldom used for the manufacturing of wings

i i diffi l i



December 2007

However, thanks to many R&D efforts led by the industry ( Advanced Composite Technology

Programme-NASA, Boeing, but also British Aerospace, Daimler Benz, Dassault, Eurocopter

and Airbus) , the aerospace industry get more capabilities to use the composite to manufacture

aircraft elements and in particular wings. It seems obvious that the knowledge on the

composite technology will be the cornerstone of the intensive competition between EADS and

Boeing. Between 1998 and 2000, EADS has registered 37 patents whereas Boeing has

registered 56 patents9. The composite is a potential game changer in an industry saddled with

high fuel costs.

Moreover there are several industrial challenges when considering Supply Chain and

Operation Management issues for the composite. Here, we have a “macro” flowchart of the

Supply Chain between the end customer and the Tier 1. This Supply Chain is described

toward an energy perspective10.

Supplier Raw Materials Production Products Transportation

Distribution

Warehouse

Customer EndUser

ProductDevelopment

Production

Energy

Emissions Waste

Recycle

Wastes

Emissions

Wastes

Energy

Emissions

Wastes

Emissions Energy

Emissions

Recycle

Wastes

Energy

Emissions

Global Effects

Fate and Persistence Emissions



December 2007

Here we have some of the Supply Chain and Operations Management challenges:

Ö Procurement Challenges: Obviously a new material strategy has a strong impact on

the Supplier Panel and Network. The use of composites is changing the procurement

organization’s focus, increasing buyer interactions with engineering and restructuring

the Supply Chain11. Boeing was the first company that has taken the initiative to

integrate more the procurement activities into the company’ strategy. The integrated

Supply Chain Management is now an important issue for this company. Now the

design team and the procurement team work closely together in order to employ new

supply chain tactics such as:

- ESI: Early Supplier Involvement in the aircraft design

- Advanced sourcing practices for key raw materials

- Outsourcing of entire systems to suppliers

Ö Operation Management Challenges: According to several industrial diagnoses

realized at the Procurement Department of Airbus, the bottleneck operations are often

operations that compel a discontinuous flow (thermal heat treating, oven and so on). In

that case, lot sizing problems must be seriously considered and solved. Owing to the

physical characteristics of the composite material, manufacturing activities should take

these constraints into consideration. Indeed composite materials should be stocked at a

low temperature and a controlled atmosphere12. After that the destocking operations

will play also a prominent place into the manufacturing process. Indeed the

temperature of the material plays here an important place.



December 2007

Titanium Alloy Technology

These recent years the annual consumption of titanium alloy is constantly increasing. The

aerospace industry plays an important role in this phenomenon. The commercial aerospace

industry represents approximately 35% of the annual consumption. This trend has a major

impact on the procurement strategy. Indeed the titanium has to be considered as a scarce raw

material that is strongly affected by the raw market fluctuations. As another scarce raw

material, Airbus and Boeing have to integrate these variations into their procurement strategy

in order to get the best prices and also to assess procurement risks to balance efficiently the

offer and the demand.

To do this, both companies have to:

Ö Manage scraps; that means trying to sell the scraps back to the demand market

Ö Improve inventory management throughout the supply chain

Ö Realize economies of scale by having a procurement strategy not only for their

companies but for the all Supply Network

Ö To manage supply risks; that means having a clear vision of the worldwide demand

and offer in order to implement the best procurement strategy (multi-sourcing vs.

strong partnership with a unique supplier, …)

• Punctuated equilibrium

The second theoretical approach is the “Punctuated equilibrium”. The main notion behind this

theory is that the technology evolves not a “on a smooth continuous basis, but via a

succession of fits and starts”. Airbus has developed a double-deck aircraft to improve the

seat-miles ratio. This project involved several technological challenges and it represents the

future of the entire Airbus Company. Moreover the evolution of this program will affect the

behaviour of the EADS group too.

Thi h id l i i h i h f h i bl d ib hi



December 2007

5.

1st equilibrium 2nd equilibrium

Market

Skills Knowledge

Abilities Suppliers

Customer

needs

Market

Skills Knowledge

Abilities Suppliers

Customer

needs

Low to medium

capacity

aircrafts *

High capacity

aircrafts *

* Capacity of both range and seats

Time

Figure n°3: Evolution of the punctuated equilibrium

Furthermore, the evolution of the core technology will also cause an evolution of the market,

the customer behavior, and the suppliers.

Some factors can give rise to inertia in the development of a new technology. The main

factors could be the following: traditions, sunk costs, internal political constraints and

uncertainties. In the case of the development of the A380 Program, the major constrains are

the sunk costs and the market uncertainties.

Comparative analysis of Supply Chain Management strategies

5.1. Supply Chain Framework throughout the main stakeholders perspective

In this section we will describe the aerospace supply chain throughout the main stakeholders’

perspective. On the one hand we will conduct a static analysis in order to have a better



December 2007

5.1.1. Suppliers’ network in the aerospace industry

The civil aerospace industry is characterized by an extensive, deep and multi-tiered supplier

network. The OEMs were playing a prominent role in this network. They were controlling all

the decision processes in this industry. Since few years, this industry has evolved from a

“build to print” subcontractor relationship to a turnkey “design to build” risk-sharing

partnership (MacPherson and Pritchard, 2005).

The major first-tier suppliers can be segmented as followed: aerostructures (including

fuselages, wings, landing gears and generally work packages), equipments (interior cabin

systems, engines …), material (titanium, steel…).

The aerospace industry has very high entry barriers owing to high sunk cost and high

requirements of technological maturity and capabilities. Thus, the number of qualified first-

tier suppliers, is limited. In this industry, it is common that different OEM purchase parts or

components from the same supplier.

5.1.2. Original Equipment Manufacturer

To describe the tasks of the OEMs, we can use the SCOR model at the level 1. There are four

activities: Plan, Source, Make, and Deliver.

• Plan

The most important here is probably to know exactly the environment that will be affected by

the planning decisions. Indeed too many planning decisions are not taken in accordance with

the suitable level of granularity. The first task in “Plan” is to define the strategic objectives

and then associate these objectives to the most suitable horizon plan in order to get the most

efficient multi-tiered vision.



December 2007

Strategic levelStrategic level

Portfolio management

Program ProgramProgram







v

vv

Project

Level of granularity

Figure n°4: Plan: Having a multi-level vision throughout the organization

Concerning the planning activity of the industrial systems, there are several concepts that

depend on two factors: time and cost to realize the products.

In terms of time, the most interesting parameter is the ratio between the production cycle of

the products and commercial cycle.

In terms of cost, the most interesting parameter is the degree of customization of the end

product.

These two parameters define the place where the demand occurs in the OEM process. That is

the decoupling point.



December 2007

Figure n°5: Basic control logics for supply chains (Delfmann &Albers, 2000)

Ö Make To Stock environment:

The decoupling point is just after the assembly process. The client won’t accept any

delays and order the products after its fabrication. This strategy is based on statistical

inventories forecasts. This strategy is effective to get a good on-time-delivery but the

inventories costs could be important.

Ö Assembly To Order environment:

The delivery time is longer here. The client chooses the product from an existent

catalogue. In the ATO environment forecasts play still an important place. There is a

number of possible end item configurations, all made from combinations of basic

components and sub assemblies The ATO enables to maintain flexibility starting basic



December 2007Ö Engineering To Order environment:

In that environment the product is highly customised and often produced in small

quantities. This environment requires the highest degree of collaboration between OEM

and the supplier.

To conclude:

Cp: Production Cycle

Cc: Commercial Cycle

x { ETO,MTO, ATO, MTS}Cp

Ccx< 1

Cp

CcETO<

Cp

CcMTO<

Cp

CcATO<

Cp

CcMTS

Responsiveness

Cost

and

As we can see, a trade-off decision is needed between cost and responsiveness.

• Source

The main tasks in this part are the following:

Ö Schedule deliveries; receive, verify, and transfer product, and authorize supplier

payments.

Ö Identify and select supply sources when not predetermined, as for engineer-to-order

product.

Ö Assess supplier performance and maintain data about the suppliers



December 2007Ö A downstream chain that is led by the customer’s order

Therefore the most difficult is to define the point in the manufacturing chain where we change

from a Make-To-Stock environment to a Make-To-Order environment.

Manufacturing based on

forecasts

Manufacturing based on

orders

Figure n°6: The bound between the MTS and the MTO environment

The main tasks in this part are the following:

Ö Schedule production activities, produce and test, package, release product to deliver

Ö Finalize engineer for engineering-to-order product

Ö Manage in-process products (WIP), equipment and facilities, production network,

regulatory compliance for production.

• Deliver

To summarize the main tasks in delivery encompass the following activities:

Ö Warehouse management from receiving and picking product to load and ship product

Ö Receive and verify product at customer site

Ö Invoicing customer

Ö Manage deliver business rules, performance, information, finished product

inventories, transportation, product life cycle, and import/export requirements.



December 2007Leasing companies are those companies that purchase aircraft directly from manufacturers or

from the second-hand market and then lease them to airline companies. Since leasing

companies handle most of the asset holding costs for the airline companies, their role as the

source of new aircraft orders becomes even more important during business turndowns in the

airline industry.

Meanwhile, the size of the global fleet of jet freighters is regularly increasing mainly due to

globalization phenomenon. Airbus forecasts freight traffic for 144 individual domestic and

international flows on the basis of historical traffic, economic data and country-to-country

trade statistics. Airbus forecast that air freight expressed in terms of freight-tonne kilometres

(FTK) will grow at a 6% average annual rate over the 2005-2025 period. Over the next 20

years, fast growing Chinese exports, as well as its emerging express market, will radically

change the hierarchy of the top freight markets15. Nowadays the world freight aircraft fleet

consists of 1, 644 aircraft in service, 908 were converted from passenger service and 736 are

factory-build freighters.

Airbus Forecasts

2005 2025

Freighter 1644 4115

Passengerserviceaircraft

15491 29385

Total 17 135 33500

130%

89%

2006 2026

Freighter 1980 3980

Passengerserviceaircraft

19230 36420

Total 21 210 40400

89%

100%

Boeing Forecasts

Figure n°6: Products Forecasts

Airbus and Boeing have sensibly the same forecasts for the next 20 years. Aircraft freighters

represent approximately 10% of the global market These statistics provide us only a “macro



December 2007

5.2. Comparative analysis between Airbus and Boeing’s supply chain and

trends in the aerospace industry

5.2.1. Similar Supply Chain Management Practices

If we look roughly at the supply chain management practices’ “picture” between Airbus and

Boeing, we can easily find some similarities.

Indeed both have major suppliers that participate early in design and development process.

Moreover they are both reducing their supplier base. This is a good way to simplify the

supplier’s network and to improve the informational flows.

Both tried to commit to long-term, mutually beneficial, reliable and stable relationships with

key suppliers. Building strong relationships throughout the entire supplier’s networks is the

cornerstone of supply chain management success. However it is difficult to reach a reliable

relationship in the suppliers’ network. Therefore trust plays an important place here.

Electronic links with suppliers via supplier portals have been created (request for

quotes/proposal, order placement, technical data interchange, such as technical specifications,

engineering drawings, facilitating virtual collaboration with global collaboration with global

partnering suppliers).

Moreover RFID initiatives have been developed by both the companies16

. They have worked

together to reach for consensus regarding standards for using global RFID technology on

commercial airplanes.

5.2.2. Supply Chain comparison of the A380 and the 787 programs

Due to an increasing market pressure, aircraft manufacturers are forced to lower their prices,

while offering better products, in order to attract customers.

Under this pressure, aircraft manufactures have adopted a risk sharing partnership within the

entire supplier network in order to reduce costs not only at one point of the supply chain but



December 2007

more than 30 of its major suppliers (Alenia, Eurocopter, Fokker, Labinal, and Saab), that will

cover about 25 percent (US$ 3 billion) of the project’s non-recurring costs 17.

Boeing has asked all its partnering suppliers to carry all the non-recurring costs, but in return

gives back to the suppliers the intellectual property rights on the components and systems

they provide, which indicates a reversal of earlier practices.

The most significant transition is that suppliers are taking up much more responsibilities in

product design, development and manufacturing than ever.

Airbus has just discovered its partnership architecture and modular outsourcing strategies.

However Boeing is reaching the next level in the 787 program. Indeed, Boeing is fast

adopting a revolutionary business model similar to the so-called “system integration” model,

involving its risk sharing partners throughout the design, development and manufacturing

processes for all the major components and subassemblies.

With the 787 program, Boeing delegates the major responsibilities of the development and

manufacturing to its first-tier suppliers and assumes the central role of system integrator. This

indicates the first time for Boeing to outsource the entire wing design and manufacturing to

external suppliers.

In order to reduce final assembly cycle times, Boeing has adopted a higher-level of

integration at the supplier level, by significantly reducing the number of parts and

components, subassemblies or sections that go into the final assembly stage. This means that

the first-tier suppliers are moving upward in the value chain and assuming more the role of

the system integrator. First tier suppliers, therefore, can offer more integrated and

interconnected solutions, decreasing the number of the components comprising the airplane.

The first tier partnering suppliers are also given full control of their own lower tier supplier



December 2007

has remained essentially unchanged in the development of the recent Airbus aircraft platforms

despite the fact that it has been increasing its outsourcing contents in recent years.

Airbus has to continue the development of this “risk-sharing partnership” strategy and the

harmonization of the methods and tools in the airbus group as a first step and then to the

entire airbus’ suppliers network as a second step. For instance Airbus is facing several

difficulties, as:

• A lack of harmonization of the IT systems and particularly a lack of standardization of

the CAD softwares.

• A lower-level of integration at the supplier level. Airbus has to significantly reduce the

number of parts and components, subassemblies or sections that go into the final

assembly stage.

5.2.3. Outsourcing strategy

The differences between Airbus’ and Boeing’s outsourcing activities mainly echo the quite

different difference overall outsourcing philosophy of these two companies. Taking the

position of the 787 program, Boeing had delegated the entire responsibility for wing design

and production to its Japanese partners, while it has also assigned a significantly greater share

of the work to the Chinese suppliers. In contrast, Airbus, while it also engages in industrial

offset agreements, it has typically elected to do so in connection with the older Airbus aircraft

models. This is a main reason explaining why Airbus seems to be facing many more

difficulties in Japan than in China. Decades of technology development through extensive

involvement in Boeing’s projects have helped the Japanese companies to establish a

leadership position in wing design and composite technology. All of this financed by Japanese

government.



