Analyze And Evaluate The Operations Management Of Airbus Management Essay

The operations process of Airbus can be most clearly characterised as a job process. This is because, even though the majority of the company’s planes are very similar, and use similar manufacturing techniques, they are so large that it is physically impossible to see the plan manufacturing process as being anything other than a job process, when analysed using these specific models of the operating process. This can be seen in the case of the manufacture of the A380 superjumbo aeroplane. According to Levers (2003, p. 42), the manufacture of this plane is such a significant engineering and operational undertaking that specific operations are needed for areas such as the upper wing skin panels. This is because the manufacturing process used to shape the plane’s wing skin is on a vast scale, and hence each skin needs to be formed and tooled separately to ensure it meets to rigorous requirements of a modern airliner (Levers, 2003, p. 42).

At the same time, whilst the company’s operations process strongly resembles a job process, Airbus is still looking to maximise efficiency wherever possible, through the use of more modern production techniques and the adoption of other operations processes where possible. For example, Woodruff (2007, p. 20) noted that “Airbus recently completed a major research project that is resulting in greater levels of automated drilling within the aerospace giant”. Specifically, the company has developed low cost robotic platforms that can be used in some areas of the manufacturing to turn a job process into more of a batch process, or a mass production process. This argument is expanded on by James (2006, p. 30) who notes that Airbus has developed horizontal spindle machining robots which are able to produce the structural ‘ribs’ for aeroplanes in a fast and efficient manner, much faster than in a pure job process. This thus allows Airbus to manufacture the ribs of its plans quickly and efficiently, and hence turn part of the manufacture into a mass production process, with the rest of the project finished in a more traditional job process manner (James, 2006, p. 30).

In addition to this, the company has attempted to turn the production of individual planes into more of a batch process through the use of what Haas and Sinha (2004, p. 1) describe as “Concurrent Engineering”. Under this approach, the Airbus Concurrent Engineering initiative uses digital design and engineering approaches to allow engineers and designers to work on multiple aeroplanes at the same time. As a result, the company is able to benefit from higher levels of efficiency, in line with a batch process. This is particularly valuable in enabling Airbus to build planes faster, and to vary specifications as the production proceeds, thus allowing Airbus to be more responsive to changing customer demands (Haas and Sinha, 2004, p. 1). A key aspect of this has been the development of virtual reality systems that are used to assist in designing the company’s manufacturing processes. These systems enable Airbus designers to work together on large projects, such as making the wings for the Airbus A350 XWB (Davies, 2009, p. 68), and thus help improve operational efficiency when compared to a pure job process.

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The company has also looked to develop lean production and supply concepts within its operations processes, despite these concepts having “scarcely been applied to aerospace, an industry sector of great importance” (Ehret and Cooke, 2010, p. 300). Specifically, Airbus looks to use outsourcing and supply chain improvements to maximise the leanness of its operations, including relying on suppliers to provide components and other work at minimal cost wherever possible. Whilst this approach has some limitations, notably the fact that “lean neglects the relevance of knowledge to outsourcing, however, and fails to recognise the diversity of the Airbus supply approach” (Ehret and Cooke, 2010, p. 300), it does provide some value and benefits including reducing costs and improving responsiveness. The company’s technological capabilities are central to its lean strategies, and hence this does allow Airbus to maintain its strong technological focus throughout its operations processes.

2) An identification and evaluation of the major strengths and weaknesses of the Operations Function in the organisation

In order to identify and evaluate the major strengths and weaknesses of the operations function in the organisation, this section will use Slack’s five performance objectives of quality, dependability, speed, flexibility and cost (Slack et al, 2009). These objectives will be analysed individually, and considered in more depth as a coherent whole in section 3.

In terms of quality, Airbus is helped by the fact that it has a highly diversified product portfolio when compared to its peers. In particular, the company manufactures various different commercial, military and freight aircraft, which gives it access to a wide variety of data on order qualifiers and order winners for the entire market (Datamonitor, 2011). This in turn allows it to apply knowledge from its commercial aircraft segment to freight and military and vice versa. This diversity is assisted by the company’s extensive product development expertise and marketing skill, which allows it to develop and market new products and technologies well. Specifically, the company has directed significant volumes of research attention towards ensuring environmental efficiency for its current and future aircraft, recognising that environmental efficiency is a key order qualifier in the current economic and social climate in the airline industry (Datamonitor, 2011).

