By Tim Hepher
PARIS (Reuters) - An industrial drumbeat is picking up in European aircraft factories as Airbus borrows a new range of carmaking strategies to keep pace with record demand.
Technologically, modern jetliners have more in common with a custom-built Formula 1 than a family saloon.
But their construction, and in particular the way 3 million parts per plane pour into factories, is getting a extra boost from cars as the jet age heads closer towards mass production.
The transformation underpins one of the toughest challenges faced by Airbus in its 44-year history: switching to a new model of best-selling A320 at the same time as embarking on a steep ramp-up for its new carbon-composite wide-bodied jet, the A350.
"Imagine building a skyscraper with 30 floors and over $100 million in value. Then imagine you are asked to ...deliver a skyscraper every day. In terms of value and complexity that is what A350 production is," Klaus Richter, the ex-BMW procurement chief who now oversees a $40 billion Airbus supply chain, said.
"A construction company would go crazy. You would have teams working on the lighting, and one week later, you would have three skyscrapers behind them waiting," he told Reuters.
Richter is drawing on experience in running one of the tightest auto supply chains to help Airbus in a new contest with its U.S. arch-rival Boeing, this time over production strategy.
While bulging order books have pushed up the share prices of both companies, their industrial war plans will determine investor returns and development cash for years to come and influence the fate of new entrants like China and Russia.
With up to 80 percent of manufacturing dollars spent externally, the supply chain is a crucial front in the battle.
In 1990, Airbus ordered 6 billion euros of parts a year. By 2020, its procurement bill is set to reach 50-60 billion euros.
"That illustrates how enormous the development has been over time and why we have to industrialize," Richter said, referring to the move from a "workshop" culture long on customisation towards higher volumes and the intuitive flow of an auto plant.
To achieve this, Airbus is relying increasingly on 'series production' techniques as well as managers such as the tall and unflappable 50-year-old Richter and former Mercedes executive Gunter Butschek, the Airbus operations chief.
Boeing led the way in adopting just-in-time "Lean Manufacturing" inspired by Toyota in the 1990s and its coloured progress charts have become a common sight, including at Airbus.
But industry watchers say Airbus is now driving automotive techniques deeper into its organisation and spreading the transformation to the supply chain more widely than before.
"Airbus are doing better than they used to, and better than Boeing, in handling their supply chain right now," said Richard Aboulafia, vice president of consultancy Teal Group.
A Boeing spokesman said it was studying "a lot of supply chains" and its cost-cutting "Partnership for Success" scheme would make its own chain more efficient, creating a "competitive advantage for Boeing, our partners and our customers".
A turning point in Airbus thinking came three years ago when missing wiring bundles from a strike-hit Tunisian plant threatened to bring A320 production to a halt, forcing managers to set up a makeshift plant in France over one weekend.
"Everyone was running like hell," Richter said.
Partly as a result, Airbus has decided to accelerate dual-sourcing for the single-aisle A320, and where needed to maintain backup facilities or limited buffer stocks, Richter said.
The changes do not end there.
Airbus is gradually changing its business model, even at the risk of displeasing some airlines, by moving towards less customisation, especially in the choice of cabin layout.
It has altered the way it deals with scrap by asking some suppliers to pre-machine parts and sharing more information with them to avoid sending shocks through the supply chain: a tool used by the car industry to manage its much higher volume.
"In automotive you find a lot of visibility and predictable demand for the supply chain to enable them to have a very high utilisation of capacity and adapt early on," Richter said.
Both Boeing, with its 787 Dreamliner, and Airbus, with its A400M military transporter, have had costly slowdowns in the past blamed on inadequate oversight of outside suppliers.
Of 3,000 suppliers on the A350, only about 200 are so-called Tier 1 firms dealing directly with Airbus, yet the $15 billion project is exposed to failure anywhere in the system.
Richter said there were few points of vulnerability or "hot spots" in the supply chain and parameters like on-time delivery, missing parts and quality had all improved "significantly".
"With that strategic preparation, we are pretty confident we can imagine the exceptions and the weak partners but these will be very limited," he said in the interview.
Even before the first A350 delivery due next month, Airbus is running its supply chain at the equivalent of 2-5 jets a month, half way towards an assembly goal of 10 a month by 2018.
Still, the margin for error is tight.
"You are running at near red-line capacity and if there is anything that throws things off, it can have a cascading effect through the supply chain," said former McKinsey & Co aerospace head Jerrold Lundquist, managing director of Lundquist Group.
Furthermore, the next three years will be crucial for Airbus, during which the A350 will be on a financial tightrope and the A320 must continue to finance the rest of the group.
With the A350 ramping to peak output quickly, any delay in reducing costs through experience could affect multiple planes.
"A large part of the learning-curve challenge is getting carbon-fibre production of the airframe and assembly up to speed in synchronisation with the supply chain," Richter said, adding the problem was "understood and intensively managed."
The A320's more modest revamp involves mainly new engines, but could place pressure on St Eloi, the oldest Airbus facility in Toulouse, where smooth production of the pylons attaching them to the wings is a critical part of the project.
It also leaves Airbus dependent on ambitous production targets of engine makers including Pratt & Whitney, although Richter was confident its parent United Technologies would prevent any major disruption.
"For United Technologies it is basically one business unit with one challenge and if needed they can support it massively to safeguard their ramp-up, and they will," he said.
(Additional reporting by Alwyn Scott in Seattle and Edward Taylor in Frankfurt; editing by Philippa Fletcher)