ES4C9 Supply Chain Management Case Study: Filton Aerostructures Lecturer: Alexa Kirkaldy

ES4C9 Supply Chain ManagementCase Study: Filton AerostructuresLecturer: Alexa Kirkaldy

Filton Aerostructures: An overview

Filton Aerostructures

British Aerospace sister

companies

Airbus

ES4C9 Supply Chain Management | Filton Aerostructures

The Procurement Function

Fabrication

Machining

Bonding

Assembly

Manufacturing


Procurement

Filton Aerostructures: An overview

1992 1993 1994 1995

Company created to supply parts to British

Aerospace

Strategic changes in the aircraft industry

3858


Improvement Targets

35%

75%Reduction in unit

costs in 2 years

Production lead times to be reduced

by

Stock-turn ratios to be improved from 4

to 12

66%

Reduction in overheads within 4 years


Issues faced by the company


Poor communications (both internally

and externally)



Bad relationship

with suppliers



Large numbers of suppliers



Low morale of employees



High demand uncertainty

Recommendations


Integrate processes using

ERP

Change shape of BOM from ‘X’ to ‘T’

Use less suppliers, build relationship with preferred

suppliers

Implement pull postponement

Implement early decoupling points


Integrate processe

s using ERP

• Moving the manufacturing team and the procurement team physically closer to one another

• The use of electronic data interchange (EDI)

• Have a committee with selected members from all departments

360º

Recommendations

Recommendations


Change BOM

shape

• Existing X configuration: uncertainty in terms of volume, time and level

• Implement JIT by changing to ‘T’ configuration

• Late customisation

Reference: Slack et al., Operations Management, 4th Edition, Prentice Hall, 2004, pp. 494-495 as cited in Kirkaldy, A., 2015

Raw materials

Finished product(Aircraft

wings)


John Ramsay(Procurement

Manager)

Core Team Leader

Fabrication Team

Leader

Machining Team Leader

Bonding Team Leader

Assembly Team

Leader

ManufacturingTeam Leader

Build relationships with preferred supplier

Recommendations

• Forge relations with customers and suppliers

• Improved forecasting and accuracy of order schedules

Recommendations

Make-to-stock

Assemble-to-order

Make-to-order

DP


, Pull postponement & customer order

decoupling points

DP

DPReference: Sharman, G. (1984). The rediscovery of logistics. Harvard Business Review, 62(5), 71–80

Forecast driven

Customer order-driven

Engineer Fabricate Assemble Deliver

Filtonsuppliers


Airbus End customer

The Bullwhip Effect on Filton’s Supply

Chain40 units80 units160

units

INFORMATION FLOW

CASH FLOW

204080= stock

level

Recommendations

Make-to-stock

Assemble-to-order

Make-to-order

DP


, Pull postponement & customer order

decoupling points

DP

DPReference: Sharman, G. (1984). The rediscovery of logistics. Harvard Business Review, 62(5), 71–80

Forecast driven

Customer order-driven

Engineer Fabricate Assemble Deliver

Filtonsuppliers


Airbus End customer

The Bullwhip Effect on Filton’s Supply

Chain40 units80 units160

units

INFORMATION FLOW

CASH FLOW

204080= stock

level

Conclusion: Achieving strategic fit


Understand customer demand

uncertaintyUnderstand the supply uncertainty

01 0

2Understand supply chain capabilities0

3 Achieve strategic fit

04


Understanding Filton Aerostructures’ customer demand uncertainty

Service level

Volume Variety of products(remains

unchanged)

Lead time

PriceRate of

innovation



Supply uncertainties within Filton Aerostructures

Stable SC Evolving SC

Less breakdowns Vulnerable to breakdowns

Stable and lower yield Variable and higher yield

Less quality problems Potential quality problems

More supply sources Limited supply sources

Reliable suppliers Unreliable suppliers

Less product changes More product changes

Less capacity constraint Potential capacity constraint

Dependable lead time Variable lead time

Flexible Inflexible


HighLow

Low

High


Sup

ply

u

nce

rtain

tyDemand uncertainty

Reference: Lu, D., MSc SCM module, Warwick Manufacturing Group as cited in Kirkaldy, A., 2015

Efficient supply chains

Responsive supply chains

Risk-hedging supply chains

Agile supply chains


Questions?


Supporting Slides

EDI ChallengesChallenges that Filton might face in its implementation

Electronic Data InterchangeWhat is Electronic Data Interchange? Details the process of EDI.


“Computer-to-computer exchange of business documents in a standard electronic format between business partners.”

- GXS Inc.



Buyer creates Purchase Order

Purchase Order is faxed or posted

Supplier enters order into internal system and generates invoice

Invoice is generated

Invoice is faxed or posted via mail

Buyer enters invoice into internal system


Purchase Order

Invoice

Buyer’s Internal System

Supplier’s Internal System

NO PAPER INVOLVED!

“Computer-to-computer exchange of business documents in a standard electronic format between business partners.”

- GXS Inc.



Confidentiality and trustThe confidentiality of shared

information creates some risk to Filton Aerostructures and its

suppliers. It is therefore important that all organisations sharing the

information have mutual trust and exercise their judgement on

commercial information.

01

Varying standards and requirements

Different industries will have varying

requirements in terms of the EDI system adopted.

Filton Aerostructures could adopt an EDI via

VAN to mitigate the need to support varying

protocols required by suppliers.

02

Aligning incentivesFilton Aerostructures should be wary of sharing too much information that may cause conflict between suppliers such as the alignment of incentives and privileges.

03

Electronic Data InterchangeChallenges that Filton Aerostructures may face in its implementation

Documents

ES4C9 Supply Chain Management Case Study: Filton Aerostructures Lecturer: Alexa Kirkaldy