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Integrated Outsourcing – The Airbus Approach

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This case study illustrates the value that can be derived from Integrated Outsourcing. The Integrated Outsourcing network discussed here is one aspect of the new paradigm known as the Demand Driven Supply Network (DDSN.) DDSN is a replenishment management model utilising a combination of processes and technologies to provide demand signals that drive the supply of parts.

According to Kevin O’Mara in AMR Research Outlook, “DDSN gives leading companies cost, time and efficiency advantages that boost profits.

It also positions winners to grow with dramatically faster response to business opportunities – at the level of lower stock outs for current products and as much as 70 percent faster time-to-market for new products.” Integrated outsourcing often incorporates Vendor Managed Inventory (VMI) techniques and solutions. VMI is the term used when a supplier, itself, is allowed to control the flow and handling of the materials they provide to the supply chain.Part I: Definitions

C-Class Components (more commonly referred to as C-Class parts) is a term many industries use to describe high volume, low cost (or HVLC) parts and materials. These components include items like screws, bolts, clips and other fasteners, as well as consumables such as adhesives, ties, and other items used by personnel in the value chain, such as gloves and dust masks. While there is no set cost (or quantity) that “officially” qualifies an item for C-Class status, for purposes of this document we will consider C-Class to be items costing less than $5.00 each.

Part II: The Scope of this Document

In the last decade, OEMs and their suppliers have worked increasingly hard to lower the purchase price of the items that flow through their supply chains … and to a large degree they have succeeded. However, the pressure to lower costs, while increasing overall product quality, has not abated. The question, then, is where can OEMs and their suppliers find an additional pocket of unnecessary cost to eliminate?

In many large-scale manufacturing companies, the answer lies on the far side of the 80/20 rule. While 80% of the cost of the parts in a supply chain (and ultimately on the manufactured product itself) can be attributed to the most expensive 20% of the parts, the 80% of parts remaining, normally labelled C-Class parts, are actually taking the largest bite out of the money spent managing and facilitating the supply chain itself. Using the C-Class supply process of Airbus’ A380 as a case study, this document outlines the “Integrated Outsourcing” model for employing innovative – yet inexpensive and easily deployed – techniques and technologies to decrease the costs of managing “high volume low cost” parts throughout a supply chain.


The 4 Objectives for this Session Document:

1. To detail how C-Class parts are adding disproportionate – and avoidable – costs and strains to a supply chain;
2. To show, specifically, how a growing number of manufacturers are working more closely with suppliers and 3PLs to eliminate much of these costs for everyone involved in the process;
3. To help companies better appreciate how their low-cost parts are actually costing them significantly more to manage and replenish than necessary;
4. To provide some tips and techniques for rethinking your C-Class supply chain efforts to incorporate the lean processes that currently help some manufacturers reduce the nonvalue- added costs of their replenishment process.

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Last modified on Tuesday, 28 August 2012 13:50

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