At the same time, the company’s quality has recently suffered due to the disparate nature of the manufacturing process inherent in such a diverse company with production locations in so many countries. In particular, Sosa et al (2007, p. 133) notes that communication has suffered, as product – component teams have failed to communicate due to the significant geographic and cultural distances in between them. This issue has also spilled over into dependability, speed and cost, with Airbus suffering major delays and cost overruns during the development of the A380 super jumbo, due to unforeseen design incompatibilities. Specifically, operations teams were working with incompatible design equipment and inconsistent Computer Aided Design tools, and thus components did not fit correctly when the entire product was assembled (Sosa et al, 2007, p. 133). This was a severe blow to the company’s reputation as a high quality and dependable manufacturer.

Airbus’ dependability has also recently suffered in the aftermath of the loss of Air France flight AF 447 which crashed when flying from Brazil to Europe. According to Martins (2012, p. 222), the probes that allow the pilot to control the speed of the aircraft malfunctioned, and hence “the design of the plane would have exercised a not inconsiderable role in the occurrence of a disaster”. Ultimately, these design issues led to “a series of important operating errors in a zone of turbulence, making the plane uncontrollable, leading to a rapid depressurization device” (Martins, 2012, p. 222). In other words, the plane had fundamental design and operation flaws that contributed to a crash in which all passengers and crew on the plane lost their lives. This lack of safety can be seen as breaching important order qualifier criteria, and thus may make it harder for Airbus to sell its planes in future if they obtain a reputation for being unsafe.

As noted in the first section, the speed of Airbus operations is relatively good, considering that the company is operating such large scale job processes. In particular, the ability to use robotics to support operations (Woodruff, 2007, p. 20) and the use of concurrent engineering (Haas and Sinha (2004, p. 1) to improve efficiency have helped maximise the speed of production. However, this has been delayed by the quality and dependability issues highlighted above, which have meant that Airbus has often been forced to make additional costly efforts to ensure that production remains on schedule. This is because speed of production is an important order qualifier in the airline production industry, with customers depending on aeroplanes being ready on time in order to run these aircraft on their routes, and the lengthy production cycle meaning it is difficult to go to another manufacturer if production is delayed. For example, in the case of the A350, the aircraft was “introduced in several batches with changes affecting components and parts throughout the aircraft” in order to ensure a timely launch (Flottau, 2012, p. 22). This increased costs for Airbus and its suppliers, which indicates quite how important speed is.

Flexibility in production is not a particularly major order winner or order qualifier criteria in the airliner manufacturing industry. This is because most planes take a long time to manufacture and configure, and hence any airline changing its order is likely to create delays for itself. However, Airbus does offer significant levels of flexibility thanks to its diversified product portfolio, and ability to apply different configurations to different airliners depending on the specific situation (Datamonitor, 2011). This does not necessarily help the company offer flexibility to existing customers, but does help it to attract new customers by making it more likely that Airbus can design and manufacture a plane of the required size and specifications to meet the customer needs.

Finally, cost is an important order qualifier in any industry, and airliner manufacture is no different. In particular, Bickers (2000, p. 46) notes that in the aftermath of the Asian financial crisis Airbus found it very difficult to get any orders from Asia, in spite of the rapidly growing airline industries in these countries. This is because airliners are very expensive and require significant capital to purchase, and hence any cost savings are likely to prove to be a vital order winner amongst customers, particularly given the current poor global economy. With this in mind, Airbus has recently entered into a significant and rigorous cost cutting plan. According to Matlack (2007, p. 2), the company has sold off several older and less efficient manufacturing plants to reduce its overheads. At the same time, Airbus has expanded its manufacturing facilities in China and other low cost production nations, in order to reduce costs by benefitting from lower cost skilled labour in these countries. Currently, Chinese companies only make up around 5% of Airbus’ airframe manufacturing operations, but this is likely to increase in future as the company expands its operations in China (Datamonitor, 2011).

3) Your view of the extent to which the operations function supports the broader Business Strategy of the organisation

Airbus’ strategy has evolved significantly over the past decade. In the late 1990s, the company was relatively small, with the market being dominated by Boeing, the US airliner manufacturer, with McDonnell Douglas also having produced many of the world’s aircraft. According to Olienjk and Carbaugh (1999, p. 60), in the late 1990s “only about one in six commercial jetliners currently in operation was produced by Airbus”. Airbus’ initial strategy was thus to try and obtain market share by aggressively targeting the most numerous short haul routes with small and cheap aircraft that would suit the demands of the rapidly growing low cost carriers of the time (Olienjk and Carbaugh, 1999, p. 60). This helps explain the company’s diverse product portfolio, which was developed to maximise market exposure.

More recently, Airbus has found itself on a more even footing with Boeing, with both companies accepted as being the two dominant forces in airline manufacture, with an almost uncontested global oligopoly (Strategic Direction, 2006, p. 8). As a result of this, Airbus’ strategy has shifted away from focusing on seizing market share, and more on obtaining profitable market dominance, whilst also focusing on competing with Boeing more directly in the same markets. For example, Airbus recently developed the A350 and A380, which are two of its largest and most advanced planes, and both designed to compete directly with Boeing’s 747, 777 and 787 on major long haul routes (Strategic Direction, 2006, p. 8). These routes tend to be more profitable for the airline companies, making them more willing to pay more for more advanced and efficient airliners, hence boosting the profit margins of the airliner manufacturers.