December 2007approach aiming to subdivide a system into smaller parts (modules) that can be independently

created and used in different systems or programs to drive multiple functionalities. This

method enables to reduce costs due to less customization, and less learning time and it offers

more flexibility in design.

This method has not only changed the design strategies but also the entire industrial

organization that is not more organized by products but rather by modules. Therefore the

manufacturing activities are often based on postponement principles19. The design and the

fabrication of the modules can be led by an important tier 1. These tiers 1 are thus in charge

all the suppliers’ network associated with this module.

This strategy enables to realize important economies of scale mainly due to a standardization

of the components.

The trend for the OEM is to design the module and to ask a tier 1 to manufacture an entire

module and manage its supplier’s network.

• Rationalization of Tiers two suppliers’ panel

Nowadays the trend is to rationalize the Tier 2 supplier’s panel. The prime manufactures ask

the suppliers to merge in order to be able to respond to an increasing demand in terms of

products’ variety and ramp-up of production.

• Lean Manufacturing

The concept of Lean Manufacturing has been developed by Toyota20. The OEMs and the

major suppliers of the aerospace industry have tried to apply the Lean manufacturing best

practices in order to be more efficient. The next step is to apply these practices to the entire

suppliers’ network. This situation can create a disconnection between the lean manufacturers

and “conventional” manufactures that may result in inefficiencies, such as excess inventory,

excessive lead times, quality non conformance and late deliveries. The present situation is that



December 2007

Past Emerging Future

Platformassembly

Large scaleintegration

Small scaleintegration

Value-added partsand assemblies

Raw material procurementstrategy

Risk Management: Proactive

philosophy

OEMsSystem

integrator

Systemintegrator

Supplier’snetwork

Supplier’snetwork

Supplier’snetwork

Individual Individual/common Common

-

+ + +Modular Design

+ + +

-

Figure n°7: Evolution of the Aerospace industry

6. ConclusionAirlines’ expectations are higher than before. There is a cost consciousness of the overall

industry. Prime manufacturers are trying to face to ramp-up challenges. Moreover the

intensive competition between Airbus and Boeing is improving the industry efficiency by

using most of the methods used few years ago in the automotive industry.

But before trying to use new supply chain best practices, there are still many difficulties

owing to cultural barriers and a lack of harmonization throughout the entire organization.



December 2007

Part 2:

State of the art:

Building tools and

frameworks to manage Supply

Chain Risks



December 2007

7. Introduction

Supply Chain Risk Management is of growing importance, as the vulnerability of supply

chain increases. Many industries put efforts in order to implement proactive management

practices. Risk management and particularly supply chain risk management is therefore

playing an important role. Supply chain risk management practices must be supported by

effective operations strategies. One of the current fads in operations management practices is

to apply lean, agile and “leagile” methods. Consequently we will show how we can build

relevant tools and frameworks to manage supply chain risks in a lean, agile or leagile context.

Firstly we have presented the state of the art concerning Supply Chain Management, Risk

Management and Supply Chain Risk Management practices (Appendix 1). We tried to

identify further research areas and we conclude that there is a lack of understanding of the

nature of risks among many supply chain researchers and practitioners. Therefore we decided

to answer the following question: What are the implications of the subjective-objective debate

regarding the nature for development of tools and frameworks for (lean, agile and leagile)

supply chain risk management? We have found that this debate between objective and

subjective risks plays an important place in the risk identification and estimation process.

Moreover this part enables us to get a theoretical background before presenting the case study

where we will present tools and frameworks to manage risks in a supply chain.



December 2007

8. Supply Chain Management

Since more than ten years almost all the companies have understood that trying to compete

alone in an environment characterized by:

Ö An increasing market pressure

Ö Procurement globalization phenomenon

Ö A high demanding market concerning delays and quality

Ö A growing uncertainty

Ö A fast evolution of innovation and technology

Ö ...

is not the efficient way. Companies have now set up the partnership as the cornerstone of their

strategies and tactics. Therefore having a good understanding of the interrelationships

between separate company functions and between the company and its markets, its industry

and the national economy is becoming a real competitive advantage.

Supply chain management is thus presented as the best solution to reach this new partnership

optimum.

8.1. Emergence of supply chain management practices

The term supply chain management has risen to prominence over the past ten years (Cooper

et al. 1997). For instance, at the 1995 Annual Conference of the Council of Logistics

Management, 13, 5 % of the concurrent session titles contained the words “supply chain”. At

the 1997 conference, just two years later, the number of sessions containing the term rose to

22,4 %.

Corporations have turned increasingly to global sources for their supplies. This globalization

of supply has forced companies to look for more effective ways to coordinate the flow of



December 2007

Therefore managing the several supply chains related to a company represent obviously the

key success to compete in that environment.

8.2. What about Supply Chain?

At first glance when we try to establish a state of the art about the “Supply Chain” and the

“Supply Chain Management”, it appears that a definition of supply chain seems to be more

common across authors than the definition of supply chain management (Cooper and Ellram

1993; LaLonde and Masters 1994; Lambert, Stock and Ellram 1998). We can list here some

of the more representative definition of supply chain.

Christopher 92 A supply chain is the network of organizations that areinvolved through upstream and downstream linkages, in the

different processes and activities that produce value in theform of products and services delivered to the ultimateconsumer

Definition orientedtoward the value

chain thatencompasses theend consumer

Lee & Billington 93 A network that is in charge of supplying raw materials, of transforming these raw materials into components and theninto end-products. Finally this network is in charge of delivering these end products to the customer

Definition orientedtoward the product

La Londe & Masters 94

Supply chain is a set of firms that pass materials forward.Normally, several independent firms are involved in

manufacturing a product and placing it in the hands of the enduser in a supply chain-raw material and component producers,product assemblers, wholesalers, retailer merchants andtransportation companies are all members of a supply chain

End-user focuseddefinition.

Partnership andCollaboration playhere an importantplace

Tayur and al. 99 A system which comprises suppliers, manufacturers,distributors and retailers that exchange material flows fromsuppliers to clients and information flows from clients tosuppliers

Definition orientedtoward the links inthe entire supplynetwork

Mentzer and al.2001

A supply chain is defined as a set of three or more entities(organizations or individuals) directly involved in the upstreamand downstream flows of products, services, finances, and/orinformation from a source to a customer

Definition orientedtoward the links inthe entire supplynetwork



December 2007definition it is easier to understand the main challenges that every department has to face

with, from the shop floor to a more cross-functional level of the organization.

Ö Definition oriented toward transformation processes (New and al. 95)

It is relevant to have a value added perspective on the entire chain. In this definition the main

activities are: raw material transformation, components manufacturing, end-products

manufacturing and transfer activities.

Raw materialTransformation

Componentsmanufacturing

End-productmanufacturing

Wholesaler Retail End Customers

Recycling

Physical Distribution and Storage

Figure n° 8: Transformation processes

Ö Definition oriented toward a Client/Supplier relationship (Tayur and al. 99)

The purpose of this definition is to make the people think the organization as a sequence of

several Client/Supplier relationships. This supply chain encompasses the suppliers of the 1st

tier suppliers and the clients of the 1st tier clients.

The main benefits of building the supply chain as a sequence of Client/Supplier (C/S)

relationship from the shop floor to a strategic level of the organization are the following:

• Establishing a C/S relationship supposes to measure the efficiency of this

relationship. Therefore it enables to get a relevant vision on the entire process

efficiency

• Establishing a C/S relationship supposes to set metrics (measure process) related to

relevant objectives. That enables to monitor regularly the current status of projects and



December 2007

8.2.2. Supply Chain focuses on the organization

There is another definition of supply chain focusedon the organization. In this definition, the difficulty

is to define the scope of the supply chain. Owing to

(Mentzer, 2001) there are three types of supply

chain complexity: a “direct supply chain”, an

“extended supply chain” and an “ultimatesupply chain”.

Source Make Deliver

Plan

S u p p l i e r

S u p p l i e r

C l i e n t

C l i e n t

SCOR model: Supply Chain Framework oriented

toward the organization

Ö A direct Supply Chain -a- consists of a company, a supplier, and a customer

involved in the upstream and/or downstream flows of products, services, finances,

and/or information.

Ö

A extended Supply Chain -b- includes suppliers of the immediate supplier andcustomers of the immediate customer, all involved in the upstream and/or downstream

flows of products, services, finances, and/or information

Ö An ultimate Supply Chain -c- includes all the organizations involved in all the

upstream and downstream flows of products, services, finances, and information from

the ultimate supplier to the ultimate customer.

Supplier

Organization

.

.

.

Ultimate

supplier

c

Financial

provider

Supplier

a b

.

Supplier

Organization

.

.

Supplier’s

supplier



December 2007

8.3. What about Supply Chain Management (SCM)?

Tacitly there is always, at least, one supply chain in an organization. This supply chain can be

voluntarily managed or not. Therefore there is a clear distinction between supply chain and

supply chain management. As we noticed before in section 1.2 definitions of SCM differ

across authors. At first glance SCM can be defined as the way of managing several partnering

relationships inside and outside the organization. Therefore we will first try to explain the

nature of these different partnering relationships. Next, we will notice that these definitions

can be classified into three main categories: Thinking the SCM as a management philosophy,

as the implementation of a management philosophy and as a set of management processes

(Mentzer and al.,2001)

8.3.1. Nature of the partnering relationships

As stated above, SCM can be defined as the way of managing several partnering relationships

inside and outside the organization. Therefore it is relevant to clarify the nature of these

relations in order to get a better understanding of SCM.

In order to be more focused on their core competencies, many companies have first

outsourced the logistic activities (Third-Party Logistics). This is in that context that the

partnering relationships have appeared. According to (Bowersox, 1990), partners work in an

extended organization that evolves with its own objectives, rules and values. Thus there is a

difference between a continuous partnering relationships and a discontinuous subcontracting

relation where transactions cost is the most used indicator.

(Lambert and al., 1996) proposed a definition of the partnering relationships. Indeed

according to them a partnering relationship is a custom-built relation based on mutual

confidence open-mindedness risks and rewards sharing The objective is to reach a



December 2007

We can depict the different types of relations that we can find in an industrial environment.

In a capacity subcontracting relationship, the

contactor relies on a subcontractor to manufacture

the products. Capacity subcontracting is a flexible

tool for industrials to cope with punctual increases

of production or technical problems.

No subcontractingrelation

No subcontractingrelation

Capacity subcontractingCapacity subcontracting

Specializedsubcontracting

Specializedsubcontracting

Intelligencesubcontracting

Intelligencesubcontracting

Joint ventureJoint venture

Vertical integrationVertical integration

Partnering degreePartnering degree

P a r t n e r i n g

M e r g e r s

&

A c q u i s i t i o n S t r a t e g y

In a specialized subcontracting relationship, the

contractor uses specific subcontractor’s equipment

and skills to manufacture products. These

contractors have chosen not to acquire such

equipment and competencies for own strategic

reasons.

Figure n°11: Several subcontracting relations21

In an intelligence subcontracting relationship, there is a strong relation between the contractor

and the subcontractor. Exchange of information, cooperation and innovation are the key

successes. The purpose is to develop the best product or service based on a collaboration

relationship.

Joint venture and vertical integration are in the “Merger and Acquisition area” owing to the

fact that these activities are rather at a strategic level. Capacity specialized and intelligence

subcontracting relationships are rather at an operational level.

We have now a better understanding of the nature of the links that exist within a suppliers’

network. We can now depict what we understand with the supply chain management issues.



December 2007

definition supposes to think about its several key flows within the organization and its relation

with other organizations with a broad vision (operational and strategic view).

SCM as a management philosophy has the following characteristics:

Ö A system approach to view the supply chain as a whole, and to manage the total flow

of goods inventory from the supplier to the ultimate customer

Ö A strategic orientation toward cooperative efforts to synchronize and converge

intrafirm and interfirm operational and strategic capabilities into a unified whole

Ö A customer focus to create unique and individualized sources of customer value,

leading to customer satisfaction

8.3.3. SCM as the implementation of a management philosophy

Having a SCM philosophy in the organization is necessary to face to the main challenges.

However, this condition is not sufficient and thus the implementation of this philosophy plays

an important place. The implementation of this management philosophy can be structured

with the following six activities. This set of activities represents a coordinated effort between

the supply chain partners in order to respond to the needs of the end customer.

a. Integrated behaviour: Firms must expand their integrated behaviour to incorporate

customers and suppliers.

b. Mutually sharing information: Sharing information throughout all the supply chain is

necessary to implement a SCM philosophy, especially for planning activities(forecasts’ exchange between all the entities of a value chain) and monitoring

activities (from an operational perspective (quality and delay) to a strategic

perspective (sharing strategic visions to get a proactive attitude)).



December 2007f. Integration of processes. This activity can be divided into 4 main steps: Understand

the chain of fragmented operations within the individual company, Be focused on cost

reduction, Understand purchasing activities through a tactical focus with a proactive

approach with customers and suppliers, Extend the scope of integration outside the

company.

g. Partners to build and maintain long-term relationships

8.3.4. SCM as a set of management processes

Owing to (La Londe and al., 1994), SCM is the process of managing relationships,

information, and materials flow across enterprise borders to deliver enhanced customer

service and economic value through synchronized management of the flow of physical goods

and associated information from sourcing to consumption.

Owing to (Mentzer, 2001), the literature is trying to define two concepts with one term, i.e.

Supply Chain Management. The idea of viewing the coordination of a supply chain from an

overall system perspective, with each of the tactical activities of distribution flows seen within

a broader strategic context (what has been called SCM as a management philosophy) is more

accurately called a Supply Chain Orientation. The actual implementation of this orientation,

across various companies in the supply chain, is more appropriately called Supply Chain

Management.

Ö Supply Chain Orientation is recognized by an organization of the systemic, strategic

implications of the tactical activities involved in managing the various flows in a

supply chain.

