As noted in our previous commentary, Supply Chain Matters has featured a number of blog commentaries highlighting the various supply chain management accomplishments and challenges related to the commercial aircraft industry. Current unprecedented, multi-year customer order backlogs for new aircraft are having an effect on the entire aerospace industry supply chain ecosystem. The need for commercial aircraft manufacturers to ramp-up their supply chains to support unprecedented levels of production volumes continue to provide unique challenges for this industry.
This week, this Editor attended the Council of Supply Chain Management Professionals (CSCMP) annual conference. Besides having the opportunity to moderate a highly informative and industry focused panel discussion co-sponsored by The Washington Post and Ryder (more background and commentary forthcoming in a future posting), we did manage to take in some rather noteworthy educational sessions.
One session that stood out for this author was: Digital Control Room for Supply Chain Management, which described the development and ongoing operation of Airbus’s Supply Chain Control Room. Having featured so many prior commentaries related to Airbus’s ongoing product development, manufacturing and supply chain activities, this presentation, delivered by James Snow, Director of Supplier Management and HO Supplier Development, provided us one of the key tenets that helps Airbus to successfully scale-up its manufacturing and supply chain activities.
Snow described the Airbus Digital Control Room as the heartbeat of the Airbus supply chain, providing a singular information and resolution control hub to manage any issues occurring across the multitude of multi-tier suppliers that support Airbus’s production volumes.
Airbus currently delivers a new aircraft, on average, every 7 hours among 11 owned production facilities and 8 final assembly lines, and the need for a singular control mechanism to coordinate, resolve and communicate status information across a truly global based supply chain is clearly evident. The effort kicked into high gear when Airbus began program preparations for the new A350 aircraft introduction and ramp-up. Last year Airbus completed delivery of 14 A350’s, while 29 are planned for completion this year. Airbus has plans to eventually ramp A350 production to 13 per month.
The control center is described as a combination supplier mapping and a singular control mechanism where multi-functional teams come together to ensure that Airbus’s supplier and other management teams are focused on the same set of issues. Its evolution was a visual paper “war room” concept which many of our production management readers can well relate to. In 2014, Airbus’s top 80 suppliers were monitored for performance and capacity risks. During 2015-2016, the effort was expanded to include the entire supply chain, along with the need to enable and control activities in a digitally supported environment. Today, the supply chain control center serves as the overall focal point of the supply and production demand network, a singular control point for supplier issues managements, and a mechanism available for Airbus senior management to monitor, resource and report on current production performance.
From our lens, one of the more fascinating learning’s derived from Airbus’s efforts in this area was the application of technology. The overall technology scope was described as not one of a big-bang program deployment of the most sophisticated technology but rather one of continuous, agile rapid development utilizing standardized software applications.
The process calls for every Airbus supplier to have a common identifier supported by the capturing of rapid scan health checks for each supplier. Suppliers tracked are multi-tiered, extending to the level of tier four suppliers, as one cited example, including bathroom counter tops. These rapid scans include overall capacity status, known supplier issues as well as issues that may be caused by Airbus itself as a customer. Eight core supplier skills are monitored on a continuous basis. Any supplier issues are managed with clear action plans that are recorded, monitored and made visible.
More importantly, a process is enforced where the supply chain control center serves as the single source for Airbus management teams to coordinate and report supplier capabilities and maturity, industrial capacity and any supplier risks. Color coding is utilized to rank various supplier and/or Airbus issues and to focus Airbus’s supplier management teams on the most critical or rear-term issues needing resolution. Supplier management teams are described as now spending more of their time directly at supplier sites working on these key issues as opposed to internal management reporting and update meetings.
Articulated major benefits are teams focused on real problems and assisting suppliers with resolving their challenges. Further described is global transparency and trust among internal and external teams with early warning to issues that can impact Airbus. Once more, every level of management has identified levels of responsibility related to certain supplier issues.
An unexpected benefit was described as this tool serving as an archive of prior product design or component engineering issues and as a foundational data store to be able to more reliably predict degradation of key performance indicators. That will likely serve as a future basis for mining supply chain intelligence and more predictive analytics capabilities than can better anticipate supplier challenges down the road.
The more we heard, the more this supply chain control center sounded as a mechanism to support and serve the executive level sales and operations planning process that exists among many manufacturers.
Moving forward, Airbus has plans to enhance supply chain control center functions with mobile-based user enhancements along with making this tool available to other functions such as manufacturing engineering, product development, contracts management and customer support.
Key learning and success factors experienced by Airbus in the use of this tool is that transparency builds trust. Initially, the fear of yet another reporting mechanism hindered initial broad deployment efforts but as the control center began to remove duplicate reporting, acceptance was gained. The Airbus supplier management team placed the development focus on process and people first, with technology serving as the adapting or best enabling support tool. Strong management endorsement and use of the tool was important as well. Another key learning articulated was that low cost and low tech approaches can work when coupled with continuous, incremental phased development.
