Using RFID to Enhance Supply Chain

Visibility Airbus Case Study

    

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Background of Airbus
Airbus is one of the worlds leading manufacturers of commercial jetliners and military airlifters, having evolved during the past 40 years on the vision, innovation and passion of its employees. The company captures half or more of all commercial airliner orders in the 100-seat and above categories, and has been the largest manufacturer in this market from 2003 to 2011 in terms of deliveries. Airbus has sold over 11,400 aircraft and delivered 7,000-plus jetliners since its creation in 1970. Today, more than 6,600 aircraft are in service with some 360 operators.

Background of Airbus
The competitive pressure and large-scale projects to create new types of aircrafts provided reasons to improve the whole supply chain management and enhance their delivery, quality as well as to reduce their inventories, achieve better response to difficult market conditions, reduce costs, and increase visibility. Airbus has an annual spend of more than 20 billion and works with over 10,000 suppliers to ensure that Airbus is capable of producing an aircraft made of seven million parts.

Issues with Airbus SCM

Increased level of global sourcing, which has meant increased competition for suppliers, cost pressure, and/or lots of business volume over time. The globalization and expanded complexity of supply chains has increased the level of risk in the supply chain. The need for effective communication channels with its huge suppliers ( 10,000 supplier providing 7 million parts ) No Clear visibility on different tiers of the supply chain. The need for strict safety has driven the industry to look at ways to uniquely identify parts and assemblies

The Value Chain Visibility

in 2007, a corporate decision was taken to launch a company-wide program to increase visibility across the lifecycle of the aircraft, using a collection of automatic identification technologies (including RFID). The project was called the Value Chain Visibility (VCV) program.

What is RFID ??
RFID is basically a tagging system used to provide electronic identity to objects, using wireless to gather and analyze information about the item.

Printed antenna

The chip

Substrate e.g. a plastic foil ...

RFID tags can be attached to almost Anything

RFID system block diagram

How Airbus utilizes RFID

The usage of RFID technology by Airbus is summarized below: Manage and reduce airline parts inventories. Minimize unplanned maintenance and detect malfunction early Enhance accuracy of information exchanged between manufacturers and suppliers Mechanics can access document, task, and parts data, and locate and track approved spare parts in real time Identify and track tool location, usage history, and repair requirements Improve safety and security by authenticating components

Phases of implementation..
Airbus introduced the RFID-technology to increase their overall supply chain transparency and visibility. Its goal is to "errorproof and automate" its supply chain and manufacturing operations to reduce aircraft production and maintenance costs. There are three phases in Airbus's rollout of RFID: Supply chain logistics and distribution, which focuses on tracking supplies and reusable shipping containers through the supply chain to warehouses and assembly facilities. Focuses on global transport, manufacturing and assembly operations, such as tracking aircraft parts across manufacturing facilities, automating work order. Extends RFID into in-service and support operations, with the aim to benefit Airbus's customers.

The Business Process..

RFID in Action
Asset Management ( video ) RFID from manufacturer to Customer ( video )

Benefits - Visibility
 Achieved strategic benefits by gaining real-time visibility.  Getting automatic updates of events in the value chain and an     
unprecedented high level of information. Enhanced its communication and quality of management and therefore to gain business improvements and also providing absolute transparency and real-time transactions. Reduce the time required to solve service-related problems, and aid in detecting problems in aircraft before they occur. Mechanics can check the parts' journey through the supply chain, its service history and its original manufacturing source. The information flow between participants in the supply chain becomes easier and faster. Speed up and streamline the configuration-management processes, whereby the installed aircraft parts are checked to confirm that they match the design requirements much faster than it did previously using paper. Ease of ensuring product authenticity, product authenticity is very crucial in the aerospace business

Benefits Processes
 Increased the efficiency by automating processes, which     
cause shorter time and less inventory. Increased accuracy and control of business operations which cause less non-conformities. Less manual intervention and improved labor productivity and efficiency. Simplified administration and parts repair management, where the repair and flight history of the component are made readily-available electronically. The microchip ensures the accuracy and availability of important information and also allows for a comprehensive tracking system. Maintenance of service records electronically significantly increased safety and service levels, reducing the time required for aircraft inspection.

Benefits - Business
 Reduction in inventory, capital assets and stock reconciliations.  Increased labor productivity and supplier monitoring.  By improved supplier-forecasting, Airbus achieves improved
supplier delivery performance.  Reduce their costs of production, maintenance and inventory  In 2006 Airbus saved 100,000! compared to the 180,000! investment costs, and reduced the repair cycle by 6.5 days, thereby improving their inventory management.  The results are leaner and more competitive business

Critical Analysis ..
Involvement of Suppliers in RFID implementation

 Such implementation required high collaboration with supplier as

there are between 2000-5000 parts require RFID making by suppliers.  Airbus is also working closely with its suppliers to help them meet the requirements.  It specified some criteria in the requirements document to help their suppliers assess which parts to tag, either with RFID or contact memory buttons.  Airbus bought tags from MAINtag and recommended to the majority of their external suppliers that they do the same.

Critical Analysis
ROI of using RFID for Airbus

 The airlines and aerospace industry has traditionally

been a low margin industry, characterized by high investment and relatively low ROI. The adoption of RFID is increasingly being seen as an enabler of higher ROI in the industry.  The company will be saving in the order of millions of euros per year, with the savings coming from avoiding work disruptions caused unavailability of the right components, improved productivity, automated data entry and reducing inventory.

Critical Analysis
Challenging issues in the RFID technology

 The initial cost of implementing RFID is very high in many

industries which is one reason for RFID's slow pace in entering companies' supply chain.  However the cost also includes not only the tags, but also the learning curve, labor costs, software and systems integration costs, process redesign and organizational impacts.  Such decisions so far depend on the critical nature of the products and the significant investment required for RFID implementation.  However, it is believed that the costs will come down significantly as the technology matures and it is expected RFID eventually will remove the human component in much of the supply chain, especially parts management and tracking and in maintenance and repair.

Critical Analysis Supply Chain Partners Issues

 An issue involving supply chain partners is the

lack of integration, for instance, when the manufacturers' resource planning systems are not linked in real-time.  Another issue is the partners' resistance to information sharing, which is necessary to achieve maximum benefit from RFID technology.

2006.10 ShangHai