Boeing has been eating Airbus for lunch lately, due to a combination of the innovative technologies in the 787 Dreamliner and the problems with the Airbus A350 and A380. Although we have taken both companies to task for their supply chain convolutions that birthed the Dreamlifter and Beluga, these are very complex companies making incredibly complex products. As Boeing ex-CEO and current Ford CEO Mulally is fond of saying, "An automobile has about 10,000 moving parts, right? An airplane has two million, and it has to stay up in the air."
Airbus has been taking a hard look internally, and perhaps they are learning something. Perhaps. Once again I’m dismayed to see "lean" used in the same title as "mean," but unfortunately in this situation it may fit.
The crisis encountered by Airbus in the severely-delayed A380 programme led to a complete review of the company’s business model, says chief operating officer Fabrice Bregier. Airbus’s phenomenal success over the previous 10 years had led the company to become complacent, he believes, and the crisis was a real wake-up call.
Sounds familiar. Unfortunately many companies encounter such a crisis. So now what?
But the crisis was also an opportunity, and the Power8 programme aimed at completely restructuring Airbus was the result. Key elements of the “new Airbus” programme include a cut in the cycle time of new aircraft development from seven and a half years to six years through a 15% improvement in engineering activities; a productivity increase of 16% by 2010 through use of Lean manufacturing; and a reduction in the supplier cost base and the number of logistics centres from 80 to eight through “smart buying”.
Sounds pretty good. Not too much meat around what their lean initiatives really are, but there rarely is in mainstream news stories.
Although the toughest part of the programme – major cost reductions that will shed up to 10,000 jobs – are only now beginning to be tackled, Bregier says the programme is already bearing fruit.
So much for lean, and why "mean" really does belong in the story’s title. I guess "bearing fruit" is depends on your perspective. I doubt those 10,000 people are happy to be the bearers of fruit. But once again traditional business metrics trump measures of knowledge, creativity, and experience.
“We will turn Airbus into an extended enterprise,” says Louis Gallois, Airbus president and chief executive. “The A350 XWB will draw on this new business model, as we assign large work packages to Tier 1 suppliers in return for a better distribution of future investment, risks and opportunities, with a consolidated supply base.”
Ah yes, transfering knowledge to suppliers around the world in exchange for "a better distribution of future investment, risks and opportunities." Opportunities on whose part? As Boeing is finding out, key suppliers with newfound knowledge sometimes create competitive products. What is the future cost of that competition compared with the current value of "distribution of investment and risk?"
In the future, Airbus will focus on “core business” activities that are critical for the integrity and safety of the aircraft, or vital for technological and commercial differentiation, for the operability and reliability of the aircraft and its maturity at entry into service. This core activity focus will be implemented in the “make or buy” strategy adopted for the A350 XWB. About 50% of aerostructures work will be outsourced to risk-sharing partners, about twice as much as in earlier programmes.
So does this mean that Airbus will follow the Boeing model and become system integrators, and if they take that model to the extreme they might end up just painting the black dot on the nose of the plane?
“Airbus was an innovator,” Bregier says. “Because it was so successful, it didn’t feel the need to change its organisation, its structure or its business model. It’s easy for me as a newcomer to see Airbus had become complacent, but that’s what most Airbus old-timers recognise.”
Hmmm… now Boeing is the innovator and is very successful. Let’s hope they don’t become complacent. What goes around comes around. Business cycles can be a funny thing.