Airbus’s Supply Chain Digital Control Room development was sponsored by CSCMP as one of six selected finalists in the organization’s 2016 Supply Chain Innovations of the Year recognition award. Judging from what we observed, Airbus has implemented unique innovation in the management and control of supply-chain wide visibility and to supplier management ramp-up and issue resolution needs without the need for a elongated big-bang technology-driven deployment. We thank Airbus for allowing this capability to be shared at this year’s CSCMP event.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Supply Chain Matters has featured a number of blog commentaries highlighting the various supply chain management accomplishments and challenges related to the commercial aircraft industry. Current unprecedented, multi-year customer order backlogs for new aircraft are having an effect on the entire aerospace industry supply chain ecosystem. Click on the search term Aerospace Supply Chain on our right-hand Categories panel and you will get quite a sampling of current and future challenges.
Wired Magazine had the opportunity to visit Boeing’s Renton Washington Production Facility, where workers build a new 737 aircraft in just nine days. The factory, currently produces new aircraft at the current rate of 42 aircraft per month, with plans to plans to expand this build rate to 47 per month next year, and up to 57 in 2019.
Boeing claims the 1.1-million-square-foot facility is most efficient airplane factory in the world. Arch rival Airbus, has its own multi-year backlog for new single-aisle commercial aircraft and this manufacturer is also investing in manufacturing automation, technology and broader supply chain wide visibility to meet its more aggressive production and supply chain ramp-up challenges.
Video often provides us powerful images of how the supply chain comes together and makes the difference for meeting customer fulfillment needs. Therefore, we invite our readers to view Wired’s recent feature: How Boeing Builds a 737 Aircraft in Just Nine Days.
A couple of caveats related to the video.
You will notice some video clips are of Boeing’s brand new 737 Max being assembled. That aircraft model is still in early production ramp-up and has not met the current cadence rate of 42 aircraft per month. The Wired editor declares that the Renton facility is the most automated aircraft production facility in the world. We believe that rival Airbus would take exception to that statement.
Overall, the most important takeaway is that when you consider Boeing, Airbus and other commercial aircraft manufacturers combined, the overall industry supply chain has its own unique challenges and opportunities. Respective Sales and Operations Planning s well as supply chain leadership teams a all tiers of the industry supply chain are constantly balancing and responding to demand and supply changes or challenges.
And, after all of these new aircraft enter operational service with respective airlines, the service lifecycle management and service parts supply chain kicks into support mode to insure that service parts and components are also available when and where needed.
The supply chain is indeed the lifeblood of an industry.
Previously and again last week, we alerted Supply Chain Matters readers to the increasing visibility to noteworthy supply challenges occurring at Pratt and Whitney related to its newly developed geared-turbofan aircraft engines. The development is significant since just was we anticipated, the weakest link in commercial aircraft supply chain ramp-up production cadence is indeed turning out to be Pratt.
Late last week, the United Technologies CEO, parent to Pratt warned the company’s investment community that Pratt will likely miss its 2016 customer engine delivery goals by 25 percent, amounting to a shortfall of 50 engines for aircraft manufacturers. The obvious question is which manufacturer will take the bulk of the impact.
CEO Gregory Haynes indicated the obvious in that Pratt’s airline customers were not happy with the news. Neither were UA stockholders who initiated an initial 2 percent sell-off in UA stock. This development represents yet another real-world example of significant supply chain glitches directly impacting stockholder perceptions.
Mr. Haynes further indicated that: ‘five parts are causing us pain this year”, due to supplier challenges in meeting Pratt’s current volume production and quality needs. There are approximately 800 parts for the high level bill of material for this new Pratt engine. The challenges are expected to extend into 2017.
A particular problem is the heart of this new engine, its newly designed aluminum titanium composite fan blades. Further indicated is that he has personally visited the shop where these blades are produced, an obvious indication of the high levels of management visibility being exhibited on the current supply challenges. Haynes indicated that today: “it takes 60 days of cycle time to build these blades and the through the shop and it needs to get to 30 days.” Obviously, that is a significant challenge for a highly engineered component, a doubling of production cycle time.
In 2014, aluminum metals provider Alcoa and Pratt announced a 10 year $1.1 billion agreement to supply state-of-the-art engine jet engine components. That included the forging of the new aluminum-titanium fan blade along with a proprietary manufacturing process. Pratt’s engineering design is different than that of GE Aircraft and its partners Snecma and CFM International. Whereas the latter has invested in carbon-fiber and ceramic composites for materials and manufacturing automation, Pratt has bet on a revolutionary new gearbox and aluminum-titanium composites to allow the engine to burn cooler, with fewer parts and more fuel efficient technologies. Supply chain design and deployment strategy is different along with approaches to manufacturing automation as well. There further exists a fierce competitiveness among existing aircraft engine manufacturers to demonstrate their new fuel saving gains and build ongoing customer loyalty and long-term commitments to each supplier’s new engine designs
Mr. Haynes assured investors that Pratt has a well-defined plan identified to address the current supply chain ramp-up challenges. Obviously, that should provide some assurances.
