Aviation Logistics and Supply Chain Management 3rd

CHAPTERAVIATION LCM Intro to Aviation LCM Flows of LCM Value Chain Management

HISTORICAL OFAIR TRANSPORTAviation businessAviation historical has different stageof development followed the timeline Aviation Logistics and Supply Chain Management 086

AIR TRANSPORT HISTORICAL Source: Michael Sales THE BIRTH OF AIR TRANSPORT Hot air balloons Source: Allaz, Camille, 2004 It’s generally agreed that true air freight was first employed to carry postal shipments in the US (US airmail service) in November 1910. Biplane Source: Allaz, Camille, 2004 Nine months later in August 1911, first air freight in Germany. Its cargo consisted of a few bundles of newspapers and when pilot landed, he also made media history; the newspapers fresh off the press arrived a whole hour earlier than was possible by rail.087

FIRST WORLD WAR After the WW I Source: Larsen et al, 2006 After the end of the first World War all necessary factors for the development of commercial aviation were in place; military, reliable services, and sufficient paid traffic was needed.During WW ISource: Larsen et al, 2006In the first World War, planes were used for thefirst time for military purposes. During that timemilitary supported the development of planesstrongly. Aviation Logistics and Supply Chain Management 088

SECOND WORLD WAR After WW II Source: US Army The second World War brought many major improvements in the pace of aviation technology, aircraft development and production. All countries involved in the war stepped up the development of aircraft and flight-based weapon delivery systems, such as the first long-range bomber. Not only for wartime in the shape of bomber and fighters, but also for the provision of heavy cargo transport.089

DEVELOPMENT OF THEAVIATION BUSINESS Source: Michale Sales, 2013BETWEEN1920 - 1940Source: Michale SalesThe air transportation of mail was the mainactivity of the aviation business, while railwayswere considered fast, safe and comfortable formoving passengers. 1925s Source: Michale Sales Juan Trippe, began a crusade to create an air network that would link America to the world, and he achieved this goal through Pan American Airways, with a fleet of flying boats that linked Los Angeles to Shanghai and Boston to London. Aviation Logistics and Supply Chain Management 090

THE JET AGE Source: Michale Sales, 2013 NOW A DAY The air transportation industry as we know it today was revolutionised by the arrival of jet aircraft, which offered a much higher speed and greater payloads. The combi-aircraft was also introduced, which could carry both passengers and freight on the main deck.091

STAGE OF DEVELOPMENTSource: Michale Sales, 2013 1991-2010 New Perspectives - Customer value, what you customer want and what you have.1974-1990Networks, Alliance and Low costoperations, alliance membergroups, network building. 1945-1973 development of quality and cost, using aircraft in the business of transporting people and goods. 1929-1944 Political development, government agreement, nine freedoms of the air transport. 1783-1929 Technical development, which are aircraft structure, engine, and systems etc. Aviation Logistics and Supply Chain Management 092



SCM, IT’S OLD CONCEPT Source: Assoc. Prof. Dr.Somyot Chearneksorn, 2013CONCEPT OFSUPPLY CHAINNapoleon vs. RussiaGermany vs. RussiaSource: Council of Logistics ManagementSupply Chain consisted of strategically placedbased of soldiers and material (inventory). Haft ofthis supply chain was closed during the 1990s. Today, US military Source: Council of Logistics Management “Air Bridge” a supply chain of transportation planes continually refuelled by strategically location gas tanker planes. Aviation Logistics and Supply Chain Management 094

WHAT’S SUPPLY CHAIN MANAGEMENT Source: Grave, 1992 DEFINITION OF Supply Chain Management Source: Grave, 1992 A Supply Chain is a network of facilities to procure raw material, make product, move product through channel and finally deliver the products to customer.095

“Supply chain is all about getting the product into your hands”Source: Technology Industry, 2013 Aviation Logistics and Supply Chain Management 096

FLOW IN SUPPLY CHAIN MANAGEMENT Source: Assoc. Prof. Dr.Somyot Chearneksorn, 2013 PHYSICAL FLOW Supplier( Manufacturer( Distributor( Retailer( Customer( Upstream) Downstream) FINANCIAL FLOW INFORMATION FLOW REVERSE FLOW095

AIRLINE CATERING SUPPLY CHAINSource: Retail inMotion, In-flight Sales Control Porks 1,000,000 Bean Vegetables dishes for Pad Thai per year. Noodle Foods & Beverage Airline Customers Beverages (Passengers)Airline HQ Suppliers Consolidators / Airline Packing Aircraft Onboard Transportation Caterers Decanting Delivery Service Aviation Logistics and Supply Chain Management 098

