RapportPFE Airbus QuirinoBarbosa 210108

Projet de Fin dEtude
prsent pour obtenir le grade
dIngnieur en Gnie Industriel

par
Part 1:
Understanding the Supply Chain Management best practices in the Aerospace industry
Analyse des risques de la chane dapprovisionnements Supply Network risks analysis Tuteur industriel : M. Emmanuel Soler International Supply Manager Airbus France Tuteur enseignant : Dr. Samuel Bassetto Matre de Confrences, Laboratoire G-SCOP, ENSGI-INPG
Quirino BARBOSA
Janvier 2008 English version
Entreprise de rfrence:
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 II 1 philosophy and to provide a risk management tool: a FMEA 2 . This procurement division is moving from a reactive suppliers management philosophy to a proactive suppliers management philosophy.
Key words:
Supply Chain Management Risk Management FMEA MRPII Lean and Agile Management
1 2
MRP: Manufacturing Resource Planning FMEA: Failure Mode and Effects Analysis
2 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
December 2007 Table of contents
1. 2.
ACKNOWLEDGEMENTS ........................................................................................................................ 6 RECOMMANDATIONS ............................................................................................................................ 7
Chapter1: Understanding the Supply Chain Management best practices in the Aerospace industry
3. 4. INTRODUCTION ....................................................................................................................................... 9 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 characteristics................................................................................................................. 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 BOEINGS 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. 8. INTRODUCTION ..................................................................................................................................... 32 SUPPLY CHAIN MANAGEMENT ........................................................................................................ 33 8.1. EMERGENCE OF SUPPLY CHAIN MANAGEMENT PRACTICES.................................................................. 33 8.2. WHAT ABOUT SUPPLY CHAIN? ........................................................................................................... 34 8.2.1. Supply Chain focuses on the product ............................................................................................ 34 8.2.2. Supply Chain focuses on the organization .................................................................................... 36 8.3. WHAT ABOUT SUPPLY CHAIN MANAGEMENT (SCM)? ....................................................................... 37 8.3.1. Nature of the partnering relationships.......................................................................................... 37 8.3.2. SCM as a management philosophy ............................................................................................... 38 8.3.3. SCM as the implementation of a management philosophy............................................................ 39 8.3.4. SCM as a set of management processes ........................................................................................ 40 8.3.5. Definitions..................................................................................................................................... 40 9. RISK MANAGEMENT ............................................................................................................................ 41 9.1. 9.2. 9.3. WHAT IS RISK?.................................................................................................................................... 42 RISK VS. UNCERTAINTY ...................................................................................................................... 44 WHAT IS RISK MANAGEMENT? ............................................................................................................ 45
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9.3.1. 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 AFFECT SUPPLY 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 an aircraft manufacturer: Implementation of a FMEA
13. 14. INTRODUCTION ................................................................................................................................ 71 A PROJECT TO IMPLEMENT PROACTIVE MANAGEMENT PRACTICES ......................... 71
14.1. A380 PROJECT DELAYS: AN EVIDENCE OF THE NECESSITY TO BUILD A PROACTIVE SUPPLY 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 THE SUPPLIER DEVELOPMENT TEAM ........................................................ 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 15.3.3. Define the scope of the Supply Chain framework..................................................................... 81 15.3.4. Conduct interviews to identify objective and mostly subjective risks ....................................... 82 15.3.5. Building a Risk Management tool: FMEA................................................................................ 83 16. 16.1. 16.2. 16.3. 17. 18. 19. 20. RESULTS .............................................................................................................................................. 85 SUPPLY CHAIN PROCESSES .................................................................................................................. 85 FMEA ................................................................................................................................................ 85 COMMUNICATION STAKES .................................................................................................................. 86 CONCLUSION ..................................................................................................................................... 86 REFERENCES ..................................................................................................................................... 87 WEB LINKS ......................................................................................................................................... 92 APPENDIXES....................................................................................................................................... 93
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20.1. 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 BARATTEAREMON, 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-structured vision 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 hadnt succeeded to find time to visit this beautiful city. Next time
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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 doesnt 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 competencies and 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.
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4. Industry analysis
4.1. 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 n1 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 (Arospatiale), 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: To enhance their industrial strengths To broaden their competences area To improve their competitiveness To deepen their expertise Boeing Based in Chicago, Illinois, Boeing is consisted of two main businesses; its defense division, Integrated Defense Systems (IDS, headquartered in St.Louis, Missouri), and its commercial division, Boeing Commercial Airplanes (BCA, headquarters in Seattle, Washington). Key manufacturing sites for commercial airplanes are located in Everett,
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 the complexity 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 customers existing fleet composition. Cost Structure The cost structure of commercial aircraft manufacturing can be characterized by high fixed costs, and relatively marginal production costs. Labor costs are kept high; therefore production operates at a high minimum efficient scale 3 . Technology Technological innovation has been the key driver for product differentiation, although most of the innovations in recent years reside in systems and components that are outside
3
Minimum Efficient Scale: The MES is the output for a business in the long run where the internal economies of scale have been fully exploited. http://www.tutor2u.net/economics/content/topics/buseconomics/mes.htm
December 2007 of the manufacturers 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, Boeings 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:
Airbus A380 key characteristics Airbus A350 key characteristics Boeing 787 key characteristics
Airbus A380 The main objectives of the Airbus A380 programme are to offer double improvements in fuel burn and operating costs when compared with todays largest commercial aircraft. The A380 has the potential to increase the operators return by as much as 35%. Its increased capacity and longer range provide airlines with significantly more seat-miles on every flight. The A380 can fly 10 to 15 % more range and burn less fuel than the Boeing 747. Thanks to
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 Boeings 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 engines on earlier widebody aircraft. Moreover about fifty per cent of the primary structure, including the fuselage and wing, will be made of composite materials, like carbon fibre reinforced plastics. This makes it possible to manufacture one-piece fuselage sections, which eliminate 1500 aluminium sheets and 40 000-50 000 fasteners. Finally, another feature is health-monitoring systems that will monitor the technical condition of the airplane and
www.airbus.com 2007
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: Reducing acoustic nuisances 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. Its 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:
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). Aircraft architecture: The aircraft architecture plays an important role in the aircraft capacity definition. Airbus, with the A380 Program, has chosen to increase seats capacity with a longer range capability.
The purpose of this theoretical approach is to put forth a framework to analyse the current state of two main innovations and their evolution in the aerospace industry. The main difficulty is to describe what lies behind a particular phenomenon we are describing. To
www.boeing.com 2007
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 Smith 6 . 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.
Carbon Fibre Titanium Technology Very Large Airlines Reinforced Plastic
Invention
Commercialization
Diffusion
Innovation
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 on 7 . This material was seldom used for the manufacturing of wings owing to two main difficulties: High cost in comparison with the aluminium Risks of delamination 8 , that doesnt enable to use this material for the aerodynamic structures.
6 7
David Smith- Exploring Innovation- McGraw Hill Education- Europe-2005 Lindustrie franaise des matriaux composites http://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf
8
Delamination: Sparation des couches d'un stratifi par rupture prs ou dans le plan de joint ((La norme AFNOR T-50-100 reprend la norme ISO-472 : 1988)). Un dlaminage est un dfaut existant dans les matriaux composites stratifis se caractrisant par une sparation ou un manque de liaison entre deux strates. Ce terme est
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 patents 9 . 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 perspective 10 .
Emissions Energy Emissions Energy Energy Recycle Emissions Global Effects Fate and Persistence Emissions Emissions
Distribution
Supplier
Raw Materials
Production
Wastes
Products
Transportation
Wastes
Customer
End User
Wastes
Emissions Waste
Warehouse Product Development Production

Energy Wastes
Recycle
Emissions
Figure n2: Dyadic Supply Chain throughout an energy perspective
improprement employ la place de cisaillement ou de clivage qui est la contrainte exerce conduisant au dlaminage.
9
Lindustrie franaise des matriaux composites, p 116 http://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf

10
Environment, Safety, and Health considerations-Composite Materials in the Aerospace Industry, p34 http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19950016608_1995116608.pdf
December 2007 Here we have some of the Supply Chain and Operations Management challenges: 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 organizations focus, increasing buyer interactions with engineering and restructuring the Supply Chain 11 . 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
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 atmosphere 12 . 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.
11
Composites bring Boeing's buyers, engineers and parts suppliers closer http://www.purchasing.com/article/CA6419134.html
12
La filire composite l'Arospatiale http://www.w3architect.com/static/people/fgaillard/these/Aa-FiliereCompo.html
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: Manage scraps; that means trying to sell the scraps back to the demand market Improve inventory management throughout the supply chain Realize economies of scale by having a procurement strategy not only for their companies but for the all Supply Network 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. This theory provides relevant insight owing to the fact that it enable to describe this architecture innovation through an evolutionary perspective. The discontinuities that
punctuated periods of equilibrium are linked to a major technological innovation. The innovations linked with the A380 program enable to reach a new equilibrium. The technology developed for this program enabled the civil aerospace market to reach a new equilibrium not only for the skills and knowledge, but also for the needs and the market opportunities.
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Market
Abilities
Suppliers
Market
Abilities
Suppliers
Low to medium capacity aircrafts * Skills Knowledge Skills
High capacity aircrafts * Knowledge
Customer needs
Customer needs
1st equilibrium
2nd equilibrium
Time
* Capacity of both range and seats
Figure n3: 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.
5. 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 understanding of the main stakeholders and their role in the entire supply chain. On the other hand we will get an evolutionary perspective on the aerospace supply chain to forecast the behaviour of the entire network. The three main stakeholders are the Supplier, the Aircraft manufacturer (OEM 13 : Airbus or Boeing) and the Customer.
13
O.E.M. :Original Equipment Manufacturer :
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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 firsttier 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. In the following figure we have described the project management organization according to the most suitable horizon plan.
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Level of granularity
Strategic level
Portfolio management
Program
Program
Program
Project
v v v
Figure n4: 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 n5: Basic control logics for supply chains (Delfmann &Albers, 2000)
Make To Stock environment: The decoupling point is just after the assembly process. The client wont 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. 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 components and sub-assemblies into production, but in general, not starting final assembly until a customer is received (For instance this environment could be observed at Dell, IBM and so on). Make To Order environment: Company carries no finished-goods inventory and builds each customer order as needed. This concept is often used when there are a very large number of possible configurations. Often the production is launched before receiving the firm order in order to reduce the commercial cycle. 22 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
December 2007 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