This shift in strategy helps explain a significant amount of Airbus’ operations strategy in recent years. Specifically, the company’s product range has expanded further as Airbus has looked to behave like an oligopolist, and compete in all market segments to help discourage new entrants and minimise the growth of competition. This also explains the company’s loss of dependability, as being a major manufacturer with a strong market share has insulated it from the impact of market feedback on its operations strategy. Finally, Airbus has shown a willingness to sacrifice cost competitiveness for speed of production in order to meet the demands of new customers who want top class planes that are ready on time, and are willing to pay more for the privilege.

At the same time, the company’s operations have shown several significant weaknesses that do not support its current strategy. In particular, the focus on speed and quality ahead of cost has meant that Airbus has struggled to expand into emerging markets where price pressures are keener and where financial crises hit harder. This has increased the importance of cost reduction in order to remain competitive and head off new potential competition (Bedier et al, 2008, p. 114). In addition, Airbus has become too comfortable as a market leader, and thus has begun to experience issues of quality and dependability which threaten its ability to grow and dominate the market ahead of Boeing, as well as encouraging new entrants and competition.

4) Your recommendations for improving the operations function, whilst leaving the broader business policy unchanged

The primary recommendation for improving the operations function is to focus on addressing the quality and dependability issues identified. In particular, greater attention needs to be paid on improving levels of interoperability between design, production and component teams to ensure all components and parts are compatible and fit for purpose. All teams should be required to work on the same software and using the same tools and measurement bases to ensure that everything works together and does not cause any delays for the customers, or any safety issues such as those which affected Air France AF 447. This is a crucial issue which needs to be addressed asap, or it will leave the company at risk of further reputational damage, as well as potentially at risk of lawsuits if other planes are argued to be unsafe. The company should immediately create an internal team that can examine the working processes across all the production and manufacturing teams in the entire company, across all countries. This team can then assess which products, techniques, tools and measurement bases are most efficient and effective, and make recommendations around rolling these out across the entire company to boost compatibility and efficiency.

The other main recommendation for improving the operations function, whilst leaving the broader business policy unchanged is to make more of an effort to develop and implement operations strategies that will be able to balance cost and speed. The company should not be left facing a position where it has to rush production and incur high crash costs in order to meet a customer deadline or avoid delays. Instead, Airbus needs to implement a strategy that will avoid these delays, and hence avoid the costs and inconvenience associated with them. With this in mind, the recommendation is that Airbus assemble another internal team that can assess the various operations management strategies available, such as lean operations, total quality management and six sigma, and determine the extent to which they can resolve the cost and speed issues that Airbus has recently encountered. Once these recommendations have been made, the company can then decide which strategies to implement in order to address the issues encountered. This will thus help to avoid any future losses or delays due to a lack of efficient operations, and hence ensure that Airbus is no longer left in a situation where it must choose between making a financial loss or missing a customer deadline.

Conclusion

This analysis has demonstrated that Airbus has developed and implemented a highly specific operations strategy that is designed to deal with the issues that can be encountered when developing, building and producing large and complex aircraft. Specifically, the company’s fundamental operations process is a job process, which is a necessity due to the large scale of production and the impracticality of trying to run batches or mass production lines. However, this process is supplemented by various technologies and systems which help introduce aspects of mass production and batch production, such as robotics and concurrent engineering, in order to improve efficiency and effectiveness. This is further combined with more modern concepts such as lean operations, allowing Airbus to achieve the high levels of customisation and focus that result from a job process, whilst also benefitting from the efficiencies offered by other types of process.

The net result of this is an operation process which allows for a high degree of flexibility and focus on quality. This focus is highly appropriate for Airbus, as the company is currently competing in an oligopoly with Boeing, and looking to dominate the market in order to secure its position and discourage additional competition. As such, it needs the flexibility to cover all market niches. However, this focus has resulted in a lack of cost competitiveness, and the market dominance has harmed the quality and dependability outcomes. As such, this report makes two recommendations. Firstly, the company needs to focus on addressing the quality and dependability issues identified by improving levels of interoperability between design, production and component teams. Secondly, Airbus needs to develop and implement operations strategies that will be able to balance cost and speed, allowing it to serve all of the market in a more effective manner without having to crash production in order to meet deadlines or avoid delays. Following these two recommendations should help ensure Airbus is able to continue to compete and dominate the market in the future.