MAN515 Operations Management: Analysis of Management at Airbus

Introduction

The main aim of this study is to analyze the challenges in business and its impact on the operation management practices. This study helps to understand the importance of demand recognition in the market, adoption of new technology along with innovative ideas to become a market leader. It also suggests the effectiveness of operations management to enhance the overall efficiency in the business. Mainly, this study is about the analysis of challenges faced due to changing demand, technology, globalization in market, cut throat competition etc. Basically this study reveals how an effective operation management helps to overcome business challenges in current market scenario. This study does the analysis of operation management at Airbus. With the help of this analysis, the study suggests some success point along with some hindrances in the current market scenario.

Company Overview

Airbus is a European multinational company that designs, manufactures, and sells civil and military aeronautical products all over the world. The corporate headquarters and the head office of the company is situated in Toulouse, France. The Chief Executive Officer of the company is Thomas Enders. Airbus is an international pioneer in the aerospace industry. The company is a leader in designing, manufacturing and delivering aerospace products, services and solutions to the customers on a worldwide level. Airbus is a commercial aircraft manufacturer along with Space and Defense in addition to Helicopters Divisions. It is considered as the largest aeronautics and Space Company all over Europe. Airbus has become an international organization with is presence in around 180 locations as well as 12,000 direct suppliers worldwide. In addition to it, the company has aircraft and helicopter final assembly lines across Asia, Europe and the America (Airbus, 2017).

Airbus: Key operational management challenges & their potential future impact

Changing Technologies

As per Gohardani, Doulgeris and Singh (2011), it has become essential for an organization to emphasize on number of production activities such as reasonable propulsion systems, reduced fuel consumption, noise reduction, aviation safety and reliability and optimized aircraft design in order to achieve desirable flight characteristics as well as to compete with the environmental aviation standards being established by the commercial industry (Gohardani et al., 2011). With the increasing worldwide demand for air travel, the demand for technologically innovative solutions has also increased in order to reduce the environmental impact generated due to aircraft emissions and noise. However, the technological advancement in the commercial airplane propulsion systems play a significant role in the reduction of environmental harm.

Propulsion Systems:

The E-Aircraft System House will serve as a resource for the Airbus in order to authenticate the electric and hybrid aircraft propulsion. The E-Aircraft House will emphasize on the advancement of the basic technological expertise and capabilities for the individual components as well as the investigation of incorporation of the components into sub-systems such as turbines, high-voltage platforms, electric fans and propellers, generators and thermal systems. The company has signed a collaboration agreement with Siemens to exhibit technical feasibility of hybrid or electric propulsion systems by the year 2020 (Airbus, 2017).

Reduced fuel consumption & Noise reduction:

Airbus has developed a helicopter that consumes up to 40% less fuel and produces significantly less noise than conventional rotorcraft (Salah, 2014). There is a Bluecopter demonstrator that has been equipped with an advanced rotor, improved airframe design and intelligent engine power management system in order to improve the fuel efficiency and reduce noise (Ford, 2015).

Continued Globalization of markets including first & second world entrants

The commercial aircraft industry has experienced significant transformations at global level and the increasing requirement of new aircrafts by various countries is playing a significant role in contributing towards these transformations. However, this industry is not as internationalized as other high technology industries all over the world. Airbus and various other commercial aircraft manufacturing companies are still designing and manufacturing in countries like Europe and America. However, there are number of new companies that are emerging in Eastern countries like Malaysia, South Korea, Singapore, China, and India, along with a huge number of companies in South American countries like Mexico. Thus, the number of competitors in the market is increasing for the well established companies like Airbus. There are six main competitors for the company that are, Bombardier C-Series, which is a Canadian airplane manufacturer, Embraer E-Jet E2 from Brazil, Mitsubishi MRJ from Japan, Comac ARJ21, Comac C919 from China, and Irkut MC-21 from Russia (Zhang, 2016). The primary focus of Bombardier and Embraer was to manufacture small aircrafts but the companies have now started manufacturing larger aircrafts as well in order to compete with the already established companies in the market. The market capture strategy of the Airbus is known for its cost-effectiveness and highly efficient aircrafts but if the competitors will be able to manufacture aircrafts of similar efficiency in reduced costs, the airlines will incline towards them to purchase aircrafts because of the availability of less expensive alternatives in the market.   