Cp Cc x
{ ETO,MTO, ATO, MTS}
<
and
Cp Cc
ETO
< < < Cc MTO Cc ATO Cc
Cp
Cp
Cp MTS
Responsiveness
Cost
As we can see, a trade-off decision is needed between cost and responsiveness. Source The main tasks in this part are the following: Schedule deliveries; receive, verify, and transfer product, and authorize supplier payments. Identify and select supply sources when not predetermined, as for engineer-to-order product. Assess supplier performance and maintain data about the suppliers Manage inventory, incoming products, supplier network, import/export requirements, and supplier agreements.
Make As we have seen before, there is a trade-off between responsiveness and cost of manufacturing. This trade-off implies the fact that the manufacturing chain is split into two parts: An upstream chain that is led by the inventory policy
December 2007 A downstream chain that is led by the customers 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 n6: The bound between the MTS and the MTO environment
The main tasks in this part are the following: Schedule production activities, produce and test, package, release product to deliver Finalize engineer for engineering-to-order product 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: Warehouse management from receiving and picking product to load and ship product Receive and verify product at customer site Invoicing customer Manage deliver business rules, performance, information, finished product inventories, transportation, product life cycle, and import/export requirements.
5.1.3. Customers
The customers can be split into three groups: airlines companies, aircraft leasing companies and aircraft freight companies. Nowadays there are approximately 500 airlines companies around the world operating large commercial aircraft. However, only a few airlines are responsible for the majority of the new orders. For instance, 50 largest airlines in the world operate 35% of the worlds fleet 14 .
Airbus Market Outlook 2005-2025 ; Global Market Forecast
12
December 2007 Leasing 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 markets 15 . 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.
Freighter Passenger service aircraft Total
2005 130% 2025 1644 4115 89% 15491 17 135 29385 33500
2006 100% Freighter Passenger service aircraft Total 1980 89% 19230 21 210
2026 3980 36420 40400
Airbus Forecasts
Boeing Forecasts Figure n6: 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 picture of the civil aircraft market. For instance Airbus and Boeing have differing opinions on how to satisfy this growing market. Airbus bet on very large aircrafts as the A380 whereas Boeing is not developing that kind of aircraft.
13
Airbus Market Outlook 2005-2025 ; Global Market Forecast
December 2007
5.2. Comparative analysis between Airbus and Boeings 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 suppliers 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 suppliers 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 companies 16 . 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 rather on the entire supply network. Indeed these recent years, both Airbus and Boeing asked for the A380 and 787 programs to absorb non-recurring costs. Non-recurring costs are related to non-recurring engineering activities, as researching, designing and testing a new product. This tactic enables the prime manufacturers to shift manufacturing risks to the suppliers. For instance, for the A380 program, Airbus has established a risk-sharing partnerships with
16
http://fr.biz.yahoo.com/11072007/175/aviation-week-ainsi-qu-airbus-et-boeing-vont-presenter-des.html
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 projects 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 networks.
On the other hand the last program developed by Airbus seems to be more in the mold of the traditional model. The core technologies related to complex or key airframe components have typically been kept pretty much in-house within the core respective companies. This model
17
A.T. Kearny & The Society of British Aerospace Companies-The Emerging Airline Industry , 2003
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 Boeings 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 Boeings projects have helped the Japanese companies to establish a leadership position in wing design and composite technology. All of this financed by Japanese government.
5.2.4. New trends in Supply Chain Management

Modular design 18 As observed few years ago in the automotive industry, the aeronautic industry spread modular design methods to improve the overall Supply Chain efficiency. The modular design is an
Frigeant V. and Talbot D. Proximits et logique modulaire dans lautomobile et laronautique : vers une convergence des modles dapprovisionnement ? IIImes Journes de la Proximit Nouvelles Croissances et Territoires , Paris, dcembre 2001.
18
December 2007 approach 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 principles 19 . 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 suppliers network. Rationalization of Tiers two suppliers panel Nowadays the trend is to rationalize the Tier 2 suppliers 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 Toyota 20 . 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 we have several elements (firms) in the network that try to be lean, the optimum will be reach when the entire network will be lean (Lean Supply Network).
The notion of manufacturing postponement is to retain the product in a neutral and non committed status as long as possible in the manufacturing process. 20 Taiichi Ohno has developed the Toyota Production System. Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment tools, and less engineering time to develop a new product.
19
December 2007
Past
Emerging
Future
Platform assembly Large scale integration Small scale integration Value-added parts and assemblies Raw material procurement strategy Modular Design Risk Management: Proactive philosophy
OEMs
System integrator
System integrator
Suppliers network Individual
Suppliers network
Suppliers network
Individual/common
Common
+ +
++ ++
Figure n7: Evolution of the Aerospace industry
6. Conclusion
Airlines 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: An increasing market pressure Procurement globalization phenomenon A high demanding market concerning delays and quality A growing uncertainty A fast evolution of innovation and technology ... 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 materials and information into and out of the company. Key to such coordination is an orientation toward closer relationships with suppliers. Moreover customers are demanding products consistently delivered faster, exactly on time, and with no damage. This global orientation and increased performance-based competition, combined with rapidly changing technology and economic conditions, all contribute to market place uncertainty. This uncertainty requires greater flexibility on the part of individual companies and supply chains, which in turn demands more flexibility in supply chain relationships.
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 are involved through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer A network that is in charge of supplying raw materials, of transforming these raw materials into components and then into end-products. Finally this network is in charge of delivering these end products to the customer 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 end user in a supply chain-raw material and component producers, product assemblers, wholesalers, retailer merchants and transportation companies are all members of a supply chain A system which comprises suppliers, manufacturers, distributors and retailers that exchange material flows from suppliers to clients and information flows from clients to suppliers A supply chain is defined as a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances, and/or information from a source to a customer Definition oriented toward the value chain that encompasses the end consumer
Lee & Billington 93
La Londe & Masters 94
Definition oriented toward the product End-user focused definition. Partnership and Collaboration play here an important place Definition oriented toward the links in the entire supply network Definition oriented toward the links in the entire supply network
Tayur and al. 99
Mentzer and al. 2001
Even if these definitions bring out the fact that the entire supply network must be customer focused, they are some differences concerning the ways to reach this point. Indeed some definitions are more focused on the product, others on the organization.
8.2.1. Supply Chain focuses on the product

Supply Chains focused on the product enable to get an operational view on the entire supply chain. In that definition design, manufacturing and logistic plays an important place. With this
December 2007 definition 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. 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.
Physical Distribution and Storage
Raw material Transformation
Components manufacturing
End-product manufacturing
Wholesaler
Retail
End Customers
Recycling
Figure n 8: Transformation processes
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 operations. The purpose of setting relevant metrics is to facilitate reengineering operations and to build a relationship based on trust. Finally setting metrics is not sufficient to reach the optimum. We have to assess regularly the relevance of these metrics according to the evolution of the organization. Moreover when we want to implement a new indicator we have to assess its global efficiency (i.e. checking its relevance in comparison with the others metrics of interrelated processes). That enables to see if there are not too many conflicting objectives.
December 2007
8.2.2. Supply Chain focuses on the organization

There is another definition of supply chain focused
Plan Supplier Client
on the organization. In this definition, the difficulty

Deliver
Source
Make
is to define the scope of the supply chain. Owing to (Mentzer, 2001) there are three types of supply
SCOR model: Supply Chain Framework oriented toward the organization
chain
complexity: a direct supply chain, an supply chain and an ultimate
extended
supply chain. 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. A extended Supply Chain -b- includes suppliers of the immediate supplier and customers of the immediate customer, all involved in the upstream and/or downstream flows of products, services, finances, and/or information 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.
b
Suppliers supplier
c
Ultimate supplier
. . .
Supplier
. . .
Supplier Financial provider
Supplier
Organization
Organization Third party Logistic
Organization
Customer
Customer Market research firm
Customer
. . .
Customers customer
. . .
Ultimate Customer
Figure n10: Types of channel relationships (Mentzer, 2001)
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 competitive advantage that is more important than another advantage reached individually by one member of this partners network.
December 2007 We can depict the different types of relations that we can find in an industrial environment. In a capacity subcontracting relationship, the
No subcontracting relation
contactor relies on a subcontractor to manufacture

P artnering
the products. Capacity subcontracting is a flexible tool for industrials to cope with punctual increases of production or technical problems. In a specialized subcontracting relationship, the
Capacity subcontracting
Specialized subcontracting
Intelligence subcontracting
contractor uses specific subcontractors equipment

M ergers & A cquisition S trategy
Partnering degree
Joint venture
and skills to manufacture products. These contractors have chosen not to acquire such equipment and competencies for own strategic reasons.
Vertical integration
Figure n11: Several subcontracting relations 21
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.
8.3.2. SCM as a management philosophy

