Airbus Supply Chain Management

June 19, 2010 7 Comments

Listen to this postHeizer (2009) define supply chain management as the “integration of the activities that procure materials, transform them into intermediate goods and final products then deliver them to the customers”(p. 360). Supply chain management integrates the transportation activates that include the distributions methods with the suppliers and venders then setup a payment system that manage the account payable and account receivables (Heizer, 2009). Supply chain management set up and manage the order fulfillment with the warehousing and inventory control then share necessary information with the suppliers, venders, distributors and the customer when needed (Heizer, 2009).

Ayadi (2009) affirm that part of Airbus success is because of their efficient supply chain management. The supply chain management provides general visibility for the different actors of the organization (Ayadi, 2009). Airbus had more than 1500 contractors distributed in 30 countries and the supply chain management used ensures right parts, systems and hardware are delivered at the right place on time. Airbus supply chain system allows the suppliers and the buyers to exchange the needed information online. The suppliers can display their ability to deliver by filling the right information on the secured website. The supply chain cycle is cover on web site from the first order through procurement to the invoicing and payment finalization (Anonymous, 2010). The suppliers data and their transactions are stored in a “foundation” data bank that help in the decision-making in future transactions (Anonymous, 2010).

Supply chain management has its disadvantages like most of the automated systems.  The Bullwhip effect could affect the Airbus supply chain cycle because of the cycle length and number of steps that go through it. The bullwhip effect is the increase in fluctuation in orders while the orders are steady with minimal fluctuation (Heizer, 2009).

References:

Anonymous. (2010). Airbus for Suppliers  Retrieved Jun 10, 2010, from http://www.airbus.com/en/airbusfor/suppliers/

Ayadi, S. (2009). Externalisation et creation de valeur au sein de la ‘Supply Chain’: L’entreprise etendue. (Outsourcing and Value Creation within the Supply Chain: The Extended Enterprise. With English summary.). La Revue des Sciences de Gestion, 44(236), 85-93. doi: http://www.larsg-revue.com/

Heizer, J., & Render, B. (2009). Operations management (9 ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

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Perfecting the Supply Chain

May 18, 2010 2 Comments

Listen to this postInventory management and the difference between good and bad performances are some of the principles that being lectured to Dell’s employees through multiple presentations (Stewart & O’Brien, 2005). Reword and punishment are some of the performance techniques used by most of Dell’s rivals, but Dell’s employees set the rewards and punishment for themselves to drive their performance. Dell Inc. has the “no excuse” culture since the management will not accept excuses for low performance or the failure to make money. Dell’s top management believe that if the expectation are set high enough then the performance will be high and the opposite is true. Dell’s General Managers have to find the reason for their poor performance and fix it, or the General Manager will be blamed for the failure (Stewart & O’Brien, 2005).

Dell Inc. became famous for its innovative supply chain model that allowed Dell to carry out successful mass customization. Dell is using Build-to-Order model to cut off the dealers’ fees and the inventory cost (Magretta, 1998). The computers are built according to the end user’s specifications which are placed in the company’s portal. Dell’s innovative supply chain insures the required parts availability when needed for the right assembly point at the exact time and place. Kumar and Craig (2007) state that Dell’s success is not only fueled by its supply chain but other processes made it more competitive than its rivals. The following are the main four processes that made Dell Inc. competitive:

  1. Postponement: Dell will postpone assembling the computer until the order is placed and customer credit is cleared. This postponement enables Dell to decrease its inventory and use the latest products from its suppliers. Dell’s rivals have to push their finished product inventory before marketing the new parts for their customers (Kumar & Craig, 2007).
  2. Modularity: means that each part of the computer is managed separately which allow the assembler to connect different parts together. This flexibility allowed Dell to excel in mass customization and overcome the last-minute changes (Kumar & Craig, 2007).
  3. Vendor Managed Inventory: Dell does not stock the required inventory in its stores. The suppliers manage the inventory in small warehouses, called revolvers, near Dell’s plants. This technique help Dell focus on the customers and the suppliers focus on innovation (Kumar & Craig, 2007).
  4. Supply chain partners: Dell sign contracts with the suppliers and service providers and share with them the available information to guarantee future order volumes.

Dell’s innovative supply chain and unique culture will keep it competitive as long as it can keep up the low production cost. Dell will lose its competitive edge once its rivals perfect their supply chain management and start to offer innovative computers at the same price.
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References:

Dell Inc. (2009). Dell Worldwide. Retrieved August 29, 2009, from http://www1.euro.dell.com/content/topics/global.aspx/about_dell/company/dell_worldwide/index?c=ae&l=en&s=corp

Kumar, S., & Craig, S. (2007). Dell, Inc.’s closed loop supply chain for computer assembly plants. Information Knowledge Systems Management, 6(3), 197-214.

Magretta, J. (1998). The power of virtual integration: an interview with Dell Computer’s Michael Dell. Harvard Business Review, 76(2), 73-84.

Stewart, A., & O’Brien, L. (2005). Execution without excuses. Harvard Business Review, 83(3), 102-111.

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