Changing customer expectations

It has been witnessed that the worldwide demand has increased Middle-of-the-market (MOM) aircrafts. The Bank of America has conducted a survey which revealed that around 90% of the commercial and cargo airlines would wish to have MOM aircrafts to be delivered till 2023 (Anselmo & Flottau, 2016). Additionally, around 60% of the airliners have reported that they would prefer to have wide body of the aircraft to permit faster boarding and exit of the passengers instead of a narrow body of the aircraft. Furthermore, it has also been revealed that more than half of the airliners would prefer to have 150 to 20 seated aircraft, while some preferred more than 200 seats. After taking into consideration, the demands of the customers, Airbus would design its MOM aircraft in accordance with the customers' opinion. The existing 5,64m fuselage of the A330 has seat width of more than the expected criteria and standards.  However, an 8-abreast fuselage would be manufactured with a similar seat width as in A350 and would help to improve the efficiencies particularly in the MOM form. It will also allow the company to deal with both the MOM as well as the replacement of A330 (Airliners.net, 2017).   

Changing Job Designs 

The workforce in the present scenario is being reshaped because of digital technologies and as the engineers at Airbus are using virtual reality headsets in order to manufacture zero defect components. Various production units utilize these technologies because of which they are becoming more widely utilized all over the industry. In the present scenario, with the increasing orders for aircrafts, the commercial aviation industry is flourishing and large scale companies such as Airbus have an increased percentage of orders of aircrafts and is automating and performing with a faster pace despite rigid labor laws of Europe that had made it difficult for the company to lay off workers during recession. Airbus is planning to implement a system that will utilize the hand tools loaded with sensors and Google Glass-type headsets in order to authenticate that the workers install parts in the approved manner and the company is planning to implement the system with the A330 primarily (Scott, 2015). Thus, the company relies on the machines and robots internally as well as for external outsourcing. Airbus has automated its operations in order to improve the quality, worker safety, reduce costs and to compete with the competitors. The company is able to manufacture more planes because of this reason and met the worldwide growth in air travel (Scott, 2015).

Quality Management

As per Ding et al. there is a requirement of minimum three external regulatory bodies in order to develop and ensure the appropriate implementation of quality standards along with the organizational standards. The two government bodies that have framed the standards and ensure their implementation by examining the aircraft manufacturing companies, their products and processes are the Federal Aviation Administration and European Safety Administration. The last one is considered as customers of the Airlines industry that inspects the quality of products and processes provided by the companies. The manufacturing defects should be revealed during the initial stage of the manufacturing of the aircrafts as it enhances the overall value of the aircrafts and the reputation of the company. The probability of mechanical errors in future also reduces due to this reason. It can be performed in a well-executed manner through establishing quality standards in the company and should supplement manufacturing company's personal quality control system. International Civil Aviation Organization (ICAO) has set global carbon emission standards which are required to be implemented by the aviation industry in order to reduce the carbon emissions. ICAO has not yet approved these standards; however all the commercial aircraft manufacturing companies are anticipated to stand for these standards after the approval of these standards by the ICAO officially.

Global Manufacturing

In the present scenario, the commercial aircraft manufacturing companies and the suppliers outsource their major manufacturing operations to the experts in the aviation sector and only conduct the process of assembling them. In addition to it, the plotting of all production approval holders (PAH) can assist the manufacturing companies to associate with the best suppliers and to utilize this standardization of quality and measurements. It would maintain collaboration with the commercial aviation authorities and at international level as well. The Federal Administration of the Aviation industry had created a team for global manufacturing purpose to look after the matters related to manufacturing and all the major components of the manufacturing process. The quality control reporting of the suppliers has also been strengthened due to this team. Airbus is considered as a true global enterprise having the facilities all over the world and a supply chain of more than 2000 primary contractors in around 20 countries. The company has to understand the requirements of the customers, suppliers as well as the industry stakeholders in all the corners of the globe. That is why, during the development phase of an aircraft, the production network of the company is personally and completely involved in the procedure in order to ensure that manufacturing processes are authenticated and procedures of assembling are complete (Airbus, 2017).     

Operational management practices

Goods & service design

Airbus is known as the market leader in aerospace industry due to its fine goods and service design in order to match the changing technology and demand in the market. Airbus is projected to continuously grow due to its advance technology and services. To meet the future demand, Airbus realizes the need to innovate its products with advanced model. Goods & service design is an important factor to customer satisfaction. Airbus continuously aims to optimize its manufacturing process in a sustainable manner. Innovation is an important driving force at Airbus that promotes cutting edge scientific excellence & technologies to contribute in its global progress. With the help of its predecessor companies, Airbus Company pioneered many of the new technologies that helped conquer the skies. (AIRBUS, 2017)

A business need to continually satisfy their target market to be successful in marketplace. It is possible only by continuously improving their products and designing with an innovative approach. In order to promote such innovations, Airbus always encourages its leading experts to push boundless imaginations and to invent new possibilities for future growth. The main reason behind successful quality management in manufacturing of its products is thousands of suppliers who deliver components, parts and sub system to the Airbus. To maintain the quality, Airbus continuously develops its supplier base & focuses towards the partnership with its suppliers in terms of cost, quality and time. (AIRBUS, 2017)

Success of Airbus can be recognized by its brand value in the market. Goods and service design is the major factor that paves the way for future growth for any organization. Here, this study is discussing about the implementation of new technology at Airbus that helps in maintaining the quality and efficiency in its services & provide innovative ideas to produce high quality products with an attractive design.