As a philosophy, SCM takes a system approach to view the supply chain as a single entity, rather than as a set of fragmented parts, each performing its own function (Ellram and Cooper 1990). SCM seeks synchronization and convergence of intrafirm and interfirm operational and strategic capabilities into an unified, compelling marketplace force (Ross, 1998). This
21
Adapted from: Le partenariat : un lment cl de la chane logistique, J.Roy, Y. Bigras, 2000 p.6
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: 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 A strategic orientation toward cooperative efforts to synchronize and converge intrafirm and interfirm operational and strategic capabilities into a unified whole 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)). c. Mutually sharing risks and rewards: Thats the main objective of a SCM philosophy implementation d. Cooperation: Cooperation refers to similar or complementary, coordinated activities performed by firms in a business relationship to produce superior mutual outcomes or singular outcomes that are mutually expected over time (Anderson and Narus, 1990). e. The same goal and the same focus on serving customers. Too often, we can observe that there is a lack of common objectives.
December 2007 f. 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. 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. 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 management philosophy. In that case SC Orientation is rather a management philosophy and the SCM is the results of this management philosophy.
8.3.5. Definitions
In practice when we try to define or to put in place a supply chain orientation philosophy, firstly we have to respond these two questions: What are the actors who will enable to solve our supply chain problematic? Who will take the decisions, what are the direct clients and the direct suppliers according to our
December 2007 problematic? Often there are two main approaches: 1/ we can be only focused on the OEM 22 . 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. 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 to manage the total flow of a distribution channel from supplier to the ultimate user Supply chain strategy includes: "two or more firms in a supply chain entering into a long-term agreement; the development of trust and commitment to the relationship; the integration of logitics activities involving the sharing of demand and sales data; The key issues in SCM are the formation of the supply chain and its efficient coordination with objectives of customer satisfaction and sustaining competency. This requires complex flow of information, materials, and funds across multiple functional areas both within and among companies.
La Londe and Masters (1994)
Faisal, Banwet, Shankar (2006)
9. Risk Management
Why have we decided to give rise to risk management issues? Risk management is probability the best way to respond to a current phenomenon in several industries. Indeed many industries are trying to move from a reactive to a proactive behaviour.
22
OEM: Original Equipment Manufacturer
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 toplevel change in general business conditions. In that context, companies are constantly evolving. Therefore change management is becoming an important issue. However it doesnt enable to get a relevant proactive management tool. Change management enables to succeed the implementation of proactive decisions, but it doesnt enable to make the right choice. (Bernstein, 1996) maintains that risk is about choice. Risk management is a good makingdecision 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 risk as an unfavourable event but also as an opportunity. Therefore we have to keep in mind that risk management and opportunity management are tightly linked. It is not surprising that risk management is becoming an important issue in project management. Consequently risk management includes maximizing the results of positive events and minimizing the consequences of adverse events. Risk is also an uncertain event or set of circumstances which, should it occur, will have an effect on achievement of one more objectives (APM PRAM Guide, 2004). This definition is
December 2007 interesting owing to the fact that it brings out three important terms: objectives, occurrence and effects. 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. Occurrence: it enables to measure the probability that an event occurs. 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: (Lowrance, 1980) describes risk as a measure of the probability and severity of adverse effects. (Rowe, 1980) defines risk as the potential for unwanted negative consequences to arise from an event or activity. (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 projects objectives.
Finally we can classify risks into five categories: Pure risks Financial risks Business risks Political risks Pure risks are normally the insurable ones. Pure risks are typically damages, accidents and losses that cannot be affected by effective management procedures. Financial risks usually 43 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
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 (Khknen, 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 probabilities of the possible outcomes are not known. Knight is focused on the metrics used to manage risks. As a result, if our purpose is to put in place proactive management practices, we will have to make more effort to deal with uncertainties than risks. Yates and Stone (1992), however, argue that every conception of risk implies that there must be uncertainty about the prospective outcomes, and that if the probability of those outcomes is known, there is no risk. The following equation can illustrate this point of view.
December 2007
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
Knight
Risk exists when Pi is known Uncertainty exists when Pi is not known {f1 (p1 ; i); f2 (p2 ; i); ; fx (px ; i)} p 2 is not known: Uncertainty
Yates and Stone

Risk exists when one of the probabilities of the several outcomes (Pi) is not measurable. The uncertainty defines the cardinal of the set of outcomes.
(Slackknown: Risk 20 p 1 is and Lewis,
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, for instance, (Dickson, 1989) defines risk management as the the identification, analysis and control of those risks which can threaten the assets or earning capacity of an enterprise. Similarly, Fone and Young (2000) see risk management as a general management function that seeks to assess and address risks in the context of the overall aims of the organisation. However, as the Royal Society (1992) stated, there is some dispute over whether it is an everyday part of business life or something which is brought and used as and when it is needed. According to us, it is obvious that risk management is not something which is brought and used as and when it is needed because the objective of managing the risk is to
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 organisations strategy and the implementation of that strategy. It should address methodically all the risks surrounding the organisations 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 organisations activities and its main aim is to help all other management activities to achieve the organisations activities and its main aim is to help all other management activities to achieve the organisations 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). (Khknen 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). They defined core processes: Risk Identification, Risk Estimation and Risk Response Planning and Execution. They defined also accessory processes: Risk Management Planning, Risk Communication, Risk Ownership Development, Risk Management Strategy, and Risk Management Control. Moreover Simon and al. (1997) suggest that, whilst there is a wide range of techniques available to undertake each of these 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.
December 2007 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. Brainstorm possible risks Consider what has gone wrong in similar projects previously Cluster into related topics Weight according to seriousness and probability Focus on the very serious and highly probable Define the project type and review typical risks 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 projects critical path. 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 severity of risks. Risk Response Planning and Execution It consists in defining, developing, and executing enhancement steps for opportunities and responses to threats. To do that, we can use one of these strategies: Risk avoidance (e.g. cancel the project or find an alternative method to achieve the same objective). Risk reduction (reduce either the likelihood of an event or its impact); Risk transfer (e.g. insurance); Risk reduction and transfer (e.g. subcontracting or outsourcing); Risk monitoring (monitor the
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 It consists in naming the owners for risk & opportunity types or for the identified risks & opportunities. Examples of typical criteria are expertise and power. Risk Management Strategy
It consists in defining the overall strategy and possibly specifying it in the terms of most important risks. Typical choice are: modify project objectives, risk avoidance, risk prevention, risk mitigation, develop contingency plans, keeps options open, monitor situation, and accept risk without any actions.
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:
Accessory Processes
Risk Management Planning Risk communication
(QL, QT, C)
(QL, QT, C)
QL QT C
Core Process
1
Risk Identification Risk ownership development
Risk Management Control
(QL, QT, C)
Risk Response Planning and Execution
Risk Estimation
(QL, QT, C)
2
QL Qualitative Quantitative Control
QT
Risk Management Strategy
(QL, QT, C)
Figure n12: Risk Management processes
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. (Khknen 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 risks must be estimated by knowledgeable individuals. The use of judgement, of knowledgeable project people does not mean that risk estimates would be necessarily be unreliable, but the subjective estimate approach of expressing risk in this context rather refers to the fact that best possible source of information-i.e. knowledgeable people-is used. There are several tools for quantifying and managing risk as FMEA (failure mode and effect analysis), CBA (cost benefit analysis), Hazop (hazard and operability study) and RBA (risk benefit analysis. Though accepted and used by many managers, they have been criticised for
December 2007 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 organisations share price, which can be slow to recover, but it can also generate conflict amongst the organisations 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: Shorter product life cycles and compressed time-to-market Increased demand for on-time deliveries in shorter time windows, and shorter lead times Globalization of supply chains Reduction of supplier base Reduced buffers, e.g. inventory and lead time Increased use of outsourcing of manufacturing and R&D to suppliers Fast and heavy ramp-up demand early in product life-cycle There is another trend which consists in moving from a direct supply chain to an ultimate supply framework (cf. 1.2.2) that involves more stakeholders. Therefore, it is getting more complicated for managers to get a relevant organization vision on an operational level and on
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 corporations 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).
120 100 100 Faillure Cost (%) 80 60 40 20 0,1 0 Preliminary Design Design Manufacturing Client 1 10
When is the failure identified?
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 leading a SCRM approach.
10.2. State of the art SCRM definitions

10.2.1.Origin of the SCRM theory
The BuyGrid model (Robinson and al., 1967; Wind and Webster, 1972) could be considered as the first efforts in SCRM research. This model describes the behaviour of buyers in three different purchasing situations: (1) The straight rebuy: where the product being purchased is
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 Williamsons 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
According to (Artebrant and al., 2003) SCRM is the identification and the management of risks within the supply chain and risks external to it through a co-ordinated approach
amongst supply chain members in order to reduce supply chain vulnerability as a whole. This definition implies to have a double-vision on the Supply Chain: a vision on the internal and the external processes as well. This supposes to identify clearly the boundaries of the chosen perimeter. Moreover this definition brings out the vulnerability of the whole supply chain. Finally, managing supply chain risks is a collaborative effort.
December 2007 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, Supplier quality/auditing/certification programmes, Supplier improvement programmes, Multiple sources vs single sourcing, Strategic alliances , Communication and early involvement of suppliers in strategic decisionsand so on. According to (Norrman and Linroth, 2002) Supply Chain Risk Management consists in defining collaboratively with partners, a set of supply chain risk management process tools to deal with risks and uncertainties caused by, or impacting on, logistics related activities or resources. This definition brings out the importance of using an efficient supply chain risk management tools. That supposes to do the necessary efforts to develop such tools. As many SCRM definitions, this definitions is focused on logistics activities. Furthermore, more research by Carr and Smeltzer (1997) identified the willingness to take risks as a key component of strategic purchasing. Indeed he defines proactive purchasing as
December 2007 purchasings 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 purchasings 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 (Jttner 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

(Jttner and al.) emphasize the fact that among practitioner-oriented risk management literature and the industrial world as well, the uses of the termrisk 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 variation in the distribution of possible supply chain outcomes, their likelihood, and their subjective values. The uncertain variations or disruptions affect the flows of information, materials or products across organisation borders (LaLonde, 1997). Supply chain risks hence comprise any risks for the information, material and product flows. After that we have to choose the perimeter of the analysis, i.e. which type of supply chain framework will we choose (direct, extended or ultimate supply chain, c.f. 1.2.2).
December 2007 According to (Jttner 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 chainenvironment 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). 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. Chaos Supply networks are more complex, this complexity can lead to chaos effects. These chaos effects result from over-reactions, unnecessary interventions, second-guessing, mistrust, and distorted information throughout the entire supply chain. Inactive cooperation and collaboration leads to a breach of trust. Once there is a breach of trust in an organization, it is hard to rebuild it again. The risk is that trust can never be rebuilt as long as the same people are involved (Mariotti, 1999).
December 2007 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) 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 networkrelated 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 least exacerbated by them. There are mainly four mitigating strategies: (1) avoidance, (2) control, (3) co-operation, (4) flexibility. Owing to Jttner and al., these four mitigating strategies could be described as follow.
December 2007
Avoidance Control Dropping specificproducts/geographical markets/supplier and/or customer organisations Vertical Integration Increased 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, unpredictable business environment) Strategic risk planning
Table n1: Risk Mitigating Strategies in Supply Chains (Jttner 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.
Network Risk Sources
Organisational Risk Sources Environmental Risk Sources
December 2007
Environmental Risk Sources
Organizational Risk Sources
Network Risk Sources
Figure n14: Diagram representing the scope of the case study
11. How do Lean, Agile and Leagile Supply Chain Strategies affect 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 management?
11.1. Literature review