Ö Supply Chain Management is the implementation of this Supply Chain Orientation

across all the firms in one of the supply chains.

These definitions can be inconsistent with what we stated above about the fact that SCM is a

hil h I h SC O i i i h hil h d



December 2007

problematic? Often there are two main approaches: 1/ we can be only focused on the

OEM22. 2/ we can be focused on a collaborative supply chain. The first approach is

limited owing to the fact that it is almost always necessary to have a partnering supply

chain vision. However the first approach can be sometimes useful.

Ö What is the scope? There are four main approaches to define the scope. 1/ A parcelled

out approach that suppose to be focused on one activity as procurement, production or

distribution. 2/ An internal approach. 3/ An internal multi-site approach: In this

approach we analyse the relationships between different industrial sites of one

company. 4/ An integrated approach: In this approach we analyse the behaviour of one

company within its several supply chain from the upstream to the downstream flows.

5/ A global approach: This approach encompasses all the actors from the upstream to

the downstream products, services, finances, information flows.

To conclude we can bring out three more SCM definitions in order to get a deeper

understanding.

Cooper and al. (1997) Supply Chain management is " …an integrative philosophy tomanage the total flow of a distribution channel from supplierto the ultimate user

La Londe and Masters (1994)

Supply chain strategy includes: "…two or more firms in asupply chain entering into a long-term agreement; …thedevelopment of trust and commitment to the relationship;…the integration of logitics activities involving the sharing ofdemand and sales data;

Faisal, Banwet, Shankar

(2006)

The key issues in SCM are the formation of the supply chain

and its efficient coordination with objectives of customersatisfaction and sustaining competency. This requirescomplex flow of information, materials, and funds acrossmultiple functional areas both within and among companies.



December 2007

The purpose of this part is to review the general literature on risk and then in part 3 to proceed

to examine the literature on supply chain risk and its management. We will also bring out

ongoing debates in order to try to deepen our knowledge in these new risk management areas.

9.1. What is risk?

The environment in which firms evolve is characterized by shorter delays, better quality,

shorter production cycles, shorter commercial cycles and an increasing competitiveness

between actors that are linked to a value chain. This phenomenon is caused by a more top-

level change in general business conditions. In that context, companies are constantly

evolving. Therefore change management is becoming an important issue. However it doesn’t

enable to get a relevant proactive management tool. Change management enables to succeed

the implementation of proactive decisions, but it doesn’t enable to make the right choice.

(Bernstein, 1996) maintains that risk is about choice. Risk management is a good making-

decision tool that enables to reach a proactive behaviour. Although its significance for modern

business is widely acknowledged, risk management is still an emerging discipline that is

under continuous development and change.

We can first analyse some state-of-the-art definitions. Risk, related to project management, is

an uncertain event or condition that, if it occurs, has a positive or negative effect on at least

one project objective, such as time, cost, scope or quality. (PMI PMBOK 2004). Moreover

(Moore, 1983) notes that risk encompasses both the possibility of loss and the hope of gain.

Nevertheless, in looking at how organizations perceive risk, it is the negative connation of

risk-loss rather than gain-which seem to preoccupy managers (Hood and Young, 2005; March

and Shapira, 1987). It is often the case that risk is understood to have only unfavourable or

negative connotation. In that case risk management includes only hedging against

unfavourable events only However as stated in the definition above we have to consider

D b 2007



December 2007

interesting owing to the fact that it brings out three important terms: objectives, occurrence

and effects.

Ö Objectives: Before trying to define what the risks that surround an organization are,

we have to know, first, where this organization wants to go. Thus defining relevant

objectives plays an important place here.

Ö Occurrence: it enables to measure the probability that an event occurs.

Ö Effects: it measures the impact dimensions of an event

Occurrence and effect represent the two dimensions of risk. In general, the expected value

derived by multiplying the impact the probability is important in decision making.

However, the attitude on risk cannot be explicitly based on considerations of the expected

value only. Indeed we can consider the following example.

In that case two events have the same mean values, but their probability and impact are

different.

0.01 * 20000€ = 200€

0.00001 * 20000000 €= 200€

In that case, the actions taken to mitigate these risks have to be different even if their expected

values are different.

Many other authors have also stressed the negative side and the two dimensions of risk:

Ö (Lowrance, 1980) describes risk as a measure of the probability and severity of

adverse effects.

Ö (Rowe, 1980) defines risk as the potential for unwanted negative consequences to

arise from an event or activity.

Ö (Simon and al., 1997) perceive risk in terms of the likelihood of an uncertain event or

set of circumstances occurring which would have an adverse effect on the

achievement of a project’s objectives

December 2007



December 2007

are specific risks that are associated with financial arrangements. For instance, hedging

against fluctuations in currency rates can be arranged via forward rate agreements with banks

and financial institutions. Business risk can usually be managed by project management

procedures. Examples of business risks are the following:

Complex technical solutions, or technical problems, or causes of inexperience

Scope changes, changes in design

Schedule delays

Problem in work performance

Regulations, requirements of authorities

Lacking information needed in planning and decision-making

Conflicting objectives between the customer and the contractor

In part three, we will deal with a case study in order to analyse risks in an important aircraft

manufacturer. For sure we will be focused on business risks. Political risks and country

risks are risks that are related to certain geographical areas of project operations. The impacts

of political and country risks are to be analysed at project portfolio level (Kähkönen, 2007).

9.2. Risk vs. Uncertainty

In the literature we can often find some confusion between risk and uncertainty. Thus it

becomes useful to clarify the differences between these two terms before analysing risks in a

real industrial context. There are several state-of-the art definitions.

Indeed (Knight, 1921) made the simple distinction between risk and uncertainty: risk is

something measurable in the sense that estimates can be made of the probabilities of

outcomes are not known On the other hand uncertainty is not quantifiable and the

December 2007



December 2007

(Slack and Lewis, 20

Risk = {Prospective outcomes} = {f1 (probability1 ; impact); f2 (p2 ; i); ………; fx (px ; i)}

If there is at least one pi that is not measurable

Therefore Risk ≠0

{f1 (p1 ; i); f2 (p2 ; i); ………; fx (px ; i)}

2 is not known: Uncertaint

Yates and Stone

Risk exists when one of the probabilities of theseveral outcomes (Pi) is not measurable.

The uncertainty defines the cardinal of the set of outcomes.

Knight

Risk exists when Pi is known

Uncertainty exists when Pi is not known

p 1 is known: Risk

01) encompass both viewpoints. They describe uncertainty as a key driver of risk through the

development of prevention, mitigation and recovery strategies. Whilst these do not eliminate

uncertainty, they do enable managers to reduce this risks which might arise from uncertainty.

9.3. What is risk management?

9.3.1. Overview of risk management definitions

The purpose of this part is to explain how we can implement a proactive management of a

supply chain within an organization by using risk management. Indeed proactive supply

management is qualitatively different from reactive supply management. Also, it is more than

integrative procurement management and more than strategic purchasing management.

Proactive supply management is concerned with a significant additional issue: risk

management (Smeltzer and Siferd, 1998).

It seems to have a general agreement on what the risk management process should be. In fact,

December 2007



December 2007

get a proactive vision on the organization and thus to know what we need in advance. The

definition used by the Royal Society goes against our argumentation.

Most professional bodies which deal with risk take the view that: Risk management should

be a continuous and developing process which runs throughout the organisation’s strategy and

the implementation of that strategy. It should address methodically all the risks surrounding

the organisation’s activities past, present and in particular, future. It must be integrated into

culture of the organization with an effective policy and programme led by the most senior

management. It must translate the strategy into tactical and operational objectives, assigning

responsibility throughout the organisation with each manager and employee responsible for

the management of risk as part of their job description. (IRM/AIRMIC/ALARM, 2002, p.2).

Moreover Tchankova (2002) maintains that “risk management has become a main part of the

organisation’s activities and its main aim is to help all other management activities to achieve

the organisation’s activities and its main aim is to help all other management activities to

achieve the organisation’s aims directly and efficiently”. This definition is relevant owing to

the fact that it brings out the fact that risk management is not another function that the

organization has to cope with. Risk management is rather a support function that helps

managers at every level of the organization in their day-to-day making decision process.

9.3.2. Risk Management processes

Risk management is generally defined as stages or processes including risk identification, risk

estimation, risk response development and risk control (see ISO 10006, 1997).

(Kähkönen and al., 2007) have defined risk management as an eight steps process. The

content is in accordance with existing risk management theory, literature, and standards (see

e.g. ISO 10006, 1997 and PMBOK 1996).

Th d fi d Ri k Id ifi i Ri k E i i d Ri k R

December 2007



December 2007Ö Control techniques: These seek to respond to identified risk in order to minimise risk

exposure.

• Risk Identification:

Risk Identification is probably the most important step in risk management processes owing

to the fact that this part of the core processes illustrates the objectives of the project. It

consists in determining which risks are likely to affect the project and in documenting the

characteristics of each. (Haywood M.M. and Peck H., 2003) put forth an eight steps method to

identify and assess risks.

Ö Brainstorm possible risks

Ö Consider what has gone wrong in similar projects previously

Ö Cluster into related topics

Ö Weight according to seriousness and probability

Ö Focus on the very serious and highly probable

Ö Define the project type and review typical risks

Ö Plan how to run the project with the risk in mind. Highlight where in the project the

risks will be most critical-normally along a project’s “critical path”.

Ö Decide how to reduce the risks so that the chances and consequences of failure are

minimised.

The most important here is that some risks are objectives others are subjectives. The purpose

is to reduce the proportion of subjectives risks. We will try in the next sections to present a

solution in order to face this problem.

• Risk Estimation

It consists in evaluating risks and risk interactions to assess the range of possible project

outcomes. This step is aiming for providing further understanding over the identified risks.

Qualitative and quantitative risk analyses are the main approaches for studying the potential

December 2007



situation and hold contingency reserves); Contingency planning – supporting all of the five

strategies.

Parallel to risk management is the issue of how to mitigate the consequences of an accident if

it does happen: to deal with the situation in a way that minimizes business impact. This is

normally referred to as business continuity management (BCM) and relates to those

management disciplines, processes and techniques, which seek to provide the means for

continuous operations of essential functions under all circumstances (Hiles and Barnes, 2001,

P.379). Business Continuity Management (BCM) is defined as the development of strategies,

plans and actions which provide protection or alternative modes of operation for those

activities or business process which, if they were to be interrupted, might otherwise bring

about a seriously damaging or potentially fatal loss to the enterprise.

The first activities in developing business continuity plans are identifying the risks and

assessing their probability and impact – the steps are hence identical to risk management. Part

of this is to understand what will be affected (damage potential analysis). Then, strategies and

recovery plans should be developed that could be implemented both before the incident

(similar to risk management strategies) and after the incident.

Concerning the accessory processes:

• Risk Management Planning

It consists in preparing and deciding the appropriate risk and opportunity management

approach, tasks and resources for the situation in question.

• Risk communication

It consists in providing shared starting point and understanding or risks and opportunities

• Risk ownership development

December 2007



• Risk Management Control

It consists in responding to changes in risk over the course of the project. As risk management

is to be applied as a continuous process throughout the project life cycle, one important

function for risk management control is to ensure that the process of identifying, estimating,

and responding to risks is repeated during the project life in an iterative manner.

Finally (Simon and al., 1997) suggest that, whilst is a wide range of techniques available to

undertake each of the three stages of the risk management process, these can be separated into

three groups:

• Qualitative techniques: These seek to identify, describe, analyse and understand risks

• Quantitative techniques: These seek to model risk in order to quantify its effect

• Control techniques: These seek to respond to identified risk in order to minimise risk

exposure.

This can be illustrated by the following figure:

Risk Identification

Risk EstimationRisk Response Planning

and Execution

22

11

33

QL QT C

CoreCore ProcessProcess

Risk ownershipdevelopmentRisk Management

Control

RiskRisk ManagementManagement

PlanningPlanningRiskRisk communicationcommunication

AccessoryAccessory

ProcessesProcesses

(QL, QT, C)(QL, QT, C)

(QL, QT, C)(QL, QT, C)

December 2007



To conclude (Zsidisin and al., 2000) did a comparison between several industries to identify

their risk management best practices. Concerning the aerospace industry, they found that it is

using both quantitative and qualitative risk assessment method, using formal models. In order

to mitigate risk on strategic parts, they work with suppliers to find ways to mitigate risk.

Finally contingency plans are implemented by a cross-functional team.

9.4. An ongoing debate: subjective VS. objective risk

Making a clear distinction between objective and subjective risks is an important issue in the

risk identification process. Owing to (Khan O. and Burnes B., 2007) there is a long-standing

debate between those who see risk as objective and those who argue that risk is subjective

(Bernstein, 1996; Frosdick, 1997; Moore, 1983; Spira and Page, 2002; Yates and Stone,

1992).

During the risk identification process there are two main steps: The first one consists in

identifying what has gone wrong in similar projects previously. This step refers rather to

objective risks. The second one consists in identifying what could be the “new” risks. This

refers rather to subjective risks. (Lupton, 1999) observed that views of risk range between the

technico-scientific perspective, which sees risk as objective and measurable, to the social

constructionist perspective, which sees it as being determined by the social, political and

historical viewpoints of those concerned. (Yates and Stone, 1992) argue that risk is a

subjective construct because it represents an interaction between the alternative and the risk

taker. The Royal Society (1992) argues that a particular risk or hazard means different things

to different people in different contexts and risk is socially constructed.

(Kähkönen and al., 2007) argue that the uniqueness of projects and associated lack of

appropriate statistically derived frequencies for deriving probabilities implies that a subjective

approach must be adopted to estimate risks Subjective estimates refer here to the fact that

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removing the element of human judgement from decision making by disguising underlying

assumptions with mathematical formulae (White, 1995).

Nevertheless, the issue of whether risk is a subjective or objective construct does not appear

to be acknowledged in the supply chain literature. Therefore we will try to consider this issue

in our risks analysis of an aerospace supply chain.

