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Understanding the risks in the aerospace supply chain

Posted by Geoff Haines on 15-Sep-2017 11:00:00
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Aerospace Supply Chain RisksAs consumers around the world are demanding greater access to air travel, this has led to orders for 38,000 new aircraft. Although this represents the potential for significant revenue, OEMs and suppliers face significant risks that they must overcome in order to develop these aircraft cost effectively and ensure a quick time to market. 

A major trigger of these risks is how OEMs are now tasking suppliers with designing aerospace parts in addition to manufacturing.

This has led to financial risks for suppliers as they invest in expanding their business functions to not only manufacturing parts, but also designing parts. This produces a risk for OEMs who now receive parts designed by suppliers who often have little experience in designing aircraft parts. 

But there are a few solutions both OEMs and suppliers can take to reduce these risks and improve the design and manufacturing of aircraft parts.

Risks to Suppliers and OEMs

OEMs today are placing greater responsibility on tier 1 suppliers to design aircraft parts while the OEMs themselves are focussing their attention on managing the overall program of aircraft production.

The consequence for suppliers is that they have to diversify their operations outside of their main business function, which carries a number of risks for both OEMs and suppliers.

For suppliers, the chance to gain a competitive edge over rivals means that they need to invest significant amounts of money in specific software and machine tools to carry out aircraft part design. But suppliers also need to invest in recruiting employees to operate these machines. 

The problem is that as suppliers progress through this process, they may reach a point when they no longer have the capital to continue to invest in part design, which may be due to an underestimation of the budget required to venture into this new function. But it’s also important to recognise that costs don’t simply involve investment in machines and recruitment.

Costs are also incurred where mistakes are made in the design process producing poor quality parts, leading to delays in part production and development. The problem is that this can have negative consequences on contractual obligations and future contract negotiations. 

For example, in 2006 Airbus had to delay the delivery of their A380 superjumbo due to a delay in installing electrical wires, as employees were still learning how to use the software used for the wiring design. But one of the major drawbacks of this type of delay is reputational damage with customers and other key shareholders.

For OEMs, the risks they face are associated with suppliers’ inability to invest in developing their design capabilities. OEMs need to recognise that suppliers are venturing into a new area of aircraft production, and so suppliers often lack the necessary skills and experience to produce high quality parts, as and when OEMs demand them. 

This is a serious problem for OEMs to have when they are trying to develop aircraft cost-efficiently and reduce their time to market.

So what can OEMs and Suppliers do?

There are solutions that OEMs and suppliers can take to avoid these issues from occurring. For example, OEMs need to conduct thorough research into their suppliers to assess the likelihood that their suppliers will be able to take on these design requirements, without running out of resources.

This form of risk assessment can help OEMs to make more informed decisions concerning which suppliers they should be handing these design responsibilities to.

Another solution OEMs and suppliers can use together concerns co-operation. Through collaboration on joint cost reductions, OEMs and suppliers can work together to cut their respective costs down and reduce their financial risks.

For example, where OEMs have tasked suppliers with producing particular parts, OEMs could place orders for these parts on a more predictable schedule, helping to reduce suppliers’ overheads. This can also benefit OEMs by increasing the efficiency of aircraft assembly later on in the process by having a clearer idea of when parts will be available.

Training 

There are also steps that suppliers can take to minimize their own risks when it comes to taking on these new design responsibilities.

As discussed earlier, one of the costs incurred by suppliers is delays in the design process as well as the creation of poor designs that lead to the wasteful production of poor quality parts. 

One way that suppliers can overcome this is by investing in training the workforce in the use of software packages used for part design. This can help to avoid errors in part design that lead to delays in part production or the production of poor quality parts.

Although this looks like another element that simply drives costs up, the best way to look at it is as an investment in keeping costs down in the future. Investing in recruiting and training designers will inevitably have costs, but this early investment can help to reduce errors in the design process, reducing the chances of the costly production of poor quality parts.

So where can suppliers go to get good quality training? DTE are a certified education partner of Dassault Systèmes and provide high quality training in the best practices in using a variety of CATIA software packages offered by Dassault Systèmes.

DTE offer comprehensive training in CATIA software where training sessions are trainer-led, with emphasis on interaction with the software in order to give trainees a more hands-on learning experience.

DTE differ to other CATIA training providers as DTE offer bespoke CATIA training courses that are tailored to each individual’s specific requests. For example, if a trainee wishes to machine a particular part, DTE encourage trainees to bring the part with them to the training session so at the end of the session, trainees have a tangible element to take away with them.

And following the CATIA training session(s), DTE offer full follow-up support, so if you have any questions about the training session or need to consolidate your knowledge, DTE are always on hand to help.

Overall, OEMs and suppliers face significant financial and operational risks as suppliers take on more responsibility in designing aircraft parts. But there are solutions to overcome these risks, including collaboration on cost reduction and suppliers investing in training their workforce. 

For more information risks in the aerospace supply chain, download the eBook 'Aerospace supply chain: Real world strategies for surviving and handling growth'.

Download the Aerospace Supply Chain eBook

Topics: Aerospace, Original Equipment Manufacturer (OEM)