11.1.1.Lean philosophy
The lean approach, which can be traced to Toyota and also known as the Toyota Production System (TPS), has resulted in legendary success by Japanese auto manufacturers. Lean principles have helped the Japanese automobile manufacturers to achieve higher quality, lower cost, and faster time-to-market. Furthermore, Japanese lean manufacturers have made
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 processing 5. 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 a make-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 quantities, qualities, and allocation of products that will match consumer demand. This supposes to be focused on the customer.
Firstly Lean philosophy was mostly applied to improve manufacturing management practices. However Lean best practices spread out to several disciplines. Lean principles have also found application in logistics (Disney, Nairn, and Towill, 1997; Jones, Hines, and Rich 1997; Wu 2002), product development and launch (Bowersox, Stank, and Daugherty 1999),
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-sum game, 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 relationships where suppliers have little involvement in their customers product design and development processes. In this context, it is difficult to drive a profound stabilization of the processes and to reach common standard between all the entities of one of the supply networks that a firm have to manage. Thus there is no real best practices sharing and implementation. That represents a loss of time and it broadens the possible set of risk sources. In that context, objective risks play an important place. However these lacks of standardization, of processes stabilization, of common best practices reduce common
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 multitiered 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 their first-tier suppliers to manage their own respective suppliers, which are second-tier or lower-tier suppliers. Thanks to much smaller supplier bases and a tiered structure, OEMs can develop longer-term dedicated relationships with their most important first-tier suppliers. If we consider a serial production context (in contrast with NPI: New Product Introduction), this type of relationship between the OEM and the first-tier supplier enables to get a better vision of the evolution of a value chain. Indeed strategic best practices are implemented in order to reinforce the trust between buyers and suppliers, there is intensive and frequent technical or cost information sharing between the customer and suppliers. Exchange of
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. These investments 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 cant 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 and they 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, thats 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: To facilitate know-how transfer throughout a supply chain (to both internal and external processes). To apply updated best practices (particularly Lean and continuous and incremental process improvement best practices as Value Stream Mapping, 5S, Total Quality Management or Kaizen). To support purchasing strategies (Suppliers panel rationalization, Supplier selection, )
December 2007 To have a better understanding of suppliers capability Resources Management,
and processes (Human
Continuous Improvement policy, Client orientation,
Suppliers Management, (Informational & Material) Flows Management, Operations Management, Change Management and so on). To support risk identification, risk estimation, and risk response planning and execution activities. However the approaches to supplier development are driven by the individual companys 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 suppliers long-term loyalty and identities as members of the Toyota family but also laid out the foundation of Toyotas 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 companys 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 We have already presented the role of supplier development activities. To summarize its role could be seen as the responsible of knowledge acquisition, storage, diffusion and adaptation to the environment. This role must be supported by a relevant organization framework. We think that this activity must keep in the touch with the following two activities: Strategic Purchasing activities: To respond to the following questions: what? (Product) and when? (effective forecasts communication) Operations activities: To respond to the following question: How?
December 2007
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: The first hybrid approach embraces the Pareto (80/20) rule, recognizing that 80% of a companys revenue is generated from 20% of the products. It is suggested that the fast-moving products that make up the dominant 20% of the product line can be produced in a lean, make-to-stock manner given that demand is relatively stable for these items and that efficient replenishment is the appropriate objective. The remaining 80% are evolving in a more unstable environment. Therefore an agile strategy could be use in order to employ a make-to-order manufacturing strategy. Often manufacturing facilities are designed in accordance with this (80/20) Pareto rule. Some lines are dedicated to efficient processing of fast-moving product while
December 2007 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. 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 received from 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: Room for manoeuvre (That indicates if we are in a proactive or reactive risk management environment) Time remaining to milestone target The entities involved in the supply chain risk management project (dyadic relationship or all the entities of a value chain) There are three types of rooms for manoeuvre: Prevention, Contingency planning and Urgent recovery actions.
December 2007 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 in both operation and risk management practices.
High
LEAN
Room for manoeuvre
AGILE
Contingency planning Manageable Short Urgent Recovery Actions Event Date
Prevention None Long
Time remaining to milestone target
Figure n15: Risk management approaches
Moreover, there are two key concepts in a Lean environment: Standardization and multitiered 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 and of stable processes doesnt enable do have a recursive perspective on supply chain risk management. Consequently it will be more relevant to identify all the stakeholders of a given value chain. Concerning the objective/subjective debate, we argue that in a Lean environment approximately 70% of risks are objectives and the other ones subjectives. Indeed as one of the key concepts of Lean management is standardization and stabilization of processes, risks could be defined as a deviation from acceptable standards and best practices.
December 2007 We can describe briefly the decision diagram in order to build SCR tools regarding the objective/subjective debate.
Definition of objectives
Definition of the scope
Are the Best Practices implemented?
Process Analysis No
Yes
Business Process Reengineering
Supply Chain Modelling
Objective Identification of the deviations from the Best Practices Subjective Brainstorm possible risks
Figure n16: 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 Directors offices).
Lean Agile
entities involved in the supply chain risk management project Risk identification sources
A dyad
All the entities of a value chain Knowledgeable people
Deviation from Best practices Updated processes with a constant identification of best practices
The cornerstone
Flexibility and relevant forecasts analysis
Figure n17: Comparison of SCRM approach 68 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
December 2007 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.
December 2007
Part 3:
Case Study: Building tools and Frameworks to manage Supply Chain Risks at an aircraft manufacturer: Implementation of a FMEA*
* FMEA: Failure Mode and Effects Analysis 70 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
December 2007
13. Introduction
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.
14.
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 suppliers 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 Making supplying processes for serial production items more reliable Making supplying processes for New Product Introduction or Development items quickly more reliable
December 2007
14.1. A380 project delays: An evidence of the necessity to build a proactive 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 of processes harmonization. Moreover it seems obvious that this particular organizational framework implies that cross-cultural challenges are playing an important role in the organization evolution. Concerning informational flows: There is a lack of harmonization of the ERP systems, the collaborative I.T. tools (such as BW 23 ).
BW is an I.T. tool that enables to collaborate with the suppliers concerning the KPI (Key Performance Indicators).
23
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 Fasteners Raw Material (Titanium, Aluminum, Special alloys) Paint coating sealant Aluminium adhesives Clusters Forging products Aluminium plate sheet & extrusion Structural Composite Adhesives Structural Composite
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 1200 suppliers. 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 such as: 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: To decrease manufacturing costs. That could ease a negotiation of prices or it could help the supplier for future investment in order to face to ramp-up production. To increase the OTD and quality of the delivered products
14.3. Objective: Building tools and frameworks to manage Supply Chain Risks
As we have seen above, the supplier development team is evolving in a reactive environment. A supplier development project is triggered when a failure is detected in one of the supply chains. Moreover, as stated in the part 2, there is a need to develop tools in order to identify
December 2007 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. Therefore it is obvious that moving from a reactive management philosophy to a proactive 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 capacity to conduct Business Process Reengineering projects A capacity to provide an engineering support to projects conducted by quality or logistic managers
December 2007
15.1.1.Supplier Development processes

The main supplier development processes could be described by the following figure:
Strategy
Airbus Procurement Strategy Diagnosis Suppliers Development Strategy Communication Policy
Reengineering
Current status Future status Action Plan
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 : Human Resources Management Warehouse, in bound and out bound logistics Manufacturing management Maintenance Informational and Physical flows, planning activities, load/capacity analysis Sourcing and order management Customer orientation Continuous improvement Process Improvement and Monitoring
The supplier development team analyzes the strategy of the firm. They try to improve the strategy and to communicate this strategic thanks to relevant objectives from executives to the shop floor
Then, a Business Reengineering Process is established in order to improve the weak components of the organization. In most of the cases a flow reengineering process is established thanks to the VSM (Value Stream Mapping) method. There are for sure other problems and methods.
An action plan is established in order to reach new objectives. To do so, this action plan must involve multi-functional team from executives to shop floor employees. 76
Quirino Barbosa
Supply Chain Risk analysis in the aerospace industry
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 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 build this partnering relationships with the suppliers. Their role will be relatively the same. The field engineers will be the direct clients of this project. Therefore we understand that we should integrate this context in our project. Communication could be the key to reach our goals.
15.3. Theoretical approach to have a deep understanding of the project

The main challenges in the implementation of new solutions in an important organization are: to understand a complex organization
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 havent 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 AP2131 (Module 4) Monitor suppliers panel & contract management AM2409 Project risk management AP2131 Procurement process AP2131 (Module 1) Define Procurement Strategy and Policy AH0010 Suppliers Guide to Procured Products and Services Risk management
December 2007 Airbus procedures present how risk management could integrate a sequence of activities in the purchasing process. Our scope
Risk Management Activities Risks identification
Risks estimation
Supplier sites audit and Risks
Risks identification and Management
Supplier Selection process Supplier identification RFI RFP/RFQ Shortlist Supplier Selection Product Design and Development Mature product manufacturing
1. Creation of the register and 2. Registration of 3. Registration of registration of risks identified risks identified risks
4. Registration of further Risks to future supply
Risk register update
Risk Action Closure Report
Supplier review record
Figure n2: 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).
IDEF: The IDEF methodology was initially intended for use in systems engineering. In the 1970s, the system design and analysis domains were in need of supporting modeling methods. The IDEF initially contained an activity (function) modeling method, called IDEF0, a conceptual modeling method called IDEF1 and a simulation model specification method-the IDEF2. Since then, other developments saw several constructs added to these models to give birth to other models. For instance, IDEF 3 has an object-state component that can be used to model how objects undergo change in process. 79 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
December 2007 To model our supply chain framework we mostly used IDEF3. We can present here a generic IDEF0 diagram.
Control
Input
Function or Activity
Output
Mechanism
Figure n2: 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.
Figure n3: Process Flow Diagram
SCOR model: (part 2) MRP II: When people try to define the term supply chain, the definition could be focused on logistic, I.T. systems, purchasing, or manufacturing. We decided in this project to be focused on
December 2007 operations 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.
Business Plan
Step by step planning
Step by step capacity check
MRP is a calculation method that gives what we need to manufacture the products.
Sales & Operations Forecasts to suppliers Order Entry & Promise Master Production Schedule Plan
Resources Requirements Plan
MRPII is a business approach to decide and plan what to produce. Its a real decisionmaking tool. The strategic business plan incorporates the
Rough-Cut Capacity Plan
MRP
Purchase Orders
Material Requirement Planning Production Activity Control
Capacity Requirements Plan
Input / Output Control
plans of marketing, finance, and production. Marketing
Figure n4: MRP II system
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 idea is that the MRPII system provides the mechanism for coordinating the efforts of marketing, finance, production, and other departments in the company. MRP II is a method for the effective planning of all resources of a manufacturing company.
15.3.3.Define the scope of the Supply Chain framework