Digital Transformation: To compete with the digitalized market, Airbus is embarking on digital transformation and focusing on culture, tools and process to meet the current demand. By leveraging technology to be highly productive and smarter, Airbus aims to lay it foundation for high competitiveness in this digital world. Digital transformation office of the company is leading operational deployment of various digital projects.  More than 9000 employees are working on around 500 projects that are a part of transformation program. These projects play an important role in designing, manufacturing & supporting its services with new project ideas. (Airbus, 2016)

‘Data Lake’ the new digital avenue: ‘Data Lake’ project is used for commercial aircraft that involves in building a reservoir data in each aircraft that provides its customers to enhancing their operations & increasing availability for fleet. In addition to this, employees of Airbus connected through an intranet platform i.e. The Hub that helps in enhancing their efficiency at workplace. The uses of augmented and virtual reality devices are being provided to the employees to improve their working method. (Airbus, 2016)

Aircraft inspection by drone: Airbus demonstrated how an aircraft can be visually inspected by using a drone. This drone follows a predetermined path and takes a series of pictures automatically. These images especially those which shows any negative quality like scratches, painting defects and dents, are compiled in 3D digital model & recoded in its database and then analyzed. With this technology, aircraft downtime for the required inspection is also reduced. (Airbus, 2016)

With the usage of advanced technology, Airbus is also concerned about environmental impact. Aircraft featured a range of inventive solutions that resulting in high fuel efficiency & reduced noise level with lower CO2 & NOx emissions. Its aircrafts use solar arrays & electric propulsion in satellites. Airbus also involved in improving air traffic management to make more efficient air movement. Its A380 emits for 40% less CO2 as per seat than its rival company. Airbus space satellites & defense satellite are designed in concern to environmental performance by using advanced technologies. (Airbus, 2017)

Supply Chain Design

In the operation management, supply chain design is one of the major areas because this area includes the function of physical movement of the materials and the goods besides supporting the information with the help of the processes which include distribution, supply and production processes (ORTEC, 2017). There is a need as well as it is the responsibility of the operation managers to make sure that the supply chain design of the organization is efficient and fast. The organizations and the operations managers, who are not able to make it up to the requirement have to face the issues in the value chain of the organization which ultimately affects the delivery efficiency, profitability margins as well as the quality standards. The customer markets and the production lines of the organization may change by the time. This needs to make the decisions related to redesigning of the supply chains of the organization by the operations managers for the purpose to overcome the changes as per the requirement (Collier & Evans, 2012).

The organization is able to develop the competitive advantage over the other competitors in the market when the organization emphasize on the supply chain design of the organization. The major activities related to the processes of the supply chain design helps in differentiating the organization from each other as well as it can also play an important role in achieving the success and can serve as the factor of failure for the other organizations. Consequently, at the time of designing the supply chains, it is essential to consider the core competencies that are performed by each member of the supply chain (Collier & Evans, 2012). The organization which fails to develop the supply chain designs that is cost effective and efficient might provide the organization with territorial loss as well as negative profit margins and this can ultimately result in organization's overall failure.

In the past decades, the company focused on developing lean supply as well as production concepts in the process of operations. These types of concepts are implemented or applied by the companies of aerospace even though these concepts are of greater importance. Use of the outsourcing as well as the supply chain improvements were made by Airbus for the purpose  of maximizing the operations' leanness, along with this, the company was also relying on the supplier in order to provide the components as well as other work so that the company will be able to conduct these at minimum cost. There were some drawbacks of the approach as this resulted in the negligence of the related knowledge regarding outsourcing and the company fails to recognize variety of the supply approach of Airbus (Texier, 2008). This does not help the company to provide with the benefits and values such as improvements in responsiveness and cost reduction.

Airbus was facing the failure in the profit and cash position because of the some of the problems which include additional cost and inability to deliver the products on time. For the purpose to continue competing and maintaining its position in the aeronautical market, the company launched (Power8) a turnaround project which helped the company to implement a new business model that includes the processes which are more cost efficient and lighter as well as the company was able to focus on the core activities (Texier, 2008).