10. Supply Chain Risk Management (SCRM)

10.1. Why Supply Chain Risk Management is becoming an important issue?

In order to cope efficiently with the increasing variability of the environment in which

companies evolve, proactive management tools are necessary. In industry, especially those

industries moving towards longer supply chains (e.g. due to outsourcing) and facing

increasingly uncertain demand as well as supply, the issue of risk handling and risk sharing

along the supply chain is an important topic (Norrman A., Jansson U., (2004)). As (Hendricks

and Singhal, 2005) showed, not only can the failure to mange supply chain risks effectively

lead to a sharp downturn in an organisation’s share price, which can be slow to recover, but it

can also generate conflict amongst the organisation’s stakeholders. (Cousins and al., 2004)

identify the wider consequences of a failure to manage risks effectively. These includes not

just only financial losses but also reduction in product quality, damage to property and

equipment, loss of reputation in the eyes of customers, suppliers and the wider public, and

delivery delays.

There are several trends that increase the vulnerability to risks in supply chains:

Ö Shorter product life cycles and compressed time-to-market

Ö Increased demand for on-time deliveries in shorter time windows, and shorter lead

times

December 2007



a strategic level as well. This lack of visibility involves more uncertainties in making decision

processes and also non-effective process monitoring practices.

Recent events have demonstrated that a disruption affecting an entity anywhere in the supply

chain can have a direct effect on a corporation’s ability to continue operations, get finished

goods to market or provide critical services to customers. Organisations that think they have

managed risk have often overlooked the critical exposures along their supply chains. As noted

by (Braithwaite & Hall, 1999), supply chains that run hundreds if not thousands of companies

over several tiers present significant risk. Some writers suggest that the domino effects of

disruptions in supply chains might have been exacerbated in the last decade (Cristopher &

Lee, 2001; Engardio, 2001; McGillivray, 2000).

There is a need to develop tools in order to identify failures earlier in the supply chain and to

avoid this “domino effect”. Indeed the closest the failure to the customer is identified, the

most important the impacts are, and particularly on cost (Bassetto, 2005).

0,1 110

100

0

20

40

60

80

100

120

Preliminary

Design

Design Manufacturing Client

When is the failure identified?

F a i l l u r e C o s t ( % )

Figure N° 13: The cost of a failure depends on where this failure is identified.

Firstly, we will try to analyse relevant SCRM definitions in order to get a common

understanding of a SCRM philosophy Then we will present what could be the main steps in

December 2007



the same as was ordered previously, (2) The modified rebuy: where some aspects of the

product specification have changed, e.g. price. (3) The new task: where an entirely new

product or service is being purchased. Moreover the Williamson‘s theory (1975, 1979) about

the transaction cost economics (TCE), could be also considered as the first steps in the SCRM

theory. Indeed TCE is concerned with the financial exchange and investments between a

buyer and supplier, with part of the costs being associated with managing the buyer and

supplier relationship. These costs could be very high and could expose the supplier to

considerable risk should the customer choose to go elsewhere. However, they are a cost the

supplier has to incur if they wish to do business with the customer. TCE predicts that as

investments become more specific to the buyer and supplier relationship, and as transaction

uncertainties increase, the relationship will move towards a more long-term contract in order

to safeguard the position of both parties. TCE implies that long term relationships may reduce

uncertainty and risk (Williamson, 1975, 1979).

10.2.2. Some definitions…

There are three important things to consider when dealing with Supply Chain Risk

Management issues. In fact, the first thing to do is to define the scope of the analysis. SCRM

could of course deal with risks for a single company, or even with the impact on a single

logistics activity. Often it is relevant to think about buyer-seller relationships (a dyad)

throughout the organization (both external and internal processes). Moreover the definitions

have to bring out two important dimensions: risks and uncertainties. Finally definitions have

to give an idea of the risk management process.

• Some emphasizes a broad vision of the Supply Chain

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Other authors emphasize the necessity to get a broad vision when leading supply chain risks

management projects. According to (Christopher and al., 2002), in order to assess supply

chain risk exposures, the company must identify not only direct risks to its operations, but

also the potential causes or sources of those risks at every significant link along the supply

chain.

Recently, a number of writers have sought to move the focus of attention away from

analysing and managing risk at level of individual customers and suppliers and towards the

understanding and management of risk at the level of the entire supply chain (Cousins and al.,

2004; Harland and al ., 2003; Lewis, 2003).

(Harland and al., 2003) recommend that risk management should focus on positioning the

organization to try to avoid such events, and to develop strategies to manage the impact of

them, should avoidance not be possible. However, their supply chain risk model is still at an

early stage of development. They argue that more and better tools are needed to assist in risk

assessment and management at the supply chain level and not just at the level of the

individual firm, though they also acknowledge that it is very difficult to develop such tools.

We will see in the case study an example of such a tool based on a FMEA in order to assist

managers in risk assessment and management.

• Some emphasizes the role of key functions in a SCRM approach

The relationship between many aspects of risk and supply chain management has been well

documented. Often the approach was focused on one component of the supply chain strategy

as “Closer working relationships with suppliers”, “Purchasing partnerships”, “Supplierquality/auditing/certification programmes”, “Supplier improvement programmes”, “Multiple

sources vs single sourcing”, “Strategic alliances” , “Communication and early involvement of

suppliers in strategic decisions”and so on.

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purchasing’s willingness to take risks and to effectively use current knowledge to make

decisions about the future. Carr contends that purchasing proaction includes purchasing

foresight and purchasing’s willingness to initiate change.

Similarly, Smeltzer and Siferd (1998) maintain that managing risk is central to purchasing

management. Perhaps, the most established body of work dealing with risk and industrial

purchasing comes from the work of the IMP (Industrial Marketing and Purchasing) Group

(Ford and al., 2003).

SCRM is a collaborative effort between at least a dyad within internal and external processes.

Moreover SCRM could be seen as the understanding of the short, middle and long term

evolution of every links within the partnering network.

10.3. Supply Chain Risk Management processes

In order to define SCRM processes, we based our analysis on the literature. Indeed (Jüttner

and al., 2003) suggest that it is relevant to distinguish four basic constructs: Supply Chain risk

sources, risk consequences, risk drivers and risk mitigating strategies.

10.3.1. Supply Chain Risk Sources and Risk consequences

(Jüttner and al.) emphasize the fact that among practitioner-oriented risk management

literature and the industrial world as well, the uses of the term”risk” can be confusing owing

to the fact that some associate “risk” with “the potential sources of the risk” and some

associate “risk” with “the potential consequences of this risk”. It the last case it refers to the

potential outcome indicators. In this sense, the terms “operational risks”, “human risks” or

“risks to customer service levels” are consequences of risks becoming events.

We will adopt the definition provided by (March & Shapira, 1987), they define “risk” as “the

December 2007



According to (Jüttner and al., 2003) supply chain-relevant risk sources fall into three

categories: Environmental risk sources, Organisational risk sources and Network-related

sources.

• Environmental risk sources

Environmental risk sources comprise any uncertainties arising from the supply chain-

environment interaction. These may be the result of accidents (e.g. fire), socio-political

actions (e.g. fuel protests or terrorist attacks) or acts of God (e.g. extreme weather or

earthquakes).

• Organisational risk sources

Organisational risk sources lie within the boundaries of the supply chain parties and range

from labour (e.g. strikes) or production uncertainties (e.g. machine failure) to IT-system

uncertainties.

• Network risk sources

Network-related risk sources arise from interactions between organisations within the supply

chain. According to (Das & Teng, 1998), environmental and organisational uncertainties are

the risk sources “to” the various links in the supply chain and network-related uncertainties

are risk sources “of” the various links. There are mainly three types of network-related risk

sources: lack of ownership, chaos and inertia (Christopher and Lee, 2001).

Ö Lack of Ownership

Lack of ownership risk sources in supply chains result from a lack of clear definition of the

boundaries between buying and supplying companies in the chain. The main causes of this

risk are outsourcing and concentration on core competencies and thus a complex network of

relationships. The main consequences are an increase of inventory costs due to product

obsolescence, markdowns.

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Information sharing among supply chain partners can be leveraged through collaboration

between buyers and suppliers. The objective is to build a boundaryless extended enterprise,

where information is transparent and there is a high level of trust and commitment

(Christopher, 2000).

The bullwhip effect, which describes increasing fluctuations of order patterns from

downstream to upstream supply chains, is an example of such chaos. (Lee and al., 1997)

Ö Inertia

This risk is characterized by a lack of responsiveness to changing environmental conditions

and market signal. Even if many firms try to develop responsive and flexible organization

(c.f. Lean and Agile, Leagile supply chain); the risk of inertia is still playing an important role

in the risks landscape. Flexibility is often sacrificed for cost reduction. Consequences can be

an inability to react to competitor moves, shifting customer demand or to any other

unpredicted event arising from environmental or organisational risk sources.

10.3.2. Supply Chain Risk Drivers and Risk Mitigating Strategies

Risk drivers are changes to the structure of supply chains and impact directly on network-

related risk sources. Through the trends of globalisation and outsourcing, the complexity

stages, dynamic network shapes become the reality. The supply network structure describes

lateral and horizontal inter-linkages, reverse loops or two-way exchanges encompassing the

upstream and downstream activities within and among the supply chain organisations

(Lamming and al., 2000). A supply network brings with it risks from all related network

sources, namely uncertainties due to lack of ownership, chaos and inertia (Christopher & Lee,

2001).

We can consider that most of the supply chain disruptions are caused by these drivers, or at

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Avoidance Dropping specificproducts/geographical markets/supplier and/or customer organisations

Control Vertical IntegrationIncreased stockpiling and the use of buffer inventory

Maintaining excess capacity in productions, storage, handling and/or transport

Imposing contractual obligations on suppliers

Information security

Corporate social responsibility

Continual risk analysis and assessment

Co-Operation Joint efforts to improve supply chain visibility and understanding

Joint efforts to share risk-related information

Joint efforts to prepare supply chain continuity plans

Trust among supply chain partners

Aligning incentives and revenue sharing policies in a supply chain

Flexibility Postponement

Multiple sourcing

Localised sourcing

Agility in the supply chain (ability to thrive in a continuously changing, unpredictablebusiness environment)

Strategic risk planning

Table n°1: Risk Mitigating Strategies in Supply Chains (Jüttner and al., 2003)

Finally we can describe here which strategy we will use for the case study. Indeed our

analysis will rather look for organizational and network risk sources than environmental risks.

The main reasons of this choice are that organizational and network risk sources are rather

“internal” supply chain risk sources. Therefore, we will be focused on the optimization of

these “internal” processes and then after it is relevant to look for environmental risk sources.

December 2007



Organizational Risk Sources

Environmental Risk Sources

Network Risk Sources

Figure n°14: Diagram representing the scope of the case study

11. How do Lean, Agile and “Leagile” Supply Chain Strategiesaffect Supply Chain Risk Management?

As stated above, our goal is to get a deep understanding of organizational risk sources. In the

case study, we will look at the organization at an operational level. One of the current fads in

operations management practices is to apply “lean, agile and leagile” methods. An

unprecedented number of companies are pursuing lean management and agility to reduce

costs, improve customer service, and gain competitive advantage.

Owing to (Omera K., 2007) the failure to locate the work on supply chain risk in the wider

literature is most clearly shown by the absence of any discussion regarding its nature, such as

the subjective/objective debate (c.f. 2.4). Therefore in this part we will try to answer this

question: What are the implications of the subjective-objective debate regarding the nature for

development of tools and frameworks for (lean, agile and leagile) supply chain risk

December 2007



significant efforts to diffuse lean principles across their supplier networks over the past

several decades, which have fostered the evolution of a new structure of buyer-seller networks

relationships. Previous studies have shown that much of the competitive advantage enjoyed

by Japanese can be attributed to this new-supplier structure (Womack and al., 1991; Dyer and

Outchi, 1993).

Taiichi Ohno, the founder of the TPS philosophy, believed that the cornerstone of the

implementation of the Lean philosophy was the elimination of wastes. He developed in 1988

a list of seven basic forms of wastes:

1. Defects in production

2. Overproduction

3. Inventories

4. Unnecessary processing5. Unnecessary movement of people

6. Unnecessary transport of goods

7. Waiting by employees

Lean focuses on the elimination of wastes with a bias towards pulling goods through the

system based on demand. Despite the focus on pull several authors note Lean is really amake-to-stock system, reacting to demand signals that typically come from forecasts or next

tier distributors, rather than actual orders. The demand horizons are typically shorter than

non-Lean systems, but the overall supply chain still relies on finished goods inventory.

Lean principles can be compared with mass-production practices that had typically

represented both U.S. and European automotive manufacturers.The key differences between a “lean push” and “mass production push” is that lean typically

relies on a much shorter forecast horizon and an ability to adapt should production schedules

need to be changed Therefore the organization must be able to anticipate accurately the

December 2007



purchasing (MacDuffie and Helper, 1997), accoundting (Ahlstrom and Karlsson 1996), And

even office environments (Hyer and Wemmerlov 2002; Tapping and Shuker 2003).

In order to deepen our understanding of Lean management practices, we will conduct a

comparative analysis of different ways to manage supplier relationships and particularly the

role of suppliers’ development team between Lean practices and mass-production practices.

The interdependences that exist within the supply networks of every firm involve managing

effectively the relationships with the partners. This represents significant technical and

organizational challenges.

• Supplier relationship management in a mass-production context

To summarize, supplier relationships management in a mass-production context is a zero-sumgame, where each entity of one of the supply networks evolve independently.

In that context, firms believed that having a broad supplier base would offer the firm a

competitive advantage. Indeed they believe that it will encourage more intense competition,

thus enabling to negotiate lower costs and to achieve higher product quality and better

delivery times.

Concerning the mass-production subcontracting system, bargaining relationships are typically

driven by price. In this context, where exchanges of informational flows are sporadic,

suppliers offer a price below their actual cost, only to ask for a cost adjustment later from

their customers. They are generally unwilling to expose to their customers any information

about their own costs and profits. Moreover there is a lack of operational vision from both

parts. There is no relevant information exchanged concerning production operations and

capabilities. The information exchanged concerns mainly the prices of the components.

The buyer-seller relationships in a mass-production context could be described as

December 2007



knowledge on risks. Therefore, it will be necessary to ask more knowledgeable individuals in

order to draw a “relevant picture” of risk sources. Moreover these knowledgeable individuals

have only a good vision of their processes and often they have no vision on how their

processes are linked to the other ones in a given supply networks. Thus they have not a good

vision on what we call before Network risk sources.

