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As an example, different parts of an Airbus A380 are produced in factories all over Europe, and then assembled in a factory in France. Transporting these massive objects must be incredibly expensive (unless in fact they are shipped in small parts).

Why not build it in one place, like ships?

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    $\begingroup$ I don't know about the costs, but big parts are also shipped: aircraft.airbus.com/market/how-is-an-aircraft-built/… $\endgroup$ – Giskard Nov 15 '17 at 16:02
  • $\begingroup$ Presumably, because it is cheaper to do so than to produce them all in the same place. Note that if they're all produced in the same place there will be some transport costs to be incurred as well for the raw materials, not to mention that some things may just be much cheaper to produce in certain places than in others (and enough to make up for the transportation costs). $\endgroup$ – Theoretical Economist Nov 16 '17 at 11:21
  • $\begingroup$ In the past, various treaties and trade agreements between the countries involved were a big factor in determining what was made where. In order to get an aircraft financed it was often necessary to spread the work around. I don't know specifically about the Airbus. $\endgroup$ – Hot Licks Nov 20 '17 at 1:51
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The main reasons for decentralization in aviation industry would be lower costs, but also (if not most importantly):

  • supportive public policies (e.g. local tax incentives, provision of low-interest or no-interest loans, other production subsidies),
  • technology and specialization,
  • industrial agreements, such as offset (in order to sell Boeing 747s to Air China, for example, at least part of the final product must be manufactured or assembled inside China itself).

In ‘Global Decentralization of Commercial Aircraft Production: Implications to the U.S. Based Manufacturing Activity’ David Pritchard entertains the following hypothesis:

[...] the geography of input supply for a global company like Boeing may not simply reflect issues such as unit costs, price-quality ratios, input delivery speeds, or any of the related factors that are traditionally thought to encourage internationally decentralized production. More simply, the argument is that big buyers can impose purchasing conditions that aircraft suppliers cannot ignore.

See also the opinion posted on Quora to similar question.

General explanations for decentralization of chain production can be found here:

Corporations are perpetually choosing which approaches to processing, logistics, and product design will best meet company goals.

[...]

Localizing production has impacts on product design choices such as processing and remanufacturing limitations based on the capabilities of supply chain members. However, a local supply chain also has the advantage of easier communication and therefore ability to initiate concurrent engineering approaches between supply chain members. Containing production within a physical area affects costs (such as reducing transportation requirements). [...] Transportation costs can plummet in a localized approach to manufacturing but other manufacturing related costs (e.g., capital costs, energy use, materials cost) could rise.

Hope this helps.

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Short answer

Airbus is a particular case of decentralised supply chain which came from historical and political reasons. Airbus is a consortium with several European states having a stake on it, which means that each state wants a part of the production in their country.

Long answer: Why is Airbus' supply chain disperse

The aviation industry for commercial planes basically has has two large players nowadays: Boeing and Airbus. The 70's-80's saw the consolidation of American producers, with Boeing as the survivor and most successful of them (incorporating other large players such as the old McDonell Douglas).

Europe had smaller producers, such as BAC or Aerospatiale. Smaller European producers in the 70's and 80's wanted to compete with Boeing, namely with the success of the 727, but the fragmented market would be a challenge. Therefore, Airbus was a consortium created with several European manufacturers to have a large aviation player with European roots. To minimize political difficulties, the supply chain was split over several countries:

While the original partners in the company recognised that the only way to compete was to consolidate national industries on a regional European basis, consolidation required negotiation and political finesse. Most sensitive was the decision where to site the different manufacturing operations.

The easiest way to defuse tensions was to build different bits of the first plane, the A300B, in the different partner countries. The French made the cockpit, the control systems and the lower-centre section of the fuselage; the UK made the wings, and the Germans made the rest of the fuselage and a part of the centre section. The Dutch made the moving parts of the wing, the flaps and the spoilers, while the Spanish made the horizontal tailplane.

Source: Financial Times

This supply chain is unlikely to become more centralised or placed offshore, for political and economic reasons.

  • From the economic perspective, today's supply chain is too fixed to be able to be moved somewhere cheaper, as the regions where each part is produced developed local expertise and innovation centres around it. Another argument is that the de-centralized supply chain helps to have a faster delivery time (see FT article mentioned above).

  • From the political perspective, European stability (commercial and military) requires that countries depend on each other for developing aircraft. Although Airbus is mostly known from the A380s and A320s, they also produce military aircraft with their subdivision Airbus Defense and Space. Placing production outside of Europe would place aviation expertise in other countries, a strategic expertise to have for defense.

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"Boeing said [Airbus'] tax breaks amounted to no more than $1bn [from the EU]." (link: http://www.bbc.com/news/business-41152544)

I doubt their reason for spreading out the supply chain is due to gains in economic efficiency. I'm guessing it is largely due to subsidies. A more dispersed manufacturing chain may get them bigger subsidies because politicians who have constituents working for an Airbus are more likely to demand subsidies for Airbus. Those politicians can withhold their vote on other matters, and the greater the number of politicians who support Airbus, the more the EU has to heed to Airbus' wishes.

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