At stake is the ongoing production ramp-up of the Airbus A320 neo which first certified with the new Pratt engine. Certification of the neo version with CFM International engines is in-process, and with the current visible challenges for Pratt, Airbus production operations teams must now deal with the option of whether to shift current backlog order fulfillment more to CFM powered versions to insure attainment of Airbus’s 2016 and perhaps 2017 production commitments for the overall market. There is obviously a lot of market visibility on Airbus right now from its A320 customers.
Bombardier, developer and manufacturer of the new C-Series single-aisle aircraft have placed a current singular bet on the Pratt fuel efficient design, and thus have already had to warn its investors of a production cutback.
While a buffering effect has been the current historically lower-cost of aviation fuel, airlines, particularly lower-fare startups want to gain a market advantage in lower operating costs.
Commercial aircraft supply chains will indeed be one of the dominant headlines stories for the weeks and months to come. A significant theme will be the classic trade-offs of product design and design for supply chain scalability.
Stay tuned since further developments are likely.
©Copyright 2016. The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog. All rights reserved.
We previously alerted our Supply Chain Matters readers to the stunning and somewhat embarrassing news that Samsung initiated on its own, a global recall of its newly announced Galaxy Note 7® smartphones due to reports of battery fires. It is now becoming much more evident that Samsung has created additional customer creditability and market perception challenges by attempting to manage its ongoing faulty battery issues on its own, without timely notification to product safety regulators. Yet, once again, there exists other multi-industry supply chain learning regarding needs to closely coordinate potential product or equipment safety issues with governmental regulatory agencies. Learning that other manufacturers and their respective suppliers have painfully encountered.
As of this week, Samsung has received 92 reports of the batteries overheating in the U.S., including 26 reports of burns and 55 reports of property damage, including fires in cars and a garage. And that is just for the U.S. The consumer electronics provider itself has been reluctant to share details relative to which supplier batteries are suspected (there are multiple battery suppliers) and why the uncontrollable thermal events are occurring. We came across a well written analysis commentary penned by Brian Morin on Seeking Alpha that points to overheating of a battery cell as a result of anode-to-cathode shorting caused by flawed separators as a potential cause. This analysis raises speculation that the problem may not just concern Samsung but other smartphone manufacturers as well, depending on the specific supplier involved. Again, Samsung has yet to identify the specific battery supplier involved in the recall, or whether the battery performance issue extends to other models.
Samsung launched the top-of-the line Galaxy Note 7 on August 17 in an effort to announce the new model prior to Apple’s expected iPhone 7 product launch. Approximately two weeks later, reports surfaced as to occurrences of faulty batteries that were exploding during the recharging process. Now as the hubris of Apple’s iPhone 7 permeates media channels, Samsung must deal with effects and visuals of battery fires among its smartphones.
Today, a published report by The Wall Street Journal, coupled with other business media reports all seem to conclude that Samsung has fumbled this recall because of attempts to singularly investigate and respond to the occurrences of faulty lithium-ion batteries that were causing unexpected explosions and fires. Global wide telecommunications carriers as the principle distributors of the Note 7 were caught in the middle of this situation, receiving conflicting information from the manufacturer and from consumers, while unable to act without a formal product recall notice. It still remains unclear as to whether the problem can be corrected by a different battery, and when supplies of that different battery are made available. Meanwhile, individual consumers and business customers are reluctant to suspend using their new smartphones without having a replacement in-hand.
This week. The United States Consumer Product Safety Commission (CPSC) was obligated to take direct control of the ongoing issues with the occurrence of some overheating batteries by issuing a formal and immediate product recall notice. The notice urges consumers to “immediately stop using and power down the recalled Galaxy Note 7 devices purchased before September 15, 2016.” They are further instructed “to contact the wireless carrier, retail outlet or Samsung.com where they purchased the device to receive free of charge a new smartphone with a different battery, a refund, or a new replacement device.” The latter statement is of course what will obviously lead to other confusion but the timing and the urgency left little choice.
According to U.S. law, the CPSC must be notified within 24 hours after a product safety risk has been identified. The agency did not issue a statement until a week after Samsung’s initial announcement. The chairman of the CPSC indicated to the WSJ that for a company to go out on its own is not a recipe for a successful product recall, and in other media interviews, was somewhat blunter in his remarks.