Even if we make a special effort to identify these subjective risks, the tools and frameworks,

which we will develop to manage efficiently supply chain risks, will be less effective than

tools develop in a Lean context. Indeed Risk Management tools and frameworks must be

supported by an effective operational strategy.

• Supplier relationship management in a Lean context

In contrast with conventional mass-production manufacturers, Lean context is a win-win

game.

In a Lean context, the supply network is better organized. Each entity in the supply network

keep much smaller supplier bases and adopts single or dual sourcing purchasing policies. The

supply network is also organized throughout a multi-tiered hierarchy structure. In this multi-

tiered hierarchy structure there are, at the moment, two different entities: the first-tiers

suppliers and the other ones (2nd, 3rd …tiers suppliers). Indeed in several industries, first tiers

suppliers are getting involved in real collaboration relationships where risks and rewards are

shared throughout the entire supply network. Second and third tiers suppliers try to reach

these objectives but in many industries we are far from it.

First-tier suppliers are usually equipped with excellent technological capabilities and are

assigned full responsibilities for designing and manufacturing a whole subsystem, rather than

discrete parts that are later assembled into finished sub-products. Moreover OEMs authorize

December 2007



production forecasts enable to implement a relevant proactive philosophy. This clear

definition of rules and mutual assistance enable to enhance efficiency, quality and

productivity in the supply chain. Concerning a new product introduction context, suppliers are

involved in the product development at a very early stage. In order to have a better

understanding of new product introduction challenges, we can quote authors that have

develop theories concerning ESI (Early Supplier Involvement) projects (Balasubramanian&

Baumgardner, 2004; Barata 2004; Burkett (2006); Calvi & Le Dain, 2007; Fujimoto, 1995;Zsidisin & E. Smith, 2004)

Risk sharing partnership

The risk sharing partnership is mainly based on trust. Suppliers are often required to make

investments in equipment or facilities dedicated to a specific customer only. Theseinvestments can be risky for the suppliers, because they are expensive, tailored to only one

customer and sometimes of no use outside the transaction with this specific customer. That

explains closer relationship between the customer and its suppliers. Both parts can’t easily

walk away from this relationship. For instance in this type of customer/supplier relationship

there are exchanges of competences, customers have guest engineers from its suppliers andthey also transfer its own employees to supplier sites. There are also changes in the inventory

policy; many firms try to make their suppliers the owners of the stock, that’s the VMI

(Vendor Management Inventory) policy. These practices enable to share risks and to stabilize

processes within dyadic relationships (OEM/1st tiers).

Supplier Development activity: The Supply Relationship conductor

In a context where organizations have developed collaborative relationships with other

entities of a given supply chain it is necessary to dedicate resources in order:

December 2007Ö To have a better understanding of suppliers capability and processes (Human



Resources Management, Continuous Improvement policy, Client orientation,

Suppliers Management, (Informational & Material) Flows Management, Operations

Management, Change Management and so on).

Ö To support risk identification, risk estimation, and risk response planning and

execution activities.

However the approaches to supplier development are driven by the individual company’s

purchasing and supplier-relation management philosophy and therefore differ from company

to company. Nevertheless we can find some trends concerning this fact.

For instance Toyota philosophy is driven by a “life-long” partnership. All the partners

(suppliers and customers) are treated as part of Toyota. Thus, Toyota should make the

sufficient efforts to raise the performance of its partners. This philosophy not only established

supplier’s long-term loyalty and identities as members of the Toyota family but also laid out

the foundation of Toyota’s various supplier development processes and organizations. In this

context, risk sharing practices are built on strong relationships between the entities of a given

supply network.

Indeed developing supplier capabilities requires huge investments in time, labour, and money.

In order to avoid unnecessary waste and ensure the effectiveness of supplier development

activities, it is important that the customer company should establish its supplier development

approaches to ensure that its activities are consistent with the company’s overall supplier

management philosophy and business strategies.

There are two important things to define for the implementation of supplier development

activities:

The Role of this department

Its place within the entire organization

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11.1.2. Agile philosophy

Agile systems focus is on flexible, efficient response to unique customer demand. It uses a

Make-To-Order environment for manufacturing and order fulfilment. Instead of relying on

speculative notions of what might be demanded, the quantity of demand, and the location of

that demand, agility employs a “wait-and-see” approach to demand, not committing to

products until demand becomes known. Naylor, Nairn, and Berry (1997) suggest that the agile

company is one that uses market knowledge and a virtual corporation to exploit profitable

opportunities in a volatile marketplace.

Key to providing agile response is flexibility throughout the supply chain. In manufacturing,

this would call for the agility to produce in large or small batches, minimizing the efforts due

to setups and product changeovers, often cited as a critical component of lean manufacturing.

Agility might also call for a flexible workforce with members cross-trained.

Beyond the capabilities of the focal firm, the rest of the supply chain must be responsive as

well for agile market accommodation. That supposes to have open and frequent information

sharing among the partners.

11.1.3. Leagile philosophy

In many cases it is difficult to apply a pure Lean strategy or a pure Agile strategy to an

industrial environment. Hybrid strategies of the lean and agile strategy play thus an important

place. It is necessary to have a good understanding of the leagile strategy in order to develop

relevant tools and frameworks for supply chain risk management.

There are two important hybrid leagile strategies:

Ö The first hybrid approach embraces the Pareto (80/20) rule, recognizing that 80% of

a company’s revenue is generated from 20% of the products. It is suggested that the

December 2007

th d di t d t ll b t h li ith i k f t h i t



others are dedicated to small-batch lines with quick, frequent changeovers in support

of the slower-moving items.

This strategy consists in using a make-to-stock (lean) policy for high volume, stable

demand products, and make-to-order (agile) policy for low volume, unstable demand

products.

Ö The second one hybrid leagile strategy is based on postponement strategies. Form

postponement refers to delaying the final form of a product until an order is receivedfrom customers dictating the quantity and qualities of the goods demanded (Feitzinger

and Lee 1997; Zinn and Bowersox, 1988).

This strategy supposes to make all the departments work together, from early

design to outbound logistics activities.

11.2. What are the implications of the subjective-objective debate regarding the

nature for development of tools and frameworks for (lean, agile and

leagile) supply chain risk management?

The purpose of this part is to explain which risk management approach will be interesting to

apply according to the nature of the environment in which the scope of the analysis evolves.According to us, having a good understanding of the operation management strategy is the

key when developing tools and framework for supply chain risk management.

The aerospace industry tries to implement Lean, Agile or Leagile strategies in order to face to

ramp-up production challenges and volatile environments. Therefore it will be interesting to

know which supply chain risk management approach we have to use in each context (Lean or

Agile).

There are three important concepts that we have to consider in the early phases of a supply

chain risk management project:

December 2007

In a Lean context the environment is more stable than in an agile context Thus it will be



In a Lean context, the environment is more stable than in an agile context. Thus it will be

easier to build prevention plans in a lean context. Agile strategies ask for more flexibility inboth operation and risk management practices.

Event DatePrevention Contingencyplanning

UrgentRecoveryActions

Room for manoeuvre

High

None

Time remaining to milestone target

Long Manageable Short

LEAN

AGILE

Figure n°15: Risk management approaches

Moreover, there are two key concepts in a Lean environment: Standardization and multi-

tiered supply network. According to this, we can see one entire supply chain as a recursive

relationship. Indeed if we consider that the relationship between the OEM and the tiers 1 are

described by a set of processes, rules and best practices: Xn, thus we can assume that the

relationship between tiers 1 and the tiers 2 can be described by almost the same set of

processes, rules and best practices at a lower rank: Xn-1. Therefore it will be interesting to

build supply chain risk tools and frameworks based on a succession of dyadic relationships.

On the other side, an agile context asks for more flexibility. Therefore it is more difficult to

have a proactive behaviour in risk management issues. Furthermore, a lack of standardization

December 2007

We can describe briefly the decision diagram in order to build SCR tools regarding the



We can describe briefly the decision diagram in order to build SCR tools regarding the

objective/subjective debate.

Are the BestPractices

implemented?

Are the BestPractices

implemented?

Definition of thescope

Definition of thescope

Yes

No

Definition ofobjectives

Definition ofobjectives

Supply Chain ModellingSupply Chain Modelling

Process AnalysisProcess Analysis

Business ProcessReengineering

Business ProcessReengineering

Identification of the deviationsfrom the Best Practices

Brainstorm possible risks

Subjective

Objective

Figure n°16: Decision Diagram to build SCR tools

In an agile environment the subjectives risks play an important place. 40% of the identified

risks could be considered as subjectives. Therefore it is important to forecast the organization

evolution and to identify what has gone wrong in similar projects previously, if it is possible

(That corresponds to objective risks identification). Concerning the identification of subjective risks, the team project must work closely with knowledgeable people. Ideally the

team project must work with multi-functional teams that have a broad vision of the operations

(from the shop floor to the Director’s offices)

December 2007

Organizations must be focused on the “cornerstone” in order to support a supply chain risk



Organizations must be focused on the cornerstone in order to support a supply chain risk

management approach by effective operations practices.

12. Conclusion

The objective of this part was to establish relevant state-of-the-art definitions concerning risk

management issues applied to supply chain management projects. Moreover we bring out the

prerequisites in order to build tools and frameworks to manage supply chain risks. The

subjective/objective debate concerning supply chain risk management is an ongoing one and

it shows us that having a good understanding of the differences between these two types of

risks could help us when trying to implement supply chain risk practices in a Lean, Agile, or a

hybrid environment.

Our scope is mostly operational risks sources. We will present in the following case study, the

methodology and the frameworks used to build a supply chain risk management tool. We

have identified and estimated mainly operational risks sources that can affect quality and

delays in a given supply chain that is moving from a mass-production environment to a lean

environment.

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Part 3:

Case Study:

Building tools and

Frameworks to manage

Supply Chain Risks at an

aircraft manufacturer:

Implementation of a FMEA*

December 2007

13. Introduction



14.

In this part we will describe how we have implemented a risk management tool at the

Procurement division of Airbus France. After a brief presentation of the context, that enables

to bring out the evidence that it is necessary to implement proactive management practices,

we will present the mythology used during this supply chain risk analysis project. Finally we

will present our solutions that integrate the subjective/objective debate concerning risk

identification management.

A project to implement proactive management practices

Ramp-up production and costs reduction projects are playing an important role in the

challenges that Airbus has to deal with. In order to face to these challenges, Airbus has to put

many efforts to stabilize and standardize processes across its several entities. Airbus has, not

only, to lead these projects throughout its five main manufacturing sites (France, Germany,

U.K., Spain and recently China), but also throughout its several supply chains (the Airbus’

supply network).

Indeed approximately 80% of an Airbus’ aircraft is bought. Therefore these ramp-up and cost

reductions challenges must be solved at the supplier network level.

Nowadays suppliers’ challenges are mainly the following:

• Rationalization of the supplier’s panel (identification of the tiers 1, tiers 2, tiers 3 and

so on)

• Reducing risks when supplying products from the supplier to an Airbus factory or to a

Final Assembly Line (FAL). The objectives are to reduce delays and increase quality.

• Building strong relationships in order to implement LEAN practices throughout the

entire supply network

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14.1. A380 project delays: An evidence of the necessity to build a proactive

Supply Chain Management philosophy



Supply Chain Management philosophy

The recent delivery delays of the Airbus A380 are the evidence that the aircraft manufacturers

have to implement relevant industrial methods in order to perform in their industry. These

delays are only the “hidden part of the iceberg”. Indeed there are several difficulties that

Airbus has to deal with. To make it simple, these difficulties could be solved by moving from

a reactive management philosophy to a proactive management philosophy.

The main difficulties that Airbus is dealing with are the following:

• Collaborative efforts, such as conducting Business Process Reengineering operations

at the Suppliers’ place, were triggered when Airbus’ logistic, manufacturing,

purchasing or quality departments had detected problems with one supplier (That

corresponds to a reactive philosophy). Business Process reengineering efforts must

follow a proactive philosophy

• Trust is one of the keys in managing suppliers’ relationships. However it is not

sufficient to manage efficiently these relationships. Indeed relevant metrics must be

implemented in collaboration with suppliers and the several departments who need to

monitor suppliers’ performance

• Helping the suppliers to implement supply chain best practices in order to get

harmonized processes between suppliers

However, before trying to implement supply chain best practices at the suppliers’ place

and to harmonize processes within the suppliers’ panel, it is urgent to analyze what is

done “in-house”. Indeed the origin of Airbus Industry stems from an alliance of four

industrial entities (c.f. part 1). This particular organizational framework is a source of lack

December 2007

• Concerning CAD tools: There is lack of harmonization of CAD tools between

departments



• Concerning supply management practices: There is a lack of common tools to assess

the suppliers’ performance.

14.2. A team focused on building strong supplier relationships: the Supplier

Development Team

The supply chain risk analysis has been conducted in the Procurement division of Airbus

France and particularly in the Supplier Development Team (PMQA; P: Procurement, M:

Material and Airframe, Q: Quality and Supply Chain, A: France). The procurement division is

in charge of buying and supplying products and services. They have to be constantly focused

on the triptych: Cost, Delays, and Quality.

Therefore the Procurement division is in charge of the definition of the Supply Chain

objectives and the implementation of the Supply Chain projects. According to Quality,

Logistics and Manufacturing needs, they must conduct Business Process reengineering

projects throughout the entire Supply Chain.

The procurement division could be divided into three parts:

Procurement

Services Equipments Airframe &Aerostructure

The Airframe & Aerostructure division has to deal with the following products:

• WorkPackages

• Casting products

Aircraft Door

December 2007

The project has been conducted in the department that was in charge of managing the



“Airframe& Aerostructure” area. The suppliers’ panel encompasses approximately 1200suppliers. The Supplier Development team is in charge of leading continuous improvement

projects at Airbus international strategic suppliers. The quality of the products delivered will

be thus better and the On-Time Delivery indicator will be better too. Therefore, thanks to

these costs reductions, Airbus will buy these products at a lower price. There is a Supplier

Development Team in the Equipment division (who is in charge of managing products suchas: engines, seats, electronic devices, etc…), but their way of managing suppliers

relationships are different.

