Sourcing is playing an important role in change at EADS, especially through increased global procurement and closer ties with suppliers.
Change in EADS’ sourcing activities is an essential part of its evolution. At the end of 2007, the Sourcing Strategy was further developed to reflect the new Vision 2020, while management also successfully pursued its existing strategic goals.
As EADS seeks to concentrate on its core activities, it intends to consolidate its supply base. The Group also aims to procure more from outside Europe, seeking to gain competitive advantage and market access while reducing its vulnerability to U.S. dollar volatility. Specifically, Vision 2020 targets sourcing 40% of volumes from outside Europe, compared with 23% today.
With EADS’ external spending equivalent to 75% of its revenues, however, greater sourcing efficiencies have long been a priority. 2007’s new goals added clarity and momentum to many existing initiatives.
With EADS’ external spending equivalent to 75% of its revenues, the Group aims to procure more from outside Europe, seeking to gain competitive advantage and market access while reducing its vulnerability to U.S. dollar volatility. Specifically, Vision 2020 targets sourcing 40% of volumes from outside Europe by 2010, compared with 23% today.
Internationalisation
Asia is the greatest priority for geographic diversification of suppliers. In 2007, sourcing offices were opened in the Indian cities of Delhi and Bangalore. EADS anticipates procuring, for example, aerostructures such as Airbus doors and engineering services.
Locations such as China were identified for office openings in 2008. It is anticipated that China will be an important source of aerostructures and raw materials.
Closer relationships
Airbus is transforming its supply chain by selling aerostructures manufacturing sites to buyers that will form long-term partnerships with Airbus, becoming strong tier-one suppliers.
EADS made progress in working more closely with suppliers. The EADS Procurement Network and the Airbus Supplier Councils, both of which were started in 2006 to enhance cooperation and networking with suppliers, became established forums and met on a regular basis. And EADS became a founding member of SPACE, an association of European aerospace companies formed to cooperate when auditing, certifying, monitoring and developing small to medium-sized suppliers.
Sourcing integration
By identifying further joint procurement opportunities, EADS continued to reduce the costs and risks in its supply chain. All 2007 targets were met and the initiative is now being expanded. Through internal joint procurement, EADS also aims to secure sourcing of potentially scarce raw materials, such as composites or titanium.
Measures were introduced to improve coordination of “offset” obligations across EADS and its suppliers. Contracts with government customers often imply the requirement to source a quantity of goods or services from the customer’s country.
Across the three axes of internationalisation, closer relationships and integration, Sourcing addresses performance improvements in the supply chain, and cost reductions through common improvements of business processes with our suppliers. Sourcing is a major element of the improvement programmes in the EADS Divisions, the largest being the Power8 programme run by Airbus, and thus a major contributor to EADS performance and profitability targets.
Sourcing is on a clear course, with a particular emphasis on managing relations to key suppliers and on enhancing Global Sourcing.
In 2008, major supplier relationships will become closer, coordination of sourcing will continue to improve and more overseas offices will open. Additionally, initiatives will be introduced to manage the supply chain’s sustainability from both environmental and ethical perspectives.
Further cost reductions and performance improvements in the supply chain will contribute to EADS’ objectives.
