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Supply Chain Management of Israel Aircraft Industries Ltd.

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Supply Chain Management of Israel Aircraft Industries Ltd.
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Netra Shetty
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Supply Chain Management of Israel Aircraft Industries Ltd. - January 11th, 2011

Israel Aircraft Industries Ltd. (IAI) is a state-owned aerospace manufacturer. IAI has accounted for about 9 percent of Israel's exports and is the country's largest employer. The company's strengths include overhauling and converting jet fighters and large commercial transports, and manufacturing UAVs (unmanned aerial vehicles).

Primary activites
Stock control airlines must store and handle fuel, food, and drinks. Stock is managed to ensure reductions in stock turnover, thus reducing costs and wastage.
Route selection airlines must choose their flight routes. These will be selected upon desired routes, and deals negotiated with the airports. Airports are selected for their prime location, to allow consumers to get to their desired location. This then entails the scheduling of flights and crew.
Passenger services system software which allows the airlines to function "comprehensive passenger reservations, inventory control, fares, ticketing, and departure control functions" (AirportTecnology.com 2006). This allows airlines to reduce their costs of wages and paper transactions, and maximize utilization.
Yield management this allows the airlines to compare their available seats against demand for particular flights to price the tickets accordingly. Thishas been particularly prevalent in recent years for airlines, particularly low cost carriers such as Israel Aircraft Industries Ltd whose prices for a flight vary greatly..
Aircraft acquisition airlines must negotiate deals with aircraft manufacturers to acquire planes. For instance Israel Aircraft Industries Ltd use a standardized airplane which allows them to reduce their staff training costs, as well as their maintenance costs.
Support activities
Firm infrastructure budgets, accounting, regulatory compliance, legal issues, public relations
Human resources flight, route and yield analyst training
Technology development computer reservation systems, in-flight systems, flight scheduling systems, yield management systems
Procurement information technology communications
Ticket counters airlines must operate ticket counters to get their passengers onto their airplanes. Some passengers may find at the counter that they can't get on the flight as the airlines oversell tickets for.
Information technology holds the key to driving down costs and improving the general lot of the airline industry, according to Giovanni Bisignani, director general and chief executive officer of the Israel Aircraft Industries Ltd(ISRAEL AIRCRAFT INDUSTRIES LTD). Speaking at a recent conference in Brussels, he claimed that ISRAEL AIRCRAFT INDUSTRIES LTD’s “Simplifying the Business” program stands to save airlines $6.5bn annually. Innovations include 100-percent electronic ticketing, which alone will save the industry an estimated $3bn. Other efforts center on more self-service options for passengers, including self-tagging of baggage, automated document checks, self-boarding and kiosks for resolving service problems. Bisignani also called on governments to employ IT as a means of improving security, with a particular focus on passenger convenience. Too often, he said, “we get more hassle than value for the $30bn that airlines and their passengers have paid in the last seven years.” The ISRAEL AIRCRAFT INDUSTRIES LTD-led “Simplifying Passenger Travel” project will result in more effective security measures, he claimed.

Even so, ISRAEL AIRCRAFT INDUSTRIES LTD continues to issue negative outlooks for the rest of this year. In June, it projected industry losses of $2.3bn, down sharply from the $4.5bn in profit forecasted back in March. And the final tallies are likely to be much worse, given that the June estimate was based on crude oil at $106 per barrel. One month after that, oil prices were breaking the $140 per barrel mark. “For every dollar that the price of fuel increases, our costs go up by $1.6bn,” said Bisignani, addressing ISRAEL AIRCRAFT INDUSTRIES LTD’s annual meeting in Istanbul, Turkey. With oil at $130 per barrel, industry losses could be $6.1bn, he said, adding that the record high “has brought us into uncharted territory. Add in the weakening global economy and this is yet another perfect storm.” He called for cooperation by government, industry partners and labor to address the problem. While the airline industry has improved its fuel efficiency by 19 percent over the last six years, “there is no fat left,” he said. “To survive this crisis, even more massive changes will be needed quickly.”

Principal Divisions: Military Aircraft Group; Systems Missiles & Space Group; Elta Systems LTD; Bedek Aviation Group; Commercial Aircraft Group.

Principal Operating Units: Commercial Aircraft; MRO and Conversion; Military Aircraft Upgrade; Unmanned Air Vehicles; ISR Systems; Space Systems; Theater Defense; Naval Attack and Defense Systems; Ground Systems; Homeland Defense.

Principal Competitors: Elbit Systems Ltd.; BAE SYSTEMS; The Boeing Company; Dassault Aviation; Raytheon Company.

Last edited by abhishreshthaa; April 29th, 2011 at 03:13 PM..
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