Developing trends in the aerospace supply chain

As aircraft manufacturers receive more and more orders for new aircraft, suppliers need to react and increase their efficiency to ensure this increased demand can be managed effectively.

This has triggered a number of changes in the supply chain that influence the activities of OEMs and suppliers. This includes how OEMs are re-shoring their supply chain, how OEMs are now placing design responsibilities on tier 1 suppliers and how OEMs and suppliers are reassessing their relationship to improve efficiency in design and manufacturing.

OEM’s manufacturing location

As OEMs are making a push to reduce their costs, many are moving their manufacturing processes closer to regions of high customer demand. Also, many large OEMs are re-shoring their supply chain back to the US.

One of the reasons for re-shoring is that natural disasters in developing countries have caused significant disruption to the supply chain, leading to costly delays.

Further problems with global suppliers include high transportation costs and increased lead times. So in light of the increased demand for new aircraft, OEMs cannot afford to take these risks. Through re-shoring, OEMs can take greater control over the supply chain and reduce their costs.

However, suppliers in Japan are increasingly becoming strong global competitors in the commercial aviation sector. Japan is responsible for over a third of the construction of Boeing’s 787, contributing both carbon fibre and titanium alloys. 

Likewise, the Mexican aviation industry has made huge developments with significant investment into training their workforce in various roles such as aviation engineers and technicians. This is particularly important as developments in technology require a more skilled workforce, meaning investment into labour is becoming an increasingly significant strategy.

Pressure to design

Many OEMs are now placing pressure on tier 1 suppliers to design parts as well as manufacture. The problem here is that tier 1 suppliers are spending a lot of money recruiting the right talent to be able to perform this kind of work. 

But this also makes way for other costs, including having to purchase the right machine tools to carry out the work and train the new recruits to use these machines.

Working together to cut costs

So how can OEMs and suppliers work together to manage the increased demand for new aircraft in a way that profitably benefits them both?

OEMs and suppliers need to conduct a full assessment of the activities they are both engaging in and see where they can work together to reduce costs. For example, suppliers may receive scattered orders from OEMs that lead to increases in suppliers’ overheads. Yet, if OEMs were to make their orders using a more organized schedule, this can help to alleviate suppliers’ inventory costs.

These cost reductions can help suppliers to use their resources more efficiently and the organized scheduling of orders creates better consistency for OEMs when receiving their parts. This consistency may then help to organize other elements of the supply chain i.e. assembly of components may then become more organized as parts have a more predictable schedule of completion.

In summary, the increased demand for new aircraft has pushed OEMs and supply chain partners to adapt their processes in order to become more efficient. This includes;

• Re-shoring the supply chain to cut costs and gain control over the supply chain
• OEMs tasking tier 1 suppliers to take more responsibility for part design
• OEMs and suppliers working together to cut their respective costs.

For more information on how OEMs and suppliers can reduce their costs, download the eBook ‘Aerospace Supply Chain: Real world strategies for surviving and handling growth’.