In Part 2 we explained how we can describe the supply network thanks to a recursive relationship.
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 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. 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 Failure Mode: RISKS
Potential Effect(s) of Failure
The SC vision is not defined A1.1 Define the vision and set a mission statement with hierachy of goals
Supply Chain executives have no vision on how the Supply Chain should operate in order to compete The Business Strategy is not operationalized and supported There is no long-term vision, therefore it will be difficult to reach the business objectives
Deviations
There is no mission statement with hierarchy of goals
This lack of vision affect not only the company that doesn't make the effort to build this vision but also all the stakeholders of the entire supply chain SC executives don't know which area they have to improve firstly The project management tools developed to analyse the current state of the organization are not relevant
The SC strategy is not consistent with the Business strategy
Business strategy is not executed through the operational components of a company Inability to respond the customer ever-changing requirements: Develop flexibility and responsiveness Confusing or conflicting communications to the organization where objectives may be contradictory
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, how frequently they occur and how easily they can be detected. An FMEA also documents current knowledge and actions about the risks of failures, for use in continuous improvement. FMEA is used during the design stage with an aim to avoid future failures. Later it is used for process control, before and during ongoing operation of the process. Ideally, FMEA begins during the earliest conceptual stages of design and continues throughout the life of the product or service. The purpose of the FMEA is to take actions to eliminate or reduce failures, starting with the highest-priority ones. It may be used to evaluate risk management priorities for mitigating known threat-vulnerabilities. 83 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
December 2007 In 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 its suppliers network. It could affect the delays (< 5days)
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.
Plan Supply Chain A1
SUPPLIER
AIRBUS
Plan Supply A2
Plan Make A2 Plan Deliver A3
Plan Supply A7
Supply A4
Make A5
Deliver A6
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 the Output 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, therefore this could represent a risk.
Process Function/ Requirements Input Output Potential Failure Mode Potential Effect(s) of Failure Potential Cause(s)/ Mechanism(s) of Failure Current Design/ Process Controls Prevention Current Design/ Process Controls Detection Recommended Action(s) DET RPN
OCC
Figure n5: FMEA criteria
SEV
December 2007
16.3. Communication stakes

We presented our supply chain framework to a department in charge of describing the internal processes of Airbus. We try to implement our supply chain framework into their systems in order to describe the processes until the suppliers operations. Once we had almost built his risk management tool, we tried to communicate our results. We discovered that a team of supply chain managers from Germany, France, U.K. and Spain were working since the beginning of September 2007 on a supply chain risk management project. Their goal was to build a standard risk register between all the Airbus entities. Their risk register was not validated, and thus it was difficult to integrate my solutions to this project. The risk register was almost based on a FMEA too. However I presented my project as a relevant input to their project. Indeed the risk register project enables to have a common tool to analyze suppliers risks, but it doesnt solve the problems with risk identification issues. Once the risk register project will be validated, our project could play an important role. Finally I worked regularly with a field engineer. Hopefully this field engineer will implement our solutions.
17. Conclusion
We reach our goals. We have defined a relevant supply chain framework that will support our risk management tool. Thanks to this case-study we succeed to illustrate, in an industrial environment, how we have answered the research 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?
December 2007
18. References
Ahlstrom, Par and Christer Karlsson (1996), "Change Processes towards Lean Production: The Role of the Management Accounting System," International Journal of Operations and Production Management, Vol. 16, No. 11, pp. 42-56. Anderson, Erin and James A. Narus (1990), A Model of Distributor Firm and Manufacturer Firm Working Relationships, Journal of Marketing, Vol. 54, January, pp. 42-58. Bassetto S. (2005), Contribution la qualification et lamlioration des moyens de production, de manire oprationnelle, dynamique, en supportant les connaissances mtier, Thse de Doctorat Ph.D, CER ENSAM de METZ. Bernstein, P. (1996), Against the Gods: The Remarkable Story of Risk, Wiley, Chichester Bowersox, D.J. (1990), The Strategic Benefits of Logistics Alliances, Harvard Business Review, July-August, pp. 36-45. Bowersox, Donald J., Theodore P. Stank, and Patricia J. Daugherty (1999), "Lean Launch: Managing Product Introduction Risk through Response-Based Logistics," Journal of Product Innovation Management, Vol. 16, No. 4, pp. 557-568. Braithwaite, T. & Thomas, H. (1990), Risky business? Critical decisions in supply chain management (part 1&2), Supply Chain Practice (1), Part 1: 40-57, Part 2: 22-58 Carr, A.S. and Smeltzer, L.R. (1997), An empirically based operational definition of strategic purchasing, European Journal of Purchasing & Supply Management, Vol. 3 No. 4, pp. 199-207. Christopher, Martin L. (1992), Logistics and Supply Chain Management, London: Pitman Publishing Christopher, M. & Lee, H. (2001) Supply Chain Confidence, Working paper, Cranfield School of Management, UK. Cooper, M. , Lambert, D. and Pagh, J. (1997), Supply Chain management: more than a new name for logistics, The international Journal of Logistics Management, Vol.8 N.1, pp.1-14 Cooper, Martha C. and Lisa M. Ellram (1993), Characteristics of Supply Chain Management and the Implication for Purchasing and Logistics Strategy, The International Journal of Logistics Management, Vol.4, N 4, pp. 13-24. Cousins, P., Lamming, R.C. and Bowen, F. (2004), The role of risk in environment-related initiatives, International Journal of Operations & Production Management, Vol. 24 No. 6, pp. 554-65. Das, T.K. and Teng, B-S. (1998), Resource and risk management in the strategic alliancemakingprocess, Journal of Management, Vol. 24 No. 1, pp. 21-42.
December 2007 Delfmann W., Albers S. (2000), Supply Chain Management in the Global Context, Arbeitbericht Nr.102-Arbeitsberichte des Seminars fr Allgemeine Betriebswirtshaftslehre, Betriebswirtshaftsliche Planung un Logistik der Universitt zu Kln. Dickson, G. (1989), Corporate Risk Management. Institute of Risk Management, Witherby, London. Disney, S.M., M.M. Nairn, and D.R. Towill (1997), "Dynamic Simulation Modeling for Lean Logistics," International Journal of Physical Distribution and Logistics Management, Vol. 27, No. 3-4, pp. 174-196. Dyer, Jeffrey H. and William G. Ouchi (1993), Japanese-style partnerships: giving companies a competitive edge Sloan Management Review, Fall 1993, pp. 51-63
Ellram, Lisa M. and Martha C. Cooper (1990), Supply Chain Management, Partnerships, and the Shipper-Third-Party Relationship, The International Journal of Logistics Management,Vol. 1, No. 2, pp. 1-10. Engardio, P. (2001), Why the supply chain broke down?, Business Week, 19 March, issue 3724, p.41. Faisal M.N., Banwet D.K. and Shankar R. (2006) Supply Chain risk mitigation: modelling the enablers, Business Process Management Journal, Vol. 12 N. 4,pp.535-552
Fone, M. and Young, P. (2000), Public Sector Risk Management, Butterworth-Heinemann, London. Ford, D., Hakansson, H., Gadde, L-E. and Snehota, I. (2003), Managing Business Relationships,2nd ed., Wiley, Chichester. Frigeant V. and Talbot D. (2001) Proximits et logique modulaire dans lautomobile et laronautique : vers une convergence des modles dapprovisionnement ? IIImes Journes de la Proximit Nouvelles Croissances et Territoires , Paris. Harland, C., Brenchley, R. and Walker, H. (2003), Risk in supply networks, Journal of Purchasing and Supply Management, Vol. 9 No. 2, pp. 51-62. Haywood Major Marc and Dr.Helen Peck (2003), Supply Chain vulnerability within UK Aerospace manufacturing: a methodology for supply chain risk management research Supply Chain Practice Vol. 5 N 4 Hendricks, K.B. and Singhal, V.R. (2003), The effect of supply chain glitches on shareholder value, Journal of Operations Management, Vol. 21 No. 5, pp. 501-22. Hiles A. and Barnes, P. (2001) The Definitive Handbook of Business Continuity Management, J.Wiley & Sons, Chichester Hood, J. and Young, P. (2005), Risk financing in UK local authorities: is there a case for risk pooling? International Journal of Public Sector Management, Vol. 18 No. 6, pp. 563-78.
December 2007 Hyer, Nancy L. and Urban Wemmerlov (2002), "The Office that Lean Built," IIE Solutions, Vol. 34, No. 10, pp. 37-43. Jones, Daniel T., Peter Hines, and Nick Rich (1997), "Lean Logistics," International Journal of Physical Distribution and Logistics Management, Vol. 27, No. 3-4, pp. 153-173. Jttner U., Peck H. & Martin C. (2003) Supply Chain Risk Management: Outlining an Agenda for future Research, International Journal of Logistics: Research and Applications Vol. 6, N. 4, 2003. Khknen K. and al. (2007) Management of Uncertainty, VTT Technical research centre of Finland Kearny A.T.& The Society of British Aerospace Companies-The Emerging Airline Industry , 2003 Khan Omera and Burnes Bernard (2007), Risk and supply chain management: creating a research agenda, The International Journal of Logitics Management , Vol.18 N2. Knight, F.H. (1921), Risk, Uncertainty and Profit, Houghton Mifflin, Boston, MA. La Londe, Bernard and Masters (1994), Emerging Logistics Strategies: Blueprint for the next century, International Journal of Physical distribution and Logistics Management, Vol24, n7, pp35-47. Lambert, D.M., M.A. Emmelhainz et J.T. Gardner (1996), Developping and Implementing Supply Chain Partenership, The International Journal of Logistics Management, vol. 7, no 2. Lamming , R., Johnsen, T., Zheng, J. & Harland, C. (2000) An initial classification of supply networks, International Journal of Operations and Production Management, 20, (6), pp. 675691. Lee, Hau L. and Corey Billington (1992), Managing Supply Chain Inventory: Pitfalls and Opportunities, Sloan Management Review, Spring, pp.65-73. Lowrance, W.W. (1980), The nature of risk, in Schwing, R.C. and Albers, W.A. (Eds), How Safe is Safe Enough?, Plenum Press, New York, NY. Lupton, D. (1999), Risk, Routledge, London. MacPherson and Pritchard, (2005) Boeings Diffusion of Commercial Aircraft Design and Manufacturing Technology to Japan: Surrendering the US Aircraft Industry for Foreign Financial Support.Canada-United States Trade Center Department of Geography, State University of New York, Buffalo, New York 14261, March 2005 MacDuffie, John Paul and Susan Helper (1997), "Creating Lean Suppliers: Diffusing Lean Production through the Supply Chain," California Management Review, Vol. 39, No. 4, pp. 118-151. March, J.G. and Shapira, Z. (1987), Managerial perspectives on risk and risk taking, Management Science, Vol. 33 No. 11, pp. 1404-18.
December 2007 Mariotti, J. (1999), The trust factor in supply chain management, Supply Chain Management Review, Vol.35 N 2, pp 70-77. McGillivray, G. (2000), Commercial risk under JIT, Canadian Underwriter, 67, pp.26-30 Mentzer T., DeWitt W., Keebler J.S., Min S., Nix N., Smith C., Zacharia Z. (2001) Defining Supply Chain Management , Journal of Business Logistics, Vol. 22, N2 Moore, P.G. (1983), The Business of Risk, Cambridge University Press, Cambridge. New S.J. and Payne P., (1995) Research Framework in Logistics: Three models, seven dinners and a survey, International Journal of Physical Distribution and Logistics management. Norrman A., Jansson U., Ericssons proactive supply chain risk management approach after a serious sub-supplier accident International Journal of Physical Distribution & Logistics Management, Vol. 34 N. 5, 2004. pp.434-456. PMBOK (2004), A guide to the project management body of knowledge, 3rd edition, Project Management Institute, Inc., Pennsylvania, USA. Robinson, P.J., Faris, C.W. and Wind, Y. (1967), Industrial Buying and Creative Marketing, Allyn and Bacon, Boston, MA. Ross, David Frederick (1998), Competing Through Supply Chain Management, New York, NY: Chapman & Hall. Rowe, W. (1980), Risk assessment: approaches and methods, in Conrad, J. (Ed.), Society, Technology and Risk Assessment, Academic Press, London. Simon, P., Hillson, D. and Newland, K. (1997), Project Risk Analysis and Management Guide (PRAM), Association for Project Management, Norwich. Slack N. and Lewis, M. (2001), Operations Strategy, 3rd ed., Prentice-Hall, Harlow. Smith D.(2005), Exploring Innovation, McGraw Hill Education- Europe Smeltzer L., Siferd S. (1998) Proactive Supply Management: The Management of Risk, International Journal of Purchasing and Materials Management. Spira, L.F. and Page, M. (2002), Risk management: the reinvention of internal control and the changing role of internal audit, Accounting, Auditing & Accountability Journal, Vol. 16 No. 4, pp. 640-61. Tapping, Don and Tom Shuker (2003), Value Stream Management for the Lean Office: 8 Steps to Planning, Mapping, and Sustaining Lean Improvements in Administrative Areas, New York: Productivity Press. Tayur S., Ganeshan R., (1999) Quantitative Models for Supply Chain Management, Kluwer Academic Publishers, 2000
December 2007 Tchankova, L. (2002), Risk identification basic stage in risk management, Environmental Management and Health, Vol. 13 No. 3, pp. 290-7. Williamson, O.E. (1975), Markets and Hierarchies: Analysis and Anti-trust Implications, The Free Press, New York, NY. Williamson, O.E. (1979), Transaction Cost Economics: The Governance of Contractual Relations, The Free Press, New York, NY. Wind, Y. and Webster, F.E. (1972), Industrial buying as organizational behavior: a guideline for research strategy, Journal of Supply Chain Management, Vol. 8 No. 3, pp. 516. Womack James P., Daniel T. Jones and Daniel Ross (1990). The Machine that Changed the World: the Story of Lean Production. Rawson Associates, Macmillan, New-York Wu, Yen-Chun Jim (2002), "Effective Lean Logistics Strategy for the Auto Industry," International Journal of Logistics Management, Vol. 13, No. 2, pp. 19-38. Yates, J.F. and Stone, E. (1992), The risk construct, in Yates, J.F. (Ed.), Risk-taking Behaviour,Wiley, Chichester.
December 2007
19. Web links