AIRBUS A350-900 SUPPLIERS Source: Airbus Fire Detection System: Kidde Wing anti-icing: Liebherr Engine: CFM International LEAP-1 Flight Control System: Packer Aerospace Weather radar: Rockwell Collins Electricity System: Honeywell Engine Thrust Reverser: French Aircelle Flight Recorder: GF Aviation Cockpit control and instrument lighting: Eaton Airframe: AVIC Hongdu Fuel System: Packer Aerospace Rader cover: AVIC Chengdu Simulate System: Rockwell Collins Wing and Movable Suface: AVIC Xi’an Landing Gear: Honeywell Empennage: COMAC Tire: Michelin Tries Gate Signal System: Crane AE Auxiliary Power Unit: Honeywell099

A300-600ST SUPPER TRANSPORTER“BELUGA”Source: Airbus Beluga The Beluga is key for all Airbus programmes and is used to carry aircraft parts over their manufacturers in Europe. Aviation Logistics and Supply Chain Management 100

SUPPLY CHAIN MANAGEMENT Source: Grave, 1992 The company need to do all these thing Buy thing: raw materials. Make thing: produce the products. Move thing: deliver the product to the customers. Sale thing: sale the product. Service thing: for the customer’ satisfaction.101

“To do every thing to give what ever the customer want, when their want it, and offer what their want in the low price but still managing make the profit ”Source:MartinChristopher Aviation Logistics and Supply Chain Management 102

VALUE CHAINSource: Michael Porter, 1990SUPPORT FIRM INFRASTRUCTURE MARGINACTIVITIES HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND OPERATION OUTBOUND MARKET SERVICEMARGIN LOGISTICS LOGISTICS & SALES PRIMARY ACTIVITIES Value Chain Concept Source: Michael Porter, 1995 In 1985 Michael Porter of Harvard published his concept of the value chain (Porter 1985). He laid out the way in which firms create value through a series of fundamental and supportive activities.103

VALUE CHAINSource: Prof. Firmino G. MucaveleValue Chain Firm Human Resource Infrastructure Management Inbound Operation Outbound Marketing Service Logistics Technology Logistics & Sales Development ProcurementThe value chain is a concept, which is described as theentire range of activities required to bring a product fromthe initial input-supply stage, through various phases ofproduction, to its final market destination.The production stages entail a combination of physicaltransformation and the participation various productsand services, and the product’s disposal after use. Aviation Logistics and Supply Chain Management 104

PRIMARY INBOUND LOGISTICS ACTIVITIES Source: International Society Logistics105 Includes activities associated with receiving, storing, and disseminating inputs to support the product or service, including transportation, material handling, warehousing, inventory control, vehicle scheduling, and return to suppliers. OPERATION Source: International Society Logistics Activities associated with transforming inputs into final form, such as machining, packaging, assembly, equipment, maintenance, testing, printing and facility operation. OUTBOUND LOGISTICS Source: International Society Logistics Includes activities associated with physically collecting, storing, and distributing a product or service to customers, such as finished goods warehousing, material handling, delivery, order processing, and scheduling.

MARKETING & SALESSource: International Society LogisticsIncludes activities associated with providing a means to whichbuyer can purchase the product and including them to do so,such as advertising, promotion, sales fore efforts, job quoting,channel selection, channel relations, and pricing.SERVICESSource: International Society LogisticsIncludes activities associated with providing service to enhanceor maintain the value of the product, such as installation, repair,training, parts supply, and product adjustment. Aviation Logistics and Supply Chain Management 106

SUPPORT FIRM INFRASTRUCTURE ACTIVITIES Source: International Society Logistics It not only a building, but include a unit which generates useful information for decision making and operations including accounting,finance, law department. HUMAN RESOURCE MANAGEMENT Source: International Society Logistics Consists of activities involved in recruiting, hiring, training, developing,and, compensating all types of personnel.107

TECHNOLOGYDEVELOPMENTSource: International Society LogisticsIncludes activities typically associated with MIS, engineering,and R&D and involve activities that seek to improve product andprocesses.New product and process development are primary concerns oftechnology development support activities.PROCUREMENTSource: International Society LogisticsInvolves activities associated with identifying, evaluating,selecting, managing, and developing source of supply. Aviation Logistics and Supply Chain Management 108

LOGISTICS MANAGEMENT It is the management of all activities, which facilitate movement and the co-ordination of supply and demand in the creation of time and place utility. Logistics is the branch of military science having to do with procuring, maintaining and transporting material, personnel. Logistics is the process of getting products and service where they are required and when they desired.109