A purchasing manager of one the commodities is in charge of assessing and improving the

performance of its suppliers’ panel. To do so, he/she works closely with a quality and a

logistic manager. The internal clients of the Supplier Development Team are these triptyches:Purchasing, Quality and Logistic Managers.

When one of the members of this triptych detects problems (quality or delays) he asks the

supplier development team to solve the problem. That corresponds to a reactive management

philosophy.

To improve both criteria (quality and OTD), the supplier development team conducts

industrial diagnosis at the suppliers sites. In order to conduct these industrial diagnosis, they

use a four steps methodology. First they lead a Process analysis to have a better understanding

of the current organisation status. Then a strategy is elaborated to reach new relevant

objectives. According to this strategy a Business Process Reengineering is realized thanks to

several Lean tools as Value Stream Mapping, 5S, Total Quality Management and so on.

Finally key points of the action plan must be regularly evaluated.

The objectives of these industrial diagnosis are:

T d f t i t Th t ld ti ti f i it ld

December 2007failures earlier in the supply chain and to avoid this “domino effect”. Indeed the closest the

failure to the customer is identified, the most important the impacts are, and particularly on



cost. Therefore it is obvious that moving from a reactive management philosophy to aproactive philosophy is the cornerstone of this supply chain risk management project.

Moreover in our analysis we have to distinguish two different environments: The Serial

Production environment where processes have already reach an interesting level of maturity

and the NPI/NPD environment (New Product Introduction and Development).

Our two main objectives are the following:• Defining accurately what we call supply chain only in a Serial Production context

• Building pragmatic tools to manage supply chain risks and thus implementing a

proactive management philosophy

15. Methodology

In the following section we will describe the methodology used to conduct this project. The

main difficulties are to define an appropriate scope, to understand the existing risk

management processes and to implement our results in a constantly evolving organization.

15.1. Integration phase into the Supplier Development Team

The first step of this project was to understand the environment in which we will conduct this

supply chain risk analysis. Therefore we have analyzed the core competencies of the Supplier

Development Team.

These are:

• A capacity to implement continuous improvement methodologies at the suppliers’

place

A it t d t B i P R i i j t

December 2007

15.1.1. Supplier Development processes

The main supplier development processes could be described by the following figure:



The main supplier development processes could be described by the following figure:

Airbus’ ProcurementStrategy

Supplier’s Development StrategyCommunication Policy

Current status Future statusAction Plan

Diagnosis

Strategy

Reengineering

Figure n° 1: Supplier Development processes

• A diagnosis is first realized in order to know the current status of the organization. The

purpose is to bring out a clear picture if the organization. This diagnosis is based on

the following topics :

Ö Human Resources Management

Ö Warehouse, in bound and out bound logistics

Ö Manufacturing management

Ö Maintenance

Ö Informational and Physical flows, planning activities, load/capacity

analysis

Ö Sourcing and order management

Ö Customer orientation

Ö Continuous improvement

Ö Process Improvement and Monitoring

• The supplier development team analyzes the strategy of the firm They try to improve

December 2007

15.1.2. An example of an industrial Diagnosis

During this project I participated in one industrial diagnosis in order to start to collaboratively



During this project I participated in one industrial diagnosis in order to start to collaboratively

work with one supplier and to make a first diagnosis of the organization. Our internal client

was the purchasing department that is now trying to rationalize the suppliers’ panel.

Therefore, it was necessary to get a better understanding of this interesting supplier

organization in order to know if they can work with Airbus and thus face the following

challenges:

• Ramp-up production

• Implementation of Supply Chain Best practices in collaboration with Airbus

15.2. Understanding the clients needs of the project

Our purpose is to move from a reactive supplier management philosophy to a proactive

supplier management philosophy. Indeed supplier development mission were triggered when

a supply chain risk occurred. The organization has developed a relevant reactivity. This

reactive philosophy is also a good thing in a fast evolving environment. However if we want

to reach the upper level that will enables to get a competitive advantage, a proactive

management philosophy must be implemented.

We will try to develop supply chain risk management tools and frameworks:

• To clarify the supply chain concept in order to harmonize processes

• To provide the clients’ project a simple tool that enables to prevent the organization

from supply chain risks and to work in advance with suppliers to mitigate risks

One of the biggest difficulties in this project is that the Airbus’ procurement organization is

now constantly evolving. For instance, the supplier development team will not exist in the

future organization. The executives put forth an organization were “Field Engineers” will

December 2007

• to know what have been already done concerning this project

• to communicate our solutions



15.3.1. Theoretical approach

In parts one & two, we have provided a strong theoretical background in order to have a deep

understanding of the project.

The purpose was:

• To understand the current state of the aerospace industry and the place that our client

Airbus is playing there

• To present the evolution of this industry in order to know the future context in which

our project will be implemented. The objective was to bring out the main stakes that

Airbus will have to deal with; This step corresponds to a proactive philosophy

• To get the recent state-of-the art concepts concerning the management of risks in a

supply chain. This steps enables to bring out the research areas that haven’t been

really investigated and also to use best practices, if any

As stated above, the main difficulties in that kind of projects are to know what have been

already done (in the organization and in the academic environment).

We have worked with the Quality department in order to understand the procedures used to

manage risks. Here, we have a short list of the procedures:

• AP2186 Procured Products and Services Risk Management (The most

important)

• AP 2131 (Module 2) Sourcing market evaluation

• AP2190 General Requirements for Aerostructure & Material Suppliers

• AP2131 (Module 6) Order and receipt products

December 2007

Airbus procedures present how risk management could integrate a sequence of activities in



the purchasing process.

Risks

identification

Supplier sites auditand Risks

Risksestimation

Risk Management Activities

Risks

identification and Management

Supplieridentification RFI RFP/RFQ Shortlist

SupplierSelection

Product Designand Development

Mature productmanufacturing

1. Creation of the register andregistration of risks 2. Registration of

identified risks3. Registration ofidentified risks

4. Registration of further Risks tofuture supply

Risk Action Closure Report

Supplier review record

Risk register update

Supplier Selection process

Our scope

Figure n°2: A sequence of activities in the purchasing process

15.3.2. Define a common supply chain framework

In order to define the scope of the project and to provide a common supply chain framework

expressed in the same language, we have used a business process modeling tool: The IDEF

tool (Integrated DEFinition Modeling technique). In order to provide a common supply chain

framework, we have used the SCOR model (c.f. Part 2) and we have implemented at the same

time the MRP II philosophy (Manufacturing Resource Planning).

December 2007To model our supply chain framework we mostly used IDEF3. We can present here a generic

IDEF0 diagram.



Function or ActivityFunction or Activity

Control

Mechanism

OutputInput

Figure n°2: IDEF0

Concerning IDEF3, this language appeared as a response to new needs in the enterprise

modeling domain. This model could help for a process flow description. In that case, the

process knowledge captured with IDEF3 is organized with a scenario. The basic IDEF3 unit

in this case is an UOB (Unit Of Behaviour). UOBs may become functions, activities,

processes, etc. An UOB may be decomposed in other UOBs and may also be cross-referenced

with IDEF0 activities.

A process flow diagram is shown in the following figure.

December 2007operations management processes. That means that our point of interest is operations

management, but we will try to describe the links between manufacturing operations with



sourcing, inbound and outbound logistics.Why have we decided to do so?

Our goal is to set up proactive management tools thanks to a risk management approach.

However a risk management approach is not sufficient. Indeed a risk management

approach must be supported by a relevant operations management philosophy that

enables to implement at both a strategic and operational levels a proactive philosophy.According to us the MRP II (Manufacturing resource Planning) is the best practice to achieve

our goals.

MRP is a calculation method

that gives what we need to

manufacture the products.

MRPII is a business approach

to decide and plan what to

produce. It’s a real decision-

making tool. The strategic

business plan incorporates the

plans of marketing, finance,

and production. Marketing

must agree that its plans are

realistic and attainable. Finance must agree that the plans are desirable from a financial point

of view, and production must agree that it can meet the required demand. The manufacturing

planning and control system, as described here, is a master game plan for all the departments

in the company This fully integrated planning and control system is called the MRPII The

Business Plan

Sales & Operations

Plan

Master Production

Schedule

Material Requirement

Planning

Production Activity

Control

Resources Requirements

Plan

Rough-Cut Capacity

Plan

Capacity Requirements

Plan

Input / Output Control

Order Entry

&

Promise

Forecasts

to suppliers

Purchase

Orders

Step by

step

planning

Step by

step

planning

Step by step

capacity

check

Step by step

capacity

check

MRP

Figure n°4: MRP II system

December 2007“There are two key concepts in a Lean environment: Standardization and multi-tiered

supply network. According to this, we can see one entire supply chain as a recursive



relationship. Indeed if we consider that the relationship between the OEM and the tiers 1 aredescribed by a set of processes, rules and best practices: Xn, thus we can assume that the

relationship between tiers 1 and the tiers 2 can be described by almost the same set of

processes, rules and best practices at a lower rank: Xn-1. Therefore it will be interesting to

build supply chain risk tools and frameworks based on a succession of dyadic relationships.”

Therefore in that case study, we will try to describe the dyadic relationship between the OEM(Airbus) and a tier 1.

15.3.4. Conduct interviews to identify objective and mostly subjective risks

Once, the supply chain framework has been defined thanks to many interviews. Our goal was

to identify risks.As we explained in part 2, for a given step of the process there are objectives risks and

subjectives risks. Therefore objectives risks were considered as a deviation from the best

practice.

For instance one of the process functions that we described was: “Define the vision and set a

mission statement with hierarchy of goals”. Thus we identified the objectives risks as a

deviation from this process function, as illustrated in the table below.

After that, in order to identify subjective risks, we have conducted several interviews with our

clients and knowledgeable people from:

• Quality Management

•

Purchasing Management• Logistic Management

• I.T. management

December 2007

Moreover after each diagnosis the Supplier Development Team write a report concerning one



industrial diagnosis at the supplier. These documents were a good source of subjective risks.

Process Function/ Requirements Potential Effect(s) of FailurePotential Failure Mode: RISKS

A1.1Define the vision and set a mission

statement with hierachy of goals

The SC vision is not defined Supply Chain executives have no vision onhow the Supply Chain should operate in order

to compete

The Business Strategy is not operationalizedand supported

There is no long-term vision, therefore it willbe difficult to reach the business objectives

This lack of vision affect not only the companythat doesn't make the effort to build this visionbut also all the stakeholders of the entire supply

chainThere is no mission statementwith hierarchy of goals

SC executives don't know which area they haveto improve firstly

The project management tools developed toanalyse the current state of the organization arenot relevant

The SC strategy is notconsistent with the Businessstrategy

Business strategy is not executed through theoperational components of a company

Inability to respond the customer ever-changingrequirements: Develop flexibility andresponsiveness

Confusing or conflicting communications to theorganization where objectives may becontradictory

Deviations

15.3.5. Building a Risk Management tool: FMEA

We decided to use a famous risk management tool: a FMEA (Failure Mode and Effects

Analysis) In FMEA Failures are prioritized according to how serious their consequences are

December 2007In most formal systems, the consequences are then evaluated by three criteria and associated

risk indices:



• Severity (S ),

• Likelihood of occurrence (O), and (Note: This is also often known as probability (P))

• Inability of controls to detect it ( D)

The overall risk of each failure would then be called Risk Priority Number (RPN).

RPN = S × O × D. The RPN is used to prioritize all potential failures to decide upon actions

leading to reduce the risk, usually by reducing likelihood of occurrence and improving

controls for detecting the failure.

We have only defined the severity of the risks. To do so, we defined the following grid:

Severity

12 Very High: The failure is identified at the Final Assembly Line. The

organization is not willing to implement Supply Chain Best Practices at all. It

could affect the delays (> 45days)

9 High: The failure is identified at the OEM' site. The organization is willing to

implement Supply Chain Best Practices but there are no resources (human and

financial). It could affect the delays (< 45days)

4 Low: The failure is identified at the supplier' site. The organization is

implementing Supply Chain Best Practices, but there is no strong collaboration

with the suppliers’ network. It could affect the delays (< 15days)

1 Minor: The failure is identified far from the Final Assembly Line (Early

Development phase, Contract Negotiation, etc). The organization is

implementing some Supply Chain Best Practices and collaborates strongly with

December 2007

16. Results



16.1. Supply chain processes

Thanks to the SCOR model, the MRP II philosophy we decided to describe the supply chain

framework as illustrated in the following figure.

Make A5 Deliver A6Supply A4

Plan Supply A2 Plan Make A2 Plan Deliver A3 Plan Supply A7

Plan Supply Chain A1

AIRBUSAIRBUSSUPPLIERSUPPLIER

Supply A8

The model could be found in the appendix 2.

16.2. FMEA

The FMEA could be found on attachments of this report in Excel format. We decided to add

two columns to the FMEA framework. Indeed we decided to bring out the Input and theOutput of the processes. The most important is the input. That could be a source of risk.

