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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
ES4C9 Supply Chain Management | Filton Aerostructures
Procurement
Filton Aerostructures: An overview
1992 1993 1994 1995
Company created to supply parts to British
Aerospace
Strategic changes in the aircraft industry
3858
ES4C9 Supply Chain Management | Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
Issues faced by the company
ES4C9 Supply Chain Management | Filton Aerostructures
Poor communications (both internally
and externally)
Issues faced by the company
ES4C9 Supply Chain Management | Filton Aerostructures
Bad relationship
with suppliers
Issues faced by the company
ES4C9 Supply Chain Management | Filton Aerostructures
Large numbers of suppliers
Issues faced by the company
ES4C9 Supply Chain Management | Filton Aerostructures
Low morale of employees
Issues faced by the company
ES4C9 Supply Chain Management | Filton Aerostructures
High demand uncertainty
Recommendations
ES4C9 Supply Chain Management | Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
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)
ES4C9 Supply Chain Management | Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
, 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
Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
, 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
Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
Understand customer demand
uncertaintyUnderstand the supply uncertainty
01 0
2Understand supply chain capabilities0
3 Achieve strategic fit
04
Conclusion: Achieving strategic fit
Understanding Filton Aerostructures’ customer demand uncertainty
Service level
Volume Variety of products(remains
unchanged)
Lead time
PriceRate of
innovation
ES4C9 Supply Chain Management | Filton Aerostructures
Conclusion: Achieving strategic fit
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
ES4C9 Supply Chain Management | Filton Aerostructures
HighLow
Low
High
Conclusion: Achieving strategic fit
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
ES4C9 Supply Chain Management | Filton Aerostructures
Questions?
ES4C9 Supply Chain Management | Filton Aerostructures
Supporting Slides
EDI ChallengesChallenges that Filton might face in its implementation
Electronic Data InterchangeWhat is Electronic Data Interchange? Details the process of EDI.
ES4C9 Supply Chain Management | Filton Aerostructures
“Computer-to-computer exchange of business documents in a standard electronic format between business partners.”
- GXS Inc.
Electronic Data InterchangeWhat is Electronic Data Interchange? Details the process of EDI.
ES4C9 Supply Chain Management | Filton Aerostructures
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
ES4C9 Supply Chain Management | Filton Aerostructures
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.
Electronic Data InterchangeWhat is Electronic Data Interchange? Details the process of EDI.
ES4C9 Supply Chain Management | Filton Aerostructures
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