“The last real frontiers ”of opportunity Source: Peter Drucker, 1962 Aviation Logistics and Supply Chain Management 110

WHAT’S LOGISTICS Source: Webster. 2013 DEFINITION OF LOGISTICS First know inMilitary Alexander the great In military science, all the activities of armed- force units in support of combat units, including transport, supply, communications, and medical aid.111

Boeing C17The Boeing C-17 Globemaster III heavy transportaircraft is currently operated by the United Statesand Royal Air Forces. Aviation Logistics and Supply Chain Management 112

WHAT’S LOGISTICS Logistics Supply Chain Source: International Society Logistics DEFINITION OF LOGISTICS International Society Logistics Logistics is a professional discipline that ensures the successful support of the product throughout its life. From design engineering to manufacturing and materials, packaging and marketing, and distribution and disposition, logistics involves every possible phase of the product support process.113

DEFINITION OF Supply Chain LogisticsLOGISTICSCouncil of LogisticsManagementLogistics management is that part of supplychain management that plans, implements, andcontrols the efficient, effective forward andreverses flow and storage of goods, services andrelated information between the point of originand the point of consumption in order to meetcustomers' requirements. Aviation Logistics and Supply Chain Management 114

LOGISTICS MANAGEMENT Source: Council of Logistics Management A part of Logistics Management Supply Chain Manangement It involves the integration of information, transportation, inventory, warehousing, Logistics is the management of the flow of material handling and packaging, and security. goods, information and other resources between the point of origin and the point of Logistics is a channel of supply chain which consumption in order to meet the requirements adds the value of time and place utility. of consumers frequently and originally. Logistics SCM115

THE OBJECTS OF LOGISTICSMANAGEMENTSource: Neelam Yaday, 2013Logistics Management Delivering customer serviceaim to; Reducing the total distribution cost Reducing the cycle time Cost reduction (variable cost) Minimum variance Capital reduction (investment, fixed cost) Movement consolidation Service improvement Quality improvement Inventory reduction Life cycle support Reliable and consistent performance Minimum product damage Quick customers responses Aviation Logistics and Supply Chain Management 116

THE SCOPE OF LOGISTICS Logistics management IN BUSINESS must balance 2 basic targets; Source: Assoc. Prof. Dr.Somyot Chearneksorn, 2013 Quality of Service Logistics and Supply Low Cost Chain in a business Maximise customer service level Ensure high product quality Achieve minimum (possible) cost Be flexible in the constant market changes117

“The scope of logistics spans the organisation, from management of material through the delivery of the final product”Source: Martin Christopher Aviation Logistics and Supply Chain Management 118

“Logistics management tried to have the right product in the right quality at the right place at the right time and with the right price”Source: Martin Christopher119

THE 7Rs T7heRsSource: Russell, Stephen H., 2000 Right Product Right Quality Delivered the right product to the No reject and make customercustomer as customer specifications. satisfaction. Right Quantity Right TimeNo good a one piece loss The delivery performance, of the required number. when their want. Right Price Right CustomerCost advantage, have a good price Having right product to the right for your customer and still make customer. a profit for company. Aviation Logistics and Supply Chain Management 120 Right Place No good at the wrong place.

THE IMPORTANT OF LOGISTICS MANAGEMENT Source: Assoc. Prof. Dr.Somyot Chearneksorn, 2013 Logistics COST STRUCTURE 14.5% 11.4% 4-30% Average of Average of World GDP of total sale in Thailand GDP each companies 80% Might reach 80% if include PURCHASING AND PRODUCTION121

LOGISTICS COST EFFICIENCYSource: International Society LogisticsThailand’s Logistics 2% 1%COST STRUCTURE 9% 6% 8% Transportation Logistics cost Administration Cost 42% Logistics cost 50% 82% structure Inventory Transportation RoadHolding Cost Cost Inland Waterways Sea Railways Air Aviation Logistics and Supply Chain Management 122

WHAT’S NEW IN LOGISTICS MANAGEMENTSource: International Society Logistics The trend now New concepts Global competition Push-Pull strategy Shorter product life cycle Direct to customer New, low-cost distribution channels Strategic alliances More powerful well-informed customer Manufacturing postponement internet and E-business strategies Dynamic Pricing E-Procurement123

AVIATION LOGISTICSAND SUPPLY CHAIN MANAGEMENTHISTORICAL OF AVIATION VALUE CHAIN CONCEPT INDUSTRY Primary activities Stages of development Support activities First world war LOGISTICS Second world war MANAGEMENT SUPPLY CHAIN CONCEPT Logistics management concept Objectives of Logistics management Flows of SCM Key activities of SCM Logistics cost structure New trend of LCM