Indeed if we need a given input to realize a function, and if this input is not existing or awry,



December 2007

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December 2007

19. Web links

Airbus www airbus com

http://www.airbus.com/




Airbus www.airbus.com Boeing www.boeing.com Composites bring Boeing's buyers, engineers and parts suppliers closerhttp://www.purchasing.com/article/CA6419134.html Environment, Safety, and Health considerations-Composite Materials in the Aerospace

Industryhttp://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19950016608_1995116608.pdf

La filière composite à l'Aérospatialehttp://www.w3architect.com/static/people/fgaillard/these/Aa-FiliereCompo.html

L’industrie française des matériaux compositeshttp://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf

December 2007

20 Appendixes


http://www.boeing.com/

http://www.purchasing.com/article/CA6419134.html

http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19950016608_1995116608.pdf

http://www.w3architect.com/static/people/fgaillard/these/Aa-FiliereCompo.html

http://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf

http://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf

http://www.w3architect.com/static/people/fgaillard/these/Aa-FiliereCompo.html

http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19950016608_1995116608.pdf

http://www.purchasing.com/article/CA6419134.html

http://www.boeing.com/



20. Appendixes

20.1. Appendix 1: State of the art definitions

State-of-the art definitions: RISK

TopicRisk

DefinitionRisk and

UncertaintyRisk

management

Author

APM PRAMGuide

x (2004)

Berntein x (1996)

Dickson x (1989)

Fone and Young x (2000)Frosdick x (1997)

Frosdick x (1997)

Grose x (1992)

Hood andYoung

x (2005)

Kähkönen x (2007) x (2007) x (2007)

Kendall x (2003)

Knight x (1921) x (1921)Lowrance x (1980)

March andShapira

x (1987)

Mitchell x (1999)

Moore x (1983)

Parr x (1997)

PMI PMBOK x (2004)

Rowe x (1980)Schtub et al. x (1994) x (1994)

Simon et al. x (1997)

Slack and Lewis x (2001) x (2001)

Snider x (1991)

December 2007

State of the art definitions: Supply Chain Management (1/3)



State-of-the art definitions: Supply Chain Management (1/3)

TopicRisk and

Purchasing

Riskconcerning

therelationship

betweenSupplier

andCustomer

Supply chainrisk

management

Transparencyinformation

Lean, Agile& Leagile SCmanagement

& Risk

Management

Risk:Objective vsSubjective

phenomenon?

Author

Antonette et al. x (2002) x (2002)

Bernstein x (1996)

Burnes and Dale x (1998)

Burnes and New x (1996)

Cachon & Fisher x (2000)

Carr and Smeltzer x (1997)

Chopra & Sodhi x (2004)

Christopher x (2000) x (2000)

Christopher & Towill x (2001) x (2000)

Christopher et al. x (2004)

Cousins and Pekman x (2003)

Cousins et al. x (2004) x (2004)

Eisenhart x (1989)

Ericson x (2001)

Faisal x (2005)

Faisal, Banwet &Shankar

x (2005) x (2006)

Feldman andCardozo

x (1975)

Finch x (2004)

Ford x (1980)

Frosdick x (1997)Gadde andHakansson

x (2001)

Giunipero & Pearcy x (2000)

December 2007


Risk



TopicRisk and

Purchasing

Riskconcerning

therelationship

betweenSupplier

andCustomer

Supply chainrisk

management



& RiskManagement


phenomenon?

Author Hollweg x (2002)

Jiang, Baker &Frazier

x (2007)

Johnson x (2001)

Karjalainen and al. x (2003)

Kendall x (2003) x (2003)

Khan & Burnes x (2007)

Koh x (2004)Koh and Saas x (2004)

Kraljic x (1983) x (1983)

Landmark x (1960-70)

Larson &Kulchitsky x (1998)

Lee et al. x (1997) x (2000)

Lengnick-Hall x (1998)

Levitt x (1965)Lewis x (2003) x (1999)

Lupton

Macintosh x (2002)

MacKinnon x (2002)

Mariotti x (1999)

Mason-Jones andal. x (2000)

Mentzer and al. x (2001)

Mitchell x (1995) x (1983)

Moore

Naylor and al. x (1999)

Naylor Nairn and

December 2007


Risk



Riskconcerning

therelationship

betweenSupplier

andCustomer


& RiskManagement


phenomenon?

Supply chainrisk

management


Risk andPurchasing

Topic

Author

Singh & Gomez-Meija x (1998)

Sinha, Whitman &Malzahn

x (2004)

Smeltzer andSiferd

x (1998)

Souter x (2000) x (2002)

Spira and PageStratton andWarburton x (2003)

x (2000, 2001,2002)

Svensson

Van der Vorst andal. x (1998)

Van Hoek and al. x (2001)

Van Landeghemand Vanmaele

x (2002)

Van-Hoeck x (2000)

Walker & Alber x (1999)

Williamson x (1979) x (1975, 79)

Wind and Webster x (1972)

Wiseman &Gomez-Meija

x (1998)

Womack et al. x (1990) x (1992)Yates and Stone

Zolkos x (2003)x

(2000 2003Zsidisin x (2000 2004)

December 2007

State-of-the art definitions: Lean applications

P d



Productdevelopmentand launch

Officeenvironments

DemandManagement

Logistics Purchasing AccountingTopic

Author/Source

Ahlstrom andKarlsson

x (1996)

Bowersox,

Stank, andDaugherty

x (1999)

Disney, Nairn,and Towill

x (1997)

Goldsby andMartichenko

x (2003)

Hyer andWemmerlov

x (2202)

Jones, Hinesand Rich

x (1997)

MacDuffie andHelper

x (1997)

Tapping andShuker

x (2003)

x (2002)Wu

December 2007

State-of-the art definitions: New Product Introduction



ESI: EarlySupplier

InvolvementTopic

Author/Source

Balasubramanian&Baumgardner

X (2004)

Barata x (2004)Burkett X (2006)

Calvi & Le Dain x (2007)

Carbone x (2007)

Fujimoto x (1995)

IAQG(International

Aerospace Quality

Group)

x (everyyear)

SAP White papercollection

x (2006)

Shister x (2007)

Stevens x (2004)

Twigg x (1996)

x (1998,2000)

Wynstra

Zsidisin & E.Smith x (2004)

December 2007

20.2. Appendix: Supply Chain Framework. IDEF model



Node A1: Plan Supply Chain

A1

Ai b

Used at:

PMQA-SD

Author:

Project: Supply Chain Risk Analysis

Date: 01/09/07 Reader:

Date:

Context:



Node:A1 Title: Serial Production- 1st Tier Suppliers Plan Supply Chain Number: 1/3

Define the vision and set amission statement with

hierarchy of goals

A1.1

SWOT analysis

According to the desired

goals conduct analysis

A1.2

Formulate actions and

processes to be taken to

attain these goals

A1.3

Implementation of the

agreed upon processes

A1.4

Monitor and get feedback from implemented processes

to fully control the operation

A1.5

December 2007

Used at:PMQA-SD

Author:Project: Supply Chain Risk Analysis

Date: 01/09/07 Reader:Date:

Context:



Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

2Node:A1 Title: Serial Production- 1st Tier Suppliers Plan Supply Chain Number: 2/3

Assess external situation :

Markets, Competition,

Technology, Supplier

markets, Labour markets,

The economy, The

regulatory environment

A1.1.1

Mission statement :

It tells what the company is

now; it defines thecustomer(s), the critical

processes and the desired

level of performance

Vision statement :

It defines where the

company wants to be. It

provides clear decision-

making criteria.

Make or Buy decision

A1.1.3A1.1.2

Identify Sales

objectives

A1.1.2.2

Identify Sales

objectives

A1.1.2.2

IdentifyInventory

objectives

A1.1.2.3

IdentifyInventory

objectives

A1.1.2.3

IdentifyProduction

objectives

A1.1.2.4

IdentifyProduction

objectives

A1.1.2.4

IdentifyDelivery

objectives

A1.1.2.5

IdentifyDelivery

objectives

A1.1.2.5

Classify the productrange according to

the strategic

objectives

A1.1.2.1

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Internal Analysis External Analysis




3

Node:A1

Title: Serial Production- 1

st

Tier Suppliers Plan Supply Chain

Number: 3/3

Strengths Analysis

A1.2.1

Weakness Analysis

A1.2.2

Opportunities Analysis

A1.2.3

Threats Analysis

A1.2.4

Competitive

Rivalry within theindustry Analysis

A1.2.3.1

Bargaining Power

of suppliers

Analysis

A1.2.3.2

Threat of

New Entrants

Analysis

A1.2.3.4

Bargaining

Power of Customers

Analysis

A1.2.3.3

Threat of

substituteProducts Analysis

A1.2.3.5

Competitive

Rivalry within theindustry Analysis

A1.2.3.1

Bargaining Power

of suppliers

Analysis

A1.2.3.2

Threat of

New Entrants

Analysis

A1.2.3.4

Threat of

New Entrants

Analysis

A1.2.3.4

Bargaining

Power of Customers

Analysis

A1.2.3.3

Bargaining

Power of Customers

Analysis

A1.2.3.3

Threat of

substituteProducts Analysis

A1.2.3.5

December 2007

Node A2: Plan Supply & Make




4

Tier 1Tier 2

A2

Airbus

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Identify Long Term Needs

A2.1

Receive

AircraftProgram

Receive

AircraftProgram

Aggregate

Manufacturing

needs according

Identify

Technical

Requirements

Identify

Technical

Req

uirementsA2.13

Identify

Functional

requirements

A2 14Long Term




5Node: A2 Title: Serial Production – 1st Tier Suppliers Plan Supply & MakeNumber: 1/5

Identify Short Term Needs

A2.6

Receive Demand

Forecast from

Airbus

A2.5

Establish

Demand

forecast

Check the

Demand

historic

Check the

Demand

historicA2.2

Analyze

Trends

A2.3

Analyze

Forecasts

accuracyA2.4

Analyze

Forecasts

accuracyA2.4

&&

Receive Firm

Order

A2.9

Receive

Repair

Needs

A2.7

Receive Spare

Needs

(A.O.G)

A2.8

Identify

back-orders

A2.10

&&&&

Identify Non-

QualityProblems

Aggregate

Manufacturing

needs according

to :

•Products

• Clients

• Factories

A2.12

Identify

Technical

Requirements

Identify

Technical

RequirementsA2.13

Identify

Functional

requirements

Identify

Timing

Requirements

A2.15

IdentifyQuality

Requirements

A2.16

&&&&

Manage configuration

conformity

and DocumentationA2.17A2.11

A2.14

Firm Orders

needs according

to :

•Products

• Clients

• Factories

A2.12

Identify

Timing

Requirements

A2.15

Identify

Quality

RequirementsA2.16

&&&&


conformity

and DocumentationA2.17

A2.14needs

Short Term

needs

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

S&OP Level LONG Term: Every Month (Horizon Plan =1 to 3 years; for Products families)

Business plan

objectives

Coordinating plans of the

i d t t

Resource requirements planningAssess

NPD/NPI

Programmes

A2.22

Assess

NPD/NPI

Programmes

A2.22

&& &&




6Node:A2 Title: Serial Production – 1st Tier Suppliers Plan Supply & MakeNumber: 2/5

&&Compare the actual

demand with the

sales plan

A2.18

Long term needs

various departments

Communicate the updated

marketing plan to manufacturing,

engineering,and finance

A2.19

Manuf acturing, engineering, and

finance adjust their plans to support

the revised marketing plan

A2.20

S&OP

Load / Capacity

Analysis

A2.29

Control the overall

coherence between S&OP

and the strategic business

plan

A2.21

& MPS

&&

Identify critical

materials

A2.24

Identify

bottleneck

operations

A2.26

Assess

Investment

capacityA2.28

Identify critical

labour

&A2.25

Sales/Demand

Plan

A2.23

&& Sales/Demand

Plan

A2.23

&&

S&OP updated from the Forecast

Consumption Analysis

Identify Toolcapacity

A2.27

&

SOP

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

MPS Level Every Week (Horizon Plan =3-6 Months; for End products)

Rough-Cut Capacity Planning

Assess

NPD/NPIProgrammes

A2.38

Assess

NPD/NPIProgrammes

A2.38

&&





&&Forecast demand

for each item in the

product family

A2.30

Short and Long

term needs

Inventory levels

o jectives for individual

end items

b

Production Plan

Devise a preliminary

plan tofit the constraints

A2.33Resolve differences between the

preliminary MPS and capacity

availability

A2.34

MPS

Control the overall

consistency between MPS

and the S&OP

A2.36

& MRP

S&OP

A.O.G

Manage Spare

needs (AOG)

(Urgent Order)

Short Term

&

MPS

Integrate

Customer’s orders

A2.31

Load / Capacity

Analysis

A2.44

&

Identify critical

materials

A2.40

Identify

bottleneck

operations

A2.42

AssessInvestment

capacityA2.43

Identify critical

labour

&A2.41

&&

Identify critical

materials

A2.40

Identify

bottleneck

operations

A2.42

AssessInvestment

capacityA2.43

Identify critical

labour

&A2.41

Sales/Demand

Plan

A2.39

&& Sales/Demand

Plan

A2.39

&&

A2.32

Forecast

Consumption Analysis:

ATP & PAB calculation

S&OP

A2.35

Update the S&OP thanks to

the Forecast Consumption

Analysis

A2.37

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

MRP Level Short term (Horizon Plan= 1 month; for components)

Planning factors: Orderquantities, lead times,

safety stock and scrap

Capacity requirements planning

Alter the load

Identify labour





&&Determine

what, how much

and when to order

A2.45

Short term needs

B.O.M.