Airbus www.airbus.com Boeing www.boeing.com Composites bring Boeing's buyers, engineers and parts suppliers closer http://www.purchasing.com/article/CA6419134.html Environment, Safety, and Health considerations-Composite Materials in the Aerospace Industry http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19950016608_1995116608.pdf La filire composite l'Arospatiale http://www.w3architect.com/static/people/fgaillard/these/Aa-FiliereCompo.html
Lindustrie franaise des matriaux composites http://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf
December 2007
20. Appendixes
20.1. Appendix 1: State of the art definitions
State-of-the art definitions: RISK
Topic Author APM PRAM Guide Berntein Dickson Fone and Young Frosdick Frosdick Grose Hood and Young Khknen Kendall Knight Lowrance March and Shapira Mitchell Moore Parr PMI PMBOK Rowe Schtub et al. Simon et al. Slack and Lewis Snider Steele and Court Tchankova Yates and Stone Zsidisin Downlin & Staelin
Risk Risk and Risk Definition Uncertainty management
x (2004) x (1996) x (1989) x (2000) x (1997) x (1997) x (1992) x (2005) x (2007) x (1921) x (1980) x (1987) x (1999) x (1983) x (1997) x (2004) x (1980) x (1994) x (1997) x (2001) x (1991) x (2007) x (1921) x (2007) x (2003)
x (1994) x (2001) x (1996) x (2002) x (1992) x (2004)
x (1994)
x (1994)
December 2007
State-of-the art definitions: Supply Chain Management (1/3)

Risk concerning the relationship between Supplier and Customer
Topic
Risk and Purchasing
Supply chain risk management
Transparency information
Lean, Agile Risk: & Leagile SC Objective vs management Subjective & Risk phenomenon? Management
Author Antonette et al. Bernstein Burnes and Dale Burnes and New Cachon & Fisher Carr and Smeltzer Chopra & Sodhi Christopher Christopher & Towill Christopher et al. Cousins and Pekman Cousins et al. Eisenhart Ericson Faisal Faisal, Banwet & Shankar Feldman and Cardozo Finch Ford Frosdick Gadde and Hakansson Giunipero & Pearcy Giunipero & Eltantawy Goldsby and GarciaDastugue Gregory Hahn et al. Hallikas et al. Handfield and Nichols Harland Helo Helo and Szekely Hendricks and Singhal Hines and al. Hoffman
x (2002) x (1998) x (1996)
x (2002) x (1996)
x (2000) x (1997) x (2004) x (2000) x (2001) x (2003) x (2004) x (1989) x (2001) x (2005) x (2005) x (1975) x (2004) x (1980) x (1997) x (2001) x (2000) x (2004) x (2003) x (2000) x (2002) x (2002, 2004) x (1999) x (2003) x (2004) x (2005) x (2005) x (1999) x (1998) x (2006) x (2000) x (2000) x (2004)
x (2004)
December 2007

Risk concerning the relationship between Supplier and Customer Lean, Agile Risk: & Leagile SC Objective vs management Subjective & Risk phenomenon? Management
Topic
Risk and Purchasing
Author Hollweg Jiang, Baker & Frazier Johnson Karjalainen and al. Kendall Khan & Burnes Koh Koh and Saas Kraljic Landmark Larson & Kulchitsky Lee et al. Lengnick-Hall Levitt Lewis Lupton Macintosh MacKinnon Mariotti Mason-Jones and al. Mentzer and al. Mitchell Moore Naylor and al. Naylor, Nairn, and Berry Norrman & Lindroth Ohno Peters and Venkatesan Philling and Zhang Puto et al. Ragatz Robinson et al. Sheth Simchi-Levi and al. Singh Appendix
x (2002) x (2007) x (2001) x (2003) x (2003) x (2004) x (2004) x (1983) x (1960-70) x (1998) x (1997) x (1998) x (1965) x (2003) x (2002) x (2002) x (1999) x (2000) x (2001) x (1995) x (1999) x (1997) x (2002) x(1998) x (1973) x (1992) x (1985) x (1997) x (1967) x (1973) x (2002) x (1998) x (1983) x (2003) x (2007)
x (1983)
x (2000)
x (1999)
x (1967)
December 2007

Risk concerning the relationship between Supplier and Customer
Topic
Risk and Purchasing
Lean, Agile Risk: & Leagile SC Objective vs management Subjective & Risk phenomenon? Management
Author Singh & GomezMeija Sinha, Whitman & Malzahn Smeltzer and Siferd Souter Spira and Page Stratton and Warburton Svensson Van der Vorst and al. Van Hoek and al. Van Landeghem and Vanmaele Van-Hoeck Walker & Alber Williamson Wind and Webster Wiseman & Gomez-Meija Womack et al. Yates and Stone Zolkos Zsidisin x (2000,2003, 2004) x (1998) x (2004) x (1998) x (2000) x (2002)
x (2003) x (2000, 2001, 2002) x (1998) x (2001) x (2002) x (2000) x (1979) x (1999) x (1975, 79) x (1972) x (1998) x (1990) x (2003) x (2000, 2004) x (1992)
December 2007
State-of-the art definitions: Lean applications