This 24-hour notification was initiated as a result of the aftereffects of the prior sudden unattended vehicle acceleration and other perceived vehicle safety issues that impacted Toyota during the period from 2009-2010. Three years later, Toyota was still dealing with the after effects and U.S. legislators collectively called for stricter controls related to product safety. Today the automotive industry as a whole continues to deal with the challenges of faulty air bag inflators and other product safety related recalls that have now exceeded all previous records for total number of recalled automobiles. The 24-hour threshold coupled with the potential for significant financial and litigation implications related to the mere potential of product safety concerns has led automotive producers to err on the side of caution and engage regulators much earlier in the process and issue a product recall. Currently it seems that not a week can go by without news of some major recall involving an automotive brand.
Samsung’s faulty battery issues further have some parallels to the 2013 challenges that impacted Boeing’s 787 Dreamliner aircraft as a result of unexplained lithium ion battery fires affecting the aircraft’s own power systems. A series of unexplained battery compartment fire incidents triggered a subsequent six-month grounding of all existing operational 787 aircraft while government safety agencies and Boeing searched for the cause. The aircraft was later approved for service after Boeing reluctantly initiated a complete redesign of the battery housing unit containing lithium-ion batteries. The incident was very costly or Boeing from both a financial as well as brand reputation basis. Airline flyers began to question the overall safety of the 787.
Boeing’s initial reaction was to push-back on government regulators. An NTSB investigative report later concluded that the probable cause was an internal short circuit within a battery cell which led to a condition of thermal runway. The report also pointed to cell manufacturing defects and oversight of cell manufacturing processes involving the battery manufacturer. Today, there are little incidents of battery issues for operational 787’s but there will also be some concerns on the part of airline travelers as more and more lithium ion battery related fires come to the forefront. U.S. and other airline safety regulators are considering outright bans on allowing bulk quantities of the batteries to fly in aircraft cargo compartments.
Hence the learning is again that product defects often involve the supply chain, not just your organization, but others as well. In this specific Galaxy Note 7 issue, Samsung SDI is a supplier, along with other battery suppliers. The open question is whether Samsung was somehow trying to control the broader industry fallout of its battery manufacturing process. We will not likely know the answer to that until later in the investigative process.
Like others, Samsung will eventually garner important learning regarding the control or management of consumer focused product performance data and in trying to control the fallout. On the one-hand, today’s social media based channels, whether good, or not so good, provide instantaneous feedback and perceptions related to consumer experiences and product performance. A belief that the fallout can be controlled or buffered by internal control processes has passed. Like any other challenge involving major supply chain disruption or business continuity, there must always exist a set of response plans that include important decision criteria as to what needs to occur at any point. Lawyers, corporate risk and other senior managers will often have their own viewpoints but they must understand that this new world of always-on media and instantaneous information requires the most-timely responses, often with a supply chain purview.
The lesson for all is to look to multi-industry learning from past events and not let internal or external perceptual concerns cloud regulatory requirements, regardless of how your organization views such requirements. In the minds of consumers and customers, product and supply chain component safety trumps all other concerns.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
In February of 2015, Supply Chain Matters called attention to business media reports indicating that Apple had initiated a secret development lab to develop a concept electric car. These reports fueled a hail of social-media based commentary regarding Apple’s potential entry into the automotive sector. However, late last week, both the Associated Press and the New York Times report (Paid subscription or free metered view) that Apple has now shifted the focus of the development effort towards creating the technology for an autonomous driving vehicle.
According to these reports, Apple’s initial efforts in automobile design: “have suffered from management turnover and technical delays.” Instead, the reports indicate that Apple’s new direction, while not foreclosing on the possibility that the firm might consider building its own car, instead focuses on partnering with other established automobile companies.
In our 2015 commentary, we echoed that designing and manufacturing an automobile from scratch is enormously expensive with a single plant costing upwards of well over $1 billion. Auto supply chain teams know all too well that sourcing production in any particular country and transporting autos among global regions can be an expensive proposition without volume and market scale. It’s clearly not the same as manufacturing and shipping volumes of iPhones and iPads or for that fact, ramping-up new product and supply chain labor resources to coincide with a product development lifecycle. Once more, intellectual property (IP) protection becomes a larger consideration because of the nature of the multiple components and new technologies that may be involved. For electric powered vehicles, the design and production cost of the batteries is the single most important material and product margin component.
This latest reported e-focusing, if accurate, would be an indication that Apple and other technology providers such as Google would be better served by focusing on embedded systems that manage and control autonomous driving as well as passenger experiences. A further rather interesting tidbit from the AP report was a statement from Elon Musk, CEO of Tesla Motors indicating that Apple had hired hundreds of engineers, including some from Tesla, to work on the original design project. The latest reported shift in strategy would be a reinforcing sign that Apple would have more reliance on an existing auto maker supply chain and manufacturing resources.