Supply Excellence — Airbus Adjusts to Weather the Storm

Airbus Adjusts to Weather the Storm

September 11th, 2008 · by Justin Fogarty · No Comments · LCCS and trade, best practices, costing, outsourcing, sourcing, supply management

On this blog, we often talk about low-cost country sourcing, outsourcing, currency fluctuation strategies and macro economic challenges. But rarely is there ever one story that ties all of those issues together as well as that of Airbus, a company faced with slowing industry demand, a strong Euro (where they manufacture) vs a weak USD (where they sell), high labor costs and angry unions.

This BBC report (video is here - unfortunately BBC has disabled the ability to embed) describes how Airbus’ Power Eight Plus strategy is cutting costs by moving some manufacturing to China and Tunisia. In conjunction, they’re also urging key suppliers to shift their operations there as well.

Considering Airbus’ estimates that each €0.10 increases in value against the USD results in a 1 billion Euro loss in profits, it should come as little surprise that they are looking to hedge against fluctuations by setting up some of their operations outside of the Eurozone. The bigger question for the company seems to be how they’ll fare in the changing socio-political-economic climate brought on by globalization, especially in an industry where carriers are consolidating and each deal won or lost can be massive. In that regard, their efficient, comfortable planes seem like a smart bet…but it never hurts to lower costs when and where you can…just in case.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.

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