Two top Airbus executives today drew a sharp distinction with Boeing over supply chain strategy and mocked their rival’s year-long programme to squeeze cost savings from suppliers.
“They say, ‘We’re partnering for success’. I don’t think it’s been that successful,” says Airbus’s US subsidiary chief executive Alan McArtor., speaking to reporters at a press breakfast in Washington DC also attended by Airbus Group CEO Tom Enders.
Last May, Boeing announced that it was seeking across-the-board savings from suppliers that began with notices to a list of undisclosed companies informing that they were no longer welcome to bid for work on new commercial aircraft.
“While we want to get best value with our supply chain we think it’s better to work with our suppliers and their processes, as opposed to dictating suppliers to carve 15% out of their cost,” McArtor says.
Enders noted that Airbus had achieved similar cost savings by working with suppliers on the A320neo programme, but without a process of issuing public threats.
“The simple test is to ask our suppliers who are supplying both companies who they would rather work with,” Enders says.
Airbus officials have been known to publicly spar with suppliers on specific performance issues, such as Rolls-Royce and Spirit AeroSystems.
But Enders describes the overall relationship between Airbus and suppliers as less confrontational than Boeing’s approach.
“We don’t use temporary weaknesses of our suppliers to drive down cost,” Enders says.
Airbus’ philosophy is a reflection of the long-term nature of industrial relationships in the aerospace industry, when a single production programme can span decades from launch to line closure, he says.
“Over the years, it’s very rare that only the OEM has leverage over suppliers,” Enders says. “Sometimes you need suppliers badly to do something and to do it immediately. You won’t want to get bogged down in protracted negotiations before they sort the issues.”
The Airbus supply chain model is branded internally as the “extended enterprise”, Enders says.
The extended enterprise system allows Airbus suppliers to have detailed knowledge of programme information, and “not just on a need to know basis”, Enders says.
Airbus has also decided to help suppliers in other ways, including obtaining financing.
Last month, Airbus acquired the Salzberg Munchen Bank as a new internal resource to ensure access to liquidity for vendors and customers.
The acquisition was made as a lesson learnt from the global financial crisis in 2008-09, when Airbus observed that banks have better access to liquidity from the European Central Bank, Enders says.
“Who knows what’s going to happen in this crazy economy – not just in Europe,” Enders says. “And, secondly, we can use it also for supplier financing, for customer financing, if need arises.”