Topic Author/Source Ahlstrom and Karlsson Bowersox, Stank, and Daugherty Disney, Nairn, and Towill Goldsby and Martichenko Hyer and Wemmerlov Jones, Hines and Rich MacDuffie and Helper Tapping and Shuker Wu x (1997) x (2003) x (2202) x (1997) x (1997) x (2003) x (2002) x (1999) Product Logistics development Purchasing and launch Office Demand environments Management
Accounting
x (1996)
December 2007
State-of-the art definitions: New Product Introduction
Topic Author/Source Balasubramanian& Baumgardner Barata Burkett Calvi & Le Dain Carbone Fujimoto IAQG (International Aerospace Quality Group) SAP White paper collection Shister Stevens Twigg Wynstra Zsidisin & E.Smith
ESI: Early Supplier Involvement X (2004) x (2004) X (2006) x (2007) x (2007) x (1995) x (every year) x (2006) x (2007) x (2004) x (1996) x (1998, 2000) x (2004)
December 2007
20.2. Appendix: Supply Chain Framework. IDEF model
Node A1: Plan Supply Chain
A1
Tier 2
Tier 1
Airbus
Used at: PMQA-SD
Author: Project: Supply Chain Risk Analysis
Date: 01/09/07
Reader: Date:
Context:
Define the vision and set a mission statement with hierarchy of goals
SWOT analysis According to the desired goals conduct analysis
Formulate actions and processes to be taken to attain these goals
Implementation of the agreed upon processes
Monitor and get feedback from implemented processes to fully control the operation
A1.1
A1.2
A1.3
A1.4
A1.5
Node:A1
Title: Serial Production- 1st Tier Suppliers
Plan Supply Chain
Number: 1/3
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Assess external situation : Markets, Competition, Technology, Supplier markets, Labour markets, The economy, The regulatory environment
Mission statement : It tells what the company is now; it defines the customer(s), the critical processes and the desired level of performance
Vision statement : It defines where the company wants to be. It provides clear decisionmaking criteria. Make or Buy decision
A1.1.1
A1.1.2
A1.1.3
Classify the product range according to the strategic objectives
Identify Sales objectives
Identify Inventory objectives
Identify Production objectives
Identify Delivery objectives
A1.1.2.1
A1.1.2.2
A1.1.2.3
A1.1.2.4
A1.1.2.5
Node:A1
2 Title: Serial Production- 1st Tier Suppliers Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
Plan Supply Chain
Number: 2/3
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Internal Analysis
External Analysis
Strengths Analysis
Weakness Analysis
Opportunities Analysis
Threats Analysis
A1.2.1
A1.2.2
A1.2.3
A1.2.4
Competitive Rivalry within the industry Analysis
Bargaining Power of suppliers Analysis
Bargaining Power of Customers Analysis
Threat of New Entrants Analysis
Threat of substitute Products Analysis
A1.2.3.1
A1.2.3.2
A1.2.3.3
A1.2.3.4
A1.2.3.5
Node:A1
Title: Serial Production- 1st Tier Suppliers 3

Plan Supply Chain
Number: 3/3
Quirino Barbosa
December 2007
Node A2: Plan Supply & Make
A2
Tier 2
Tier 1
Airbus
Used at: PMQA-SD
Author:
Date: 01/09/07
Reader: Date:
Context:
December 2007 Identify Long Term Needs
Project: Supply Chain Risk Analysis
Receive Aircraft Program
A2.13
Aggregate Manufacturing needs according to :
Identify Technical Requirements Identify Functional requirements
A2.1
Check the Demand historic Analyze Trends
A2.14
Identify Timing Requirements
Long Term needs
Firm Orders
A2.2 Analyze Forecasts accuracy A2.4
A2.3
&
Establish Demand forecast
Products Clients Factories
&
&
A2.6
A2.15
Identify Quality Requirements
A2.12
Receive Demand Forecast from Airbus
A2.16 Manage configuration conformity and Documentation A2.17

A2.5
Identify Short Term Needs

Receive Firm Order
A2.7
Receive Spare Needs (A.O.G)
A2.13
A2.8
&
Receive Repair Needs
A2.14
Short Term needs
&
A2.9
Identify back-orders
&
&
A2.15
A2.12
A2.10
Identify NonQuality Problems
A2.11
Node: A2
Title: Serial Production 1st Tier Suppliers 5

Plan Supply & Make
Number: 1/5
Quirino Barbosa
Used at: PMQA-SD
Author:
Date: 01/09/07
Reader: Date:
Context:
December 2007
Project: Supply Chain Risk Analysis
S&OP Level
Business plan objectives
LONG Term: Every Month (Horizon Plan =1 to 3 years; for Products families) Resource requirements planning
Assess NPD/NPI Programmes
Coordinating plans of the various departments
A2.22
&
Load / Capacity Analysis
Sales/Demand Plan
&
Long term needs
A2.23
Identify critical materials
S&OP
S&OP updated from the Forecast Consumption Analysis
A2.29
A2.24
&
Compare the actual demand with the sales plan
A2.18
Identify critical labour
A2.25
&
Communicate the updated marketing plan to manufacturing, engineering,and finance
Identify bottleneck operations
&
A2.26
Identify Tool capacity
A2.19
A2.27
Assess Investment capacity
Manufacturing, engineering, and finance adjust their plans to support the revised marketing plan
A2.28
A2.20
&
Control the overall coherence between S&OP and the strategic business plan
MPS
&
A2.21 SOP
Node:A2

Quirino Barbosa Supply Chain Risk analysis in the aerospace industry
Plan Supply & Make
Number: 2/5
Used at: PMQA-SD
Author: Project: Supply December 2007 Chain Risk Analysis
Date: 01/09/07
Reader: Date:
Context:
MPS Level
Every Week (Horizon Plan =3-6 Months; for End products) Rough-Cut Capacity Planning
A2.38
Inventory levels objectives for individual end items Load / Capacity Analysis
&
MPS
Forecast demand for each item in the product family
Sales/Demand Plan
&
A2.39
Production Plan
A2.44 A2.40
Short and Long term needs
&
A2.30
S&OP Integrate Customers orders
A2.41
&
&
A2.31
Devise a preliminary plan to fit the constraints
A2.42
A2.32
Forecast Consumption Analysis: ATP & PAB calculation
A2.43
A2.33
Resolve differences between the preliminary MPS and capacity availability
S&OP
Update the S&OP thanks to the Forecast Consumption Analysis
A2.34
&
A2.35 MRP
Control the overall consistency between MPS and the S&OP
&
A.O.G
Short Term
Manage Spare needs (AOG) (Urgent Order)
A2.36 MPS
A2.37
Node:A2
Quirino Barbosa
7 Title: Serial Production 1st Tier Suppliers Supply Chain Risk analysis in the aerospace industry
Plan Supply & Make
Number: 3/5
Used at: PMQA-SD
Author:
Date: 01/09/07
Reader: Date:
Context:
Project: Supply December 2007 Chain Risk Analysis
MRP Level
Planning factors: Order quantities, lead times, safety stock and scrap
Short term (Horizon Plan= 1 month; for components) Capacity requirements planning
Alter the load
A2.55
Inventory record file: How much is available, how much is allocated and how much is available for future demand Change the capacity available
Identify labour capacity
&
A2.50
Identify machine capacity
&
A2.54
MRP
A2.56 A2.51
Short term needs
&
Determine what, how much and when to order
A2.45
MPS Keep priorities current
&
A2.46
Check component availability
Identify labour requirements for each time period at each work centre
A2.52
&
Identify machine requirements for each time period at each work centre
B.O.M.
A2.53
A2.47
Release orders
A2.48
Plan Supply
&
A.O.G
& Plan Make Control the overall coherence between MRP and the MPS
&
MRP
A2.49
Short Term
A2.37
Node:A2
Quirino Barbosa
8 Title: Serial Production 1st Tier Suppliers Supply Chain Risk analysis in the aerospace industry
Plan Supply & Make
Number: 4/5
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Plan Supply
Net Needs
Load/Capacity provisional analysis
A2.57
A2.58
Integrate NPI/NPD programs into supply plans
Improve the collaboration with the suppliers
LONG Term
Communicate Price requirements Communicate Functional requirements Collaborate with the suppliers
A2.59
Communicate Quantity requirements Launch Purchase Order
Maintaining close contact with Production activities
&
A2.60
Set procurement objectives
A2.61
Establish relevant KPIs
A2.62
Measure Procurement Performance
A2.63
A2.64
Risk Prioritization
A2.65
&
Risk Action closure
A2.66
A2.67
Risk Identification and Recording
Action Plan
MEDIUM Term
A2.68
A2.69
A2.70
A2. 71
A2.72
Manage Spare needs
A2.37
SHORT Term
Plan Make
Gather information needed by the shop floor Check tooling and material availability
A2.73
A2.74
Check capacity requirements and availability (schedule and load)
Choose the most suitable Dispatching rule
A2.75
A2.76
Rank the shop orders in desired priority sequence by work center
PLAN
A2.77
Net Needs
Establish a dispatch list Release orders to the shop floor
EXECUTE
A2.78
A2.79
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
Control order status
CONTROL
A2.80
A2.81
A2.82
A2.83
A2.84
Node: A2

Plan Supply & Make
Number: 5/5
Quirino Barbosa
December 2007
Node A3: Plan Deliver
A3
Tier 2
Tier 1
Airbus
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Plan Outbound Logistic
Monitor transportation performance
A3.1
A3.2
Establish Logistic Strategies
Reserve Extra Long Load (WP only)
A3.1.1
A3.1.2
A3.1.3
Check transportation resources availability
Communicate transportation planning
Gather transportation documents
Check transportation resources
Assess transportation conditions
Monitor Transportation KPIs
Communicate transportation performance
A3.1.4
A3.2.1
A3.2.2
A3.2.3
A3.2.4
A3.2.5
Node: A3
Quirino Barbosa
11 Title: Serial Production- 1st Tier Suppliers Supply Chain Risk analysis in the aerospace industry
Plan Delivery
Number: 1/2
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Plan Delivery
A3.3
Gather Delivery planning demand
Plan Deliveries
Communicate Delivery information
A3.3.1
A3.3.2
A3.3.3
12
Node: A3
Quirino Barbosa
Title: Serial Production- 1 Tier Suppliers Supply Chain Risk analysis in the aerospace industry
st
Plan Delivery
Number: 2/2
December 2007
Node A4: Supply
A4
Tier 2 Tier 1 Airbus
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Transfer Raw Mat. or S.P. to a Control Area
A4.9
Receive Raw material or sub parts Collect Delivery Certificates Reception Registration on ERP Edit Reception Note Authorize Supplier Payment
A4.1
A4.2
A4.4
A4.5
A4.6
&
Collect conformity documents
&
O
Send Raw Mat. or S.P. to a Control Area if administrative non conformity
Archive documents
&
Transfer Raw Mat. or S.P. to Warehouse
A4.10
A4.8
A4.3
A4.7
Transfer Raw Mat. or S.P. directly to the Production Line
A4.11
Control Inventory obsolescence
A4.12
Node: A4
Title: Serial Production 1st Tiers Suppliers 14

