Airbus has set up special intervention programmes with its suppliers to ensure that the demands of production ramp-up do not translate as late deliveries. Airbus COO Günter Butschek explains the process to Will Stirling.
Airbus has a problem, but a nice one. The aircraft maker has an order backlog for nearly 4,500 aircraft. Its A320 family aircraft is the world’s most popular single aisle aircraft, with over 8,500 sold. Earlier this year, production rate hit 42 aircraft, the highest production rate for a commercial aircraft ever. And with other aircraft, like the giant A350 also in high demand the pan-European company is in full ramp-up mode.
Like any big manufacturer, Airbus looks for opportunities in productivity and performance improvement while limiting additional capex.
“We always hold the supplier accountable but we offer our support and we even make our support mandatory if required” Günter Butschek
Therefore much of the burden of ramp-up falls on Airbus’s suppliers. Acutely aware of this, and of the almost irreplaceable status of certain key suppliers, Airbus works closely with them to ensure it hits delivery targets.
Günter Butschek, chief operating officer of Airbus, explains how the company thinks. “We have intensive discussions with our suppliers to make sure that they fully understand their own technical capacity framework and, within this framework, their production improvement opportunities.
“After all,” he continues, “we would like to see some benefit from this volume increase. If our suppliers just automatically translated higher volume into additional capex, the benefits on the cost side [for both parties] would be very limited.”
Magellan’s big league investment to keep pace
Airbus’ interventions with suppliers may stave off capex for themselves by focussing on effieiciency and productivity techniques. But at some point rising demand requires capital spend. Canadian engineering group Magellan Aerospace is one of Airbus UK’s most important suppliers and it is taking the plunge in this area in a big way.
Magellan manufactures the 18-metre wing spars for the popular A320 airframe. It also makes the new Sharklet wing tips for the A320 and central in-box ribs for A350 wings. In July the company, which has facilities in Bournemouth and Wrexham, was awarded a massive £370 million seven-year contract extension for making these titanium and aluminium parts for Airbus UK.
The company is preparing for a huge piece of capital investment to cope with its primary customers’ demands. Foundations are being dug for a 22-metre bed, high speed axis spar milling machine from Cincinatti Hypermill, which will be installed by March 2013. The investment, including the long implementation, totals over £4.5m.
Haydn Martin, corporate director of business development at Magellan, says Airbus’s delivery schedule is a little irregular, which makes the investment necessary. “[For the A320] its not 42 sets of spars every month, it fluctuates, and can be more. So we’ve take a decision to invest in this high capacity machine.” Magellan UK’s growth has shadowed that of its top customer in recent years, with turnover rising from £40m in 2005 to £130m in 2012. “We say we have become a Tier 1.1. We are growing and constantly being challenged, for investment, skilled people and delivery.”
And it is continuously investing in equipment to keep up, says Mr Martin. In the last year or so Magellan UK has bought a big Akuma multi-axis lathe, two Unisign 5-axis CNC machines, specifically to machine new, sharper version of special wing parts for the A320. The Wrexham factory this year has made a £2.5m investment in a DST (Doris Sharman) horizontal milling machine.
Martin says while his company has not needed to enter into one of the Joint Improvement Programmes, they’ve worked with Airbus in other ways. “They have asked us to find partners to take on certain contracts. On the smaller components it’s easy, but with large components; there are sometimes only three companies who can supply those parts in the UK. To go offshore is not a solution.”
Twenty years ago, Airbus UK would have had from eight to 12 suppliers for the type of large structural components that its tier one companies, like Magellan and SPS Technologies, manufacture. Due to the economies of scale of Airbus’s relentless ramp-up, that number is now three. Such demands are good for those companies who can deliver.
“This is completed before we actually approve any additional investment,” says Mr Butschek. “We actually go beyond the expectations of the suppliers. We spend valuable time with them to jointly understand their capacity framework. If we can’t do it any other way then we go for investment.”
While operational support is common, it’s unusual for Airbus to provide financial support to suppliers. Most of Airbus UK’s suppliers are tier one companies of a critical mass “The base assumption is that our suppliers are in a stable financial condition,” says Mr Butschek.
But the plane manufacturer does not take this entirely for granted. “[Financial capability] gets intensely discussed and monitored, by a kind of ‘watch tower’. We monitor whatever [financial] information is accessible and available to us, so we get an early warning in case a supplier might experience some financial issues or get into financial trouble.”
If this happens Butschek says a case-by-case decision is made as to what extent Airbus will support the supplier. “There are plenty of opportunities before it comes to the worst,” he states.
But far more suppliers have struggled to comfortably keep pace with the rate increase, than have had financial issues, especially on single aisle aircraft production.
“We carefully monitor the performance of the suppliers. We perform regular audits to gain a deep understanding of what are the weaknesses and strengths – and what is our contribution to the problem?” Butschek says.
Having analysed the specific supplier situation, Airbus sets up a comprehensive set of actions where the ‘problem suppliers’ issues have the most commonality.
A Joint Improvement Programme or project is the most commonly used approach for a specific programme, or where there are certain technical or capacity constraints for a particular component.
“Airbus specialists form a joint team with suppliers, it goes into the details of project, to explore what would drive joint improvement,” says Butschek. “Typically you see a sustainable improvement in delivery performance.”
“Most of these suppliers cannot be easily replaced so intervention is part of risk mitigation for us” Günter Butschek
A Transformation Project is a more severe intervention, launched if major shortcomings in the supplier’s organisational setup – their methods, processes and tools – are identified.
In these cases, rate response difficulties are not just linked to production. “We might talk to a supplier where there’s need of support across the border [in transportation] or at least in more than just one function.” The solution is similar to before; a support team from Airbus, a dedicated support team from the supplier forming a joint team that work from action plans derived from the findings of a very detailed audit performed with the supplier.
Mr Butschek insists that the intervention is not about seizing control. “We do not invade the supplier. We always hold the supplier accountable but we offer our support and we even make our support mandatory if required. Most of these suppliers cannot be easily replaced so intervention is part of risk mitigation for us.”
Read more about how the demands of civil aircraft programmes are creating a niche league of responsive, well capitalised ‘super tier ones’ like Magellan Aerospace on themanufacturer.com.