The company is under pressure of enhancing the supply chain design of the company and delivering highest number of aircrafts. It is a serious concern for the company. Airbus has a diversified portfolio of the product in comparison to other companies of the industry. There are many freight, commercial and military aircrafts that are manufactured by the company. The company is one of the leading companies in this industry. Now, the suppliers have delegated more of the responsibility related to design manufacturing and development by integration across the network of supplier, closer collaboration and partnerships. Airbus increased the global outsourcing (Hollinger, 2016).  

Quality Management

The quality management of the organization emphasizes on all the major activities related to goods and the services production as well as the assembly. The quality management provides the benefits to the overall organization because it helps in enhancing the processes, lowering the cost, reducing the waste; enhancing the engagement of the staff and helping in identifying the opportunities related to training in the organization (American Society for Quality, 2017).

The implementation of the quality standards are ensured by the external regulatory body as well as the organization. Along with this, the internal standards of the organization are also ensured. The standards are developed for the purpose ensuring the process of the manufacturing of the aircrafts and the other relevant processes. The customers of the airlines are also considered as the body for the inspection of the quality of the processes and the products of the company.  The company focuses on the inspection of the manufacturing of the aircrafts in the initial stage which helps in the development of the aircraft without any defects. Along with this, it also helps in reducing the chances of the mechanical failure in the future as well. The company focuses on managing the quality through the testing which helps in reducing the defects and ultimately improves the quality. This helps in providing the products of good quality to the customers.

The company also measures the performance of the suppliers of the company as they are the major part of the organization and it is essential for the organization to measure their performance. The suppliers are a responsible body of the company and it is also essential to maintain a good relation with them. The suppliers of the company contribute in the success of the company (ORTEC, 2017). The supply chain of Airbus is global and the company is able to grow the product line because of the contribution of the suppliers.  

The quality control system in the company is also effective. The decisions related to the quality management mainly depend on the creation, design, goods and the services delivery to make sure that the expectations of the customers are met. A collaborative OTD process has been implemented by Airbus for bringing more of the objectivity as well as fairness in measuring the performance of the supplier. This approach helped in meeting the values of the community, maintaining the relationship with the suppliers as well as in preserving small supplier panel need (Martin-Rohmer, 2015). This helped in enhancing the quality as well as meeting the needs of the customers at the same time. The company is able to become a leading company because of quality management in the processes of the company. The effective collaboration among the areas of the production, quality as well as engineering helps in enhancing the performance of the company in all perspectives and meeting the needs of the customers. The quality control helps in enhancing the overall performance of the company. This also helps the company in achieving higher profits, maintaining relationship with the suppliers and meeting the needs of the customers.  

The employees of the company are accountable and are aware about the quality of the goods as well as also understand their responsibility towards their work which helped the company to become one of the successful companies of the industry. The quality of work of the employees of the company is also enhanced through providing them with the training. As a result, it helped in enhancing the various activities of the company in an efficient manner. The employees are aware about the performance of their team and their own which makes them enable to identify the areas of the improvements.

The company also ensures that they are able to meet the demands of their customers in context to the quality and the company understands the customers and provides them with good quality products and services. This is achievable for the company as the company believes in communicating with the customers.

Conclusion

This report explains the challenges and importance of operation management. This report also suggests how a company maintains sustainability in the market. This report highlights the importance of operation management in order to enhance customer satisfaction, optimum utilization of resources, production efficiency & productivity and competitive advantage. A company can lead the market with the adoption of new technology, customer oriented approach and innovative style. Airbus is a European multinational company that designs, manufactures, and sells civil and military aeronautical products. The company is a leader in designing, manufacturing and delivering aerospace products, services and solutions to the customers on a worldwide level. The main reason the success of Airbus is effective operation management and innovative approach with optimum quality management. With the increasing worldwide demand for air travel, the demand for technologically innovative solutions has also increased in order to reduce the environmental impact generated due to aircraft emissions and noise. Airbus is known for its cost-effectiveness and highly efficient aircrafts but if the competitors will be able to manufacture aircrafts of similar efficiency in reduced costs, the airlines will incline towards them to purchase aircrafts because of availability of less expensive alternatives in the market.   

Recommendations

For long term sustainability, it is required to apply research and design process to innovate product and services. In terms of rapidly changing technologies, it is essential to adopt these changes to run a business according to the coming demand. Customer oriented approach always helps in sustaining customers and to acquire new ones. With the increasing concern of environmental activities the business activities must be eco- friendly to minimize the environmental harm due to the business operations. With the implementation of innovative approach, a business can lead in the industry.

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