Supply
Number: 1/2
Quirino Barbosa
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Stock In raw material or S. P. in Warehouse
Stock out from Warehouse
A4.13
A4.15
&
&
&
&
&
Stock In Registration on ERP
Stock Out Registration on ERP
Dispatch
A4.14
A4.16
A4.18
Control inventory obsolescence
A4.17
Node:
A4
Quirino Barbosa
15 Title: Serial Production 1st Tiers Suppliers Supply Chain Risk analysis in the aerospace industry
Supply
Number: 2/2
December 2007
Node A5: Make
A5
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
Stock In Elementary Parts
Stock Out
A5.5
A5.7
Sub contractors products & Raw Material Transfer from Warehouse
A5.1
Manufacture Elementary Parts
&
A5.2
Test and Attach Q-docs
&
&
&
Elementary parts transferred to Sub-assembly Unit
A5.3
Transfer
&
O
A5.4
A5.6
A5.8
A5.9
Transfer directly to the point of use
A5.10
Node:
A5
Title: Serial Production- 1st Tiers Supplier
Make
Number: 1/2
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Stock In Sub-Assembly
Stock Out
A5.14
A5.16
Manufacture Sub-Assembly
A5.11
Test and Attach Q-docs
&
A5.12
Transfer
&
&
&
Transfer Subassembly parts to Final assembly unit
A5.13
&
Dispatch
A5.20
A5.15
A5.17
A5.18
A5.19
Node:
A5
Title: Serial Production- 1st Tiers Supplier
Make
Number: 2/2
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Stock In Final Assembly Unit
A5.24
&
Final Assembly Unit Test and Attach Q-docs
&
A5.21
A5.22
Transfer
&
A5.23
A5.25
A5.26
A5.27
Node:
A5
Title: Serial Production- 1st Tiers Supplier 3

Make
Number: 2/2
Quirino Barbosa
December 2007
Node A6: Deliver
A6
Tier 2 Tier 1
Airbus
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Stock out Final Assembly Unit
A6.2
Edit Delivery Note and QDocs
&
&
Prepare Material for distribution (kits, etc)
Pack Product
Shipment
A6.1
A6.4
A6.5
A6.6
A6.3
5
Node: A6 Quirino Barbosa
Supply Chain RiskProduction- 1staerospace industry Title: Serial analysis in the Tiers Supplier
Deliver
Number: 1/1
December 2007
Node A7: Plan Supply & Make
A7
Tier 2
Tier 1
Airbus
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Identify Long Term Needs

Receive Aircraft Program
A7.13
A7.1
Check the Demand historic Analyze Trends
A7.14
Long Term needs
Firm Orders
A7.2 Analyze Forecasts accuracy A7.4
A7.3
&
Establish Demand forecast
&
&
A7.6
A7.15
A7.12
Receive Demand Forecast from Airbus

A7.5
Identify Short Term Needs

Receive Firm Order
A7.7
Receive Spare Needs (A.O.G)
A7.13
A7.8
&
Receive Repair Needs
A7.14
Short Term needs
&
A7.9
Identify back-orders
&
&
A7.15
A7.12
A7.10
Identify NonQuality Problems
A7.11
Node: A7
Title: Serial Production Airbus 7

Plan Supply & Make
Number: 1/4
Quirino Barbosa
Used at: PMQA-SD
Author:
Date: 01/09/07
Reader: Date:
Context:
Project: Supply Chain Risk Analysis December 2007
S&OP Level
Business plan objectives
LONG Term: Every Month (Horizon Plan =1 to 3 years; for Products families) Resource requirements planning
Coordinating plans of the various departments
A7.22
&
Sales/Demand Plan
&
Long term needs
A7.23
S&OP
S&OP updated from the Forecast Consumption Analysis
A7.29
A7.24
&
Compare the actual demand with the sales plan
A7.18
A7.25
&
Communicate the updated marketing plan to manufacturing, engineering,and finance
&
A7.26
Identify Tool capacity
A7.19
A7.27
Manufacturing, engineering, and finance adjust their plans to support the revised marketing plan
A7.28
A7.20
&
Control the overall coherence between S&OP and the strategic business plan
MPS
&
A7.21 SOP
Node: A7

Plan Supply & Make
Number: 1/4
Quirino Barbosa
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
MPS Level
December 2007
Every Week (Horizon Plan =3-6 Months; for End products) Rough-Cut Capacity Planning
A7.38
Inventory levels objectives for individual end items Load / Capacity Analysis
&
MPS
Forecast demand for each item in the product family
Sales/Demand Plan
&
A7.39
Production Plan
A7.44 A7.40
Short and Long term needs
&
A7.30
S&OP Integrate Customers orders
A7.41
&
&
A7.31
Devise a preliminary plan to fit the constraints
A7.42
A7.32
Forecast Consumption Analysis: ATP & PAB calculation
A7.43
A7.33
Resolve differences between the preliminary MPS and capacity availability
S&OP
Update the S&OP thanks to the Forecast Consumption Analysis
A7.34
&
A7.35 MRP
Control the overall consistency between MPS and the S&OP
&
A.O.G
Short Term
A7.36 MPS
A7.37
Node: A7

Plan Supply & Make
Number: 1/4
Quirino Barbosa
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
MRP Level
Planning factors: Order quantities, lead times, safety stock and scrap
Short term (Horizon Plan= 1 month; for components) Capacity requirements planning
Alter the load
A7.55
Inventory record file: How much is available, how much is allocated and how much is available for future demand Change the capacity available
Identify labour capacity
&
A7.50
Identify machine capacity
&
A7.54
MRP
A7.56 A7.51
Short term needs
&
Determine what, how much and when to order
A7.45
MPS Keep priorities current
&
A7.46
Check component availability
Identify labour requirements for each time period at each work centre
A7.52
&
Identify machine requirements for each time period at each work centre
B.O.M.
A7.53
A7.47
Release orders
A7.48
Plan Supply
&
A.O.G
& Plan Make Control the overall coherence between MRP and the MPS
&
MRP
A7.49
Short Term
A7.37
Node: A7

Plan Supply & Make
Number: 1/4
Quirino Barbosa
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
Plan Supply
Net Needs
Load/Capacity provisional analysis
December 2007
A7.57
A7.58
Integrate NPI/NPD programs into supply plans
Improve the collaboration with the suppliers
LONG Term
Communicate Price requirements Collaborate Functional requirements Collaborate with the suppliers
A7.59
Communicate Quantity requirements Launch Purchase Order
Maintaining close contact with Production activities
&
A7.60
Set procurement objectives
A7.61
Establish relevant KPIs
A7.62
Measure Procurement Performance
A7.63
A7.64
Risk Prioritization
A7.65
&
Risk Action closure
A7.66
A7.67
Risk Identification and Recording
Action Plan
MEDIUM Term
A7.68
A7.69
A7.70
A7. 71
A7.72
Manage Spare needs
A7.37
SHORT Term
Plan Make
Gather information needed by the shop floor Check tooling and material availability
A7.73
A7.74
Check capacity requirements and availability (schedule and load)
Choose the most suitable Dispatching rule
A7.75
A7.76
Rank the shop orders in desired priority sequence by work center
PLAN
A7.77
Net Needs
Establish a dispatch list Release orders to the shop floor
EXECUTE
A7.78
A7.79
Weekly input/output control by department or work centre Gather Exception reports on scrap, rework, and late shop orders Establish performance summaries on order status, work centre efficiencies
Control order status
Check Inventory status
CONTROL
A7.80
A7.81
A7.82
A7.83
A7.84
Node: A7
11 Title: Serial Production AIRBUS Supply Chain Risk analysis in the aerospace industry
Plan Supply & Make
Number:3/4
Quirino Barbosa
December 2007
Node A8: Supply
A8
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Transfer Raw Mat. or S.P. to a Control Area
A8.10
Receive Raw material or sub parts Collect Delivery Certificates Reception Registration on ERP Edit Reception Note Authorize Supplier Payment
A8.1
A8.2
A8.4
A8.5
A8.6
&
Collect conformity documents
&
O
Send Raw Mat. or S.P. to a Control Area if administrative non conformity
Archive documents
&
Transfer Raw Mat. or S.P. to Warehouse
A8.11
A8.8
A8.3
A8.7
Transfer Raw Mat. or S.P. directly to the Production Line
A8.12
Control Inventory obsolescence
A8.17
Node: A9
13 Supply Chain Risk analysis in the aerospace industry
Quirino Barbosa
Title: Serial Production- Airbus
Supply
Number: 1/2
Used at: PMQA-SD
Date: 01/09/07
Reader: Date:
Context:
December 2007
Stock In raw material or S. P. in Warehouse
Stock out from Warehouse
A8.13
A8.15
&
&
&
&
&
Dispatch
A8.14
A8.16
A8.18
A8.17
Node: A9
Quirino Barbosa
14 Title: Serial Production- Airbus Supply Chain Risk analysis in the aerospace industry
Supply
Number: 2/2

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Janvier 2008 English version

2 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

December 2007 Table of contents

ACKNOWLEDGEMENTS ........................................................................................................................ 6 RECOMMANDATIONS ............................................................................................................................ 7

3 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

4 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

5 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

6 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

7 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

8 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

9 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

4.1.1. Major players in the commercial aircraft industry

10 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

4.1.2. Industry characteristics

11 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

4.2. Industry dynamics

4.2.1. Description of the main product innovations

12 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

13 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

4.2.2. Theoretical approach of innovation

14 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Carbon Fibre Titanium Technology Very Large Airlines Reinforced Plastic

Figure n 1: Difference between Invention and Innovation

15 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Warehouse Product Development Production

Figure n2: Dyadic Supply Chain throughout an energy perspective

Lindustrie franaise des matriaux composites, p 116 http://www.industrie.gouv.fr/biblioth/docu/dossiers/sect/pdf/rapfinal_long.pdf

16 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

La filire composite l'Arospatiale http://www.w3architect.com/static/people/fgaillard/these/Aa-FiliereCompo.html

17 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

18 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Low to medium capacity aircrafts * Skills Knowledge Skills

High capacity aircrafts * Knowledge

* Capacity of both range and seats

Figure n3: Evolution of the punctuated equilibrium

5. Comparative analysis of Supply Chain Management strategies

O.E.M. :Original Equipment Manufacturer :

19 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

5.1.1. Suppliers network in the aerospace industry

5.1.2. Original Equipment Manufacturer

20 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Figure n4: Plan: Having a multi-level vision throughout the organization

21 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Cp: Production Cycle Cc: Commercial Cycle

{ ETO,MTO, ATO, MTS}

< < < Cc MTO Cc ATO Cc

23 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Manufacturing based on forecasts

Manufacturing based on orders

24 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

Freighter Passenger service aircraft Total

2026 3980 36420 40400

Boeing Forecasts Figure n6: Products Forecasts

Airbus Market Outlook 2005-2025 ; Global Market Forecast

25 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

26 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

27 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry

5.2.3. Outsourcing strategy

5.2.4. New trends in Supply Chain Management

28 Quirino Barbosa Supply Chain Risk analysis in the aerospace industry