Keep priorities

current

A2.46

MRP

Control the overall

coherence between MRP

and the MPS

A2.49

&

Plan Supply

& Plan Make

&&

Load / Capacity

Analysis

A2.54

Identify labour

requirements for each

time period at each

work centreA2.52 &

MPS

Inventory record file: How much

is available, how much is

allocated and how much is

available for future demand

Release orders

A2.47

Check component

availability

A2.48

Identify machine


time period at each

work centreA2.53

00A2.55

Change the

capacity

available

A2.56

A.O.G

Manage Spare

needs (AOG)

(Urgent Order)

Short Term

&

y

capacity

A2.50 &&Identify machine

capacity

A2.51

&

MRP

A2.37

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Plan Supply

Net Needs A2.57

LONG Term

Launch

Load/Capacity

provisional

analysis

Maintaining

l t tCollaborate

i h h

Integrate

NPI/NPD

programs into

supply plans

Improve the

collaboration

with the

suppliers

Communicate

F ti lCommunicate

Q tit

Communicate

P i

A2.58 A2.59




9Node: A2 Title: Serial Production – 1st Tier Suppliers Plan Supply & MakeNumber: 5/5

Plan Make

Risk Action

closure

MEDIUM Term

SHORT Term

&&

Measure

Procurement

Performance

A2.68

Risk

Identification

and Recording

Risk

PrioritizationAction Plan

A2.69 A2.70 A2. 71 A2.72

Set

procurement

objectives

A2.66

Establish

relevant

KPI’s

A2.67

Launch

Purchase Order

Manage

Spare needs

Net Needs

PLAN

EXECUTE

CONTROL

Gather information

needed by the shop

floor

Control order

status

Check tooling

and material

availability

Check capacityrequirements and

availability

(schedule and load)

Choose the most

suitable Dispatching

rule

Rank the shoporders in desired

priority sequence

by work center

Establish a dispatch

list

Release orders to the

shop floor

Weekly input/output

control by

department or work

centre

Gather Exception

reports on scrap,

rework, and late

shop orders

Check Inventory

status

Establish performance

summaries on order

status, work centre

efficiencies

close contact

with Production

activities

with the

suppliers

Functional

requirementsQuantity

requirements

Price

requirements

A2.60 A2.61 A2.62 A2.63

A2.74

A2.65

A2.75 A2.76

A2.78

A2.73A2.77

A2.64

A2.37

A2.79

A2.80 A2.81 A2.82 A2.83 A2.84

&&

December 2007

Node A3: Plan Deliver




10

Tier 1Tier 2

A3

Airbus

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:




11Node: A3 Title: Serial Production- 1st Tier Suppliers Plan Delivery Number: 1/2

Plan OutboundLogistic

A3.1

Establish

Logistic

Strategies

A3.1.1

Reserve Extra

Long Load

(WP only)

A3.1.2

Check

transportation

resources

availabilityA3.1.3

Communicate

transportation

planning

A3.1.4

Monitor

transportation

performance

A3.2

Check

transportation

resources

A3.2.2

Assess

transportation

conditions

A3.2.3

Gather

transportation

documents

A3.2.1

Communicate

transportation

performance

A3.2.5

Monitor

Transportation

KPI’s

A3.2.4

December 2007

Used at:PMQA-SD

Author:



Date:

Context:




12Node: A3

Title: Serial Production- 1st Tier Suppliers Plan DeliveryNumber: 2/2

Plan Delivery

A3.3

Communicate

Delivery

information

A3.3.3

Plan

Deliveries

A3.3.2

Gather Delivery

planning

demandA3.3.1

December 2007

Node A4: Supply




13

Tier 1Tier 2

A4

Airbus

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:




14Node: A4 Number: 1/2Title: Serial Production 1st Tiers Suppliers Supply

Receiv

Raw material

or sub parts

A4.1

eCollect

Delivery

Certificates

A4.2

Authorize

Supplier

Payment

A4.6

Archive

documents

A4.8

Archive

documents

A4.8

Collect

conformity

documents

A4.3

&& OO

Edit Reception

Note

A4.5

Reception

Registration on

ERP

A4.4

Send Raw Mat. or S.P.

to a Control Area

if administrative

non conformityA4.7

&& OO OO

Transfer Raw Mat.

or S.P.

to a Control Area

A4.10

Transfer Raw Mat. or

S.P.

to Warehouse

A4.9

Transfer Raw Mat.or S.P. directly

to the Production Line

A4.11

&&

Control Inventory

obsolescence

A4.12

December 2007

Used at:PMQA-SD

Author:



Context:

Stock In raw

material or S. P.

in Warehouse

A4.13

Stock out from

Warehouse

A4.15




15Node: A4 Number: 2/2Title: Serial Production 1st Tiers Suppliers Supply

Stock In

Registration on

ERP

A4.14

&&&&

Control inventory

obsolescence

A4.17

Stock Out

Registration on

ERP

A4.16

&&

&&

&&

Dispatch

A4.18

December 2007

Node A5: Make




16

Tier 1Tier 2

A5

Airbus

Used at:

PMQA-SD

Author:



Date:

Context:

Sub contractors

products & Raw

Material Transfer

f W h

Stock In

ElementaryParts

A5.5

Stock Out

A5.7



Node: A5

from Warehouse

A5.1

Manufacture

Elementary Parts

A5.2

Manufacture

Elementary Parts

A5.2

Test and Attach

Q-docs

A5.3

Test and Attach

Q-docs

A5.3A5.3

Transfer

A5.4

Transfer

A5.4A5.4

Title: Serial Production- 1st Tiers Supplier Make

Stock In

Registration onERP

A5.6

&&&&

Control inventory

obsolescence

A5.9

Stock Out

Registration onERP

A5.8

&&

&&

&&

Number: 1/2

OO

Transfer directly to

the point of use

A5.10

Elementary parts

transferred to

Sub-assembly

Unit

December 2007

Used at:PMQA-SD

Author:Project: Supply Chain Risk Analysis


Context:

Stock In

Sub-Assembly

A5.14

Stock Out

A5.16




2

Node: A5 Title: Serial Production- 1st Tiers Supplier MakeNumber: 2/2

Manufacture

Sub-Assembly

A5. 1

Test and Attach

Q-docs

1

A5.12

Transfer

A5.13Stock In

Registration on

ERP

A5.15

&&&&

Control inventory

obsolescence

A5.18

Stock Out

Registration on

ERP

A5.17

&&

&&

&&

Dispatch

A5.20

OO


the point of use

A5.19

Transfer Sub-

assembly parts to

Final assembly

unit

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Stock In Final

Assembly

Unit

A5.24

&&&&




3

Node: A5

Title: Serial Production- 1

st

Tiers Supplier Make

Number: 2/2

Test and Attach

Q-docs

A5.22

Transfer

A5.23

Final Assembly

Unit

A5.21

Stock In

Registration on

ERP

A5.25

Control inventory

obsolescence

A5.26

&&OO


the point of use

A5.27



December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Stock out Final

Assembly Unit

A6 2




5

Node: A6 Number: 1/1

Edit DeliveryNote and Q-

DocsA6.1

Title: Serial Production- 1st Tiers Supplier Deliver

Shipment

A6.6

Shipment

A6.6

Prepare Materialfor distribution

(kits, etc…)

Pack Product

A6.5

A6.2

Stock Out

Registration on

ERP

A6.3

&& &&A6.4

December 2007

Node A7: Plan Supply & Make




6

AirbusTier 1Tier 2

A7

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Identify Long Term Needs

A7.1

Receive

Aircraft

Program

Establish

Demand

Check the

Demand

historic

Check the

Demand

historicA 2

Analyze

Trends

A 3

&&

Firm Orders

AggregateManufacturing

needs according

to :

•Products

Identify

Technical

Requirements

Identify

Technical

RequirementsA7.13

Identify

Functionalrequirements

Identify

Timing&&&&

A7.14Long Term

needs




7Node: A7 Title: Serial Production – Airbus Plan Supply & MakeNumber: 1/4

Identify Short Term Needs

A7.6

Receive Demand

Forecast fromAirbus

A7.5

Demand

forecastA7.2 A7.3

Analyze

Forecasts

accuracyA7.4

Analyze

Forecasts

accuracyA7.4

&&

Receive Firm

Order

A7.9

Receive

Repair

Needs

A7.7

Receive Spare

Needs

(A.O.G)

A7.8

Identify

back-orders

A7.10

&&&&

Identify Non-

Quality

Problems

Aggregate

Manufacturing

needs according

to :

•Products

• Clients

• Factories

A7.12

Identify

Technical

Requirements

Identify

Technical

RequirementsA7.13

Identify

Functional

requirements

Identify

Timing

Requirements

A7.15

Identify

Quality

Requirements

A7.16

&&&&


conformity

and DocumentationA7.17A7.11

A7.14

Firm Orders

• Clients

• Factories

A7.12

Timing

Requirements

A7.15

Identify

Quality

RequirementsA7.16

&&&&


conformity

and DocumentationA7.17

Short Term

needs

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

S&OP Level LONG Term: Every Month (Horizon Plan =1 to 3 years; for Products families)

Business plan

objectives

Coordinating plans of the

various departments

Resource requirements planningAssess

NPD/NPI

ProgrammesA7.22

Sales/Demand

Plan

Assess

NPD/NPI

Programmes

A7.22

&& Sales/Demand

Plan

&&




8

Node: A7

Title: Serial Production – Airbus Plan Supply & Make

Number: 1/4

&&Compare the actual

demand with the

sales plan

A7.18

Long term needs

Communicate the updated

marketing plan to manufacturing,

engineering,and finance

A7.19

Manufacturing, engineering, and

finance adjust their plans to support

the revised marketing plan

A7.20

S&OP

Load / Capacity

Analysis

A7.29

Control the overall

coherence between S&OP

and the strategic business

plan

A7.21

&MPS

&&

Identify critical

materials

A7.24

Identify

bottleneck

operations

A7.26

Assess

Investment

capacityA7.28

Identify critical

labour

&A7.25

A7.23A7.23

S&OP updated from the Forecast

Consumption Analysis

Identify Tool

capacityA7.27

&

SOP

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

MPS Level Every Week (Horizon Plan =3-6 Months; for End products)

Inventory levels

bjectives for individual

end items

o

Load / Capacity

Analysis

Assess

NPD/NPI

Programmes

A7.38

Sales/Demand

Plan

A7.39

Assess

NPD/NPI

Programmes

A7.38&& Sales/Demand

Plan

A7.39

&&

Rough-Cut Capacity Planning





&&Forecast demand

for each item in the

product family

A7.30

Short and Long

term needs

Production Plan

Devise a preliminary

plan to

fit the constraints

A7.33Resolve differences between the

preliminary MPS and capacity

availability

A7.34

MPS

Control the overall

consistency between MPS

and the S&OP

A7.36

&MRP

S&OP

A.O.G

Manage Spare

needs (AOG)

(Urgent Order)

Short Term

&

MPS

Integrate

Customer’s orders

A7.31

A7.44

&

Identify critical

materials

A7.40

Identify

bottleneck

operations

A7.42

Assess

Investment

capacityA7.43

Identify criticallabour

&A7.41

&&

Identify critical

materials

A7.40

Identify

bottleneck

operations

A7.42

Assess

Investment

capacityA7.43

Identify criticallabour

&A7.41

A7.32Forecast

Consumption Analysis:

ATP & PAB calculation

S&OP

A7.35

Update the S&OP thanks to

the Forecast Consumption

Analysis

A7.37

December 2007

Used at:PMQA-SD

Author:



Date:

Context:

MRP Level Short term (Horizon Plan= 1 month; for components)

Planning factors: Order

quantities, lead times,

safety stock and scrap

Load / Capacity

Analysis

Capacity requirements planning

Inventory record file: How much

i il bl h h i

00

Alter the load

A7.55

Change the&

Identify labour

capacity

A7.50 &&





&&Determine

what, how much

and when to order

A7.45

Short term needs

B.O.M.

Keep priorities

current

A7.46

MRP

Control the overall

coherence between MRP

and the MPS

A7.49

&

Plan Supply

& Plan Make

&&

A7.54

Identify labour


time period at each

work centreA7.52 &

MPS

is available, how much is

allocated and how much is

available for future demand

Release orders

A7.47

Check component

availability

A7.48

Identify machine


time period at each

work centreA7.53

g

capacity

available

A7.56

A.O.G

Manage Spare

needs (AOG)

(Urgent Order)

Short Term

Identify machine

capacity

A7.51

&

MRP

A7.37

December 2007

Used at:

PMQA-SD

Author:



Date:

Context:

Project: Supply Chain Risk Analysis Date:

Plan Supply

Net NeedsA7.57

LONG Term

&&

Launch

Purchase Order

Load/Capacity

provisional

analysis

Maintaining

close contact

with Production

activities

Collaborate

with the

suppliers

Integrate

NPI/NPD

programs into

supply plans

Improve the

collaboration

with the

suppliers

Collaborate

Functional

requirements

Communicate

Quantity

requirements

Communicate

Price

requirements

A7.58 A7.59

A7.60 A7.61 A7.62 A7.63 A7.65A7.64




11Node: A7 Number:3/4Title: Serial Production AIRBUS Plan Supply & Make

Plan Make

Risk Action

closure

MEDIUM Term

SHORT Term

&&

Measure

Procurement

Performance

A7.68

Risk

Identification

and Recording

Risk

PrioritizationAction Plan

A7.69A7.70

A7. 71 A7.72

Set

procurement

objectives

A7.66

Establish

relevant

KPI’s

A7.67

Manage

Spare needs

Net Needs

PLAN

EXECUTE

CONTROL

Gather informationneeded by the shop

floor

Control order

status

Check toolingand material

availability

Check capacityrequirements and

availability

(schedule and load)

Choose the mostsuitable Dispatching

rule

Rank the shoporders in desired

priority sequence

by work center

Establish a dispatch

list

Release orders to the

shop floor

Weekly input/output

control by

department or work

centre

Gather Exception

reports on scrap,

rework, and late

shop orders

Check Inventory

status

Establish performance

summaries on order

status, work centre

efficiencies

A7.74

A7.65

A7.75 A7.76

A7.78

A7.73A7.77

A7.37

A7.79

A7.80 A7.81 A7.82 A7.83 A7.84

&&

December 2007

Node A8: Supply




12

AirbusTier 1Tier 2

A8

December 2007

Used at:PMQA-SD

Author:



Date:

Context:




13Node: A9 Number: 1/2Title: Serial Production- Airbus Supply

Re e

Raw material

or sub parts

A8.1

ceivCollect

Delivery

Certificates

A8.2

Authorize

Supplier

Payment

A8.6

Archive

documents

A8.8

Archive

documents

A8.8

Collect

conformity

documentsA8.3

&& OO

Edit Reception

Note

A8.5

Reception

Registration on

ERP

A8.4

Send Raw Mat. or S.P.

to a Control Area

if administrativenon conformityA8.7

&& OO OO

Transfer Raw Mat.

or S.P.

to a Control Area

A8.11

Transfer Raw Mat. or

S.P.

to Warehouse

A8.10

Transfer Raw Mat.or S.P. directly

to the Production Line

A8.12

&&

Control Inventory

obsolescence

A8.17

December 2007

Used at:PMQA-SD

Author:



Context:

Stock In raw

material or S. P.

in Warehouse

A8.13

Stock out from

Warehouse

A8.15




14Node: A9 Number: 2/2Title: Serial Production- Airbus Supply

Stock In

Registration on

ERP

A8.14

&&&&

Control inventory

obsolescence

A8.17

Stock Out

Registration on

ERP

A8.16

&&

&&

&&

Dispatch

A8.18

RapportPFE Airbus QuirinoBarbosa 210108

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