Client expectations, regulations and emerging technologies have been forcing aircraft companies to create competitive strategies to earn a share of the aerospace market. Innovation, efficiency and cost savings can be attained by importing supply chain and logistics expertise from other industries and associations that have seen similar dynamics. These methods have led to the complexity of aircraft design, processes and aerospace supply chain management. Aircraft and satellite manufacturers are under pressure to frequently measure order backlog. Commercial aircraft companies continue to retain thousands of undelivered orders. Here are some common aerospace supply chain challenges and issues that contribute to the complexity of business which all aerospace businesses need to consider.
Raw materials: Metals such as steel, titanium, aluminum, copper, nickel and chromium are the required materials used for the manufacture of aircrafts. Tariffs are causing dramatic price increases for gathering these raw materials. It is important to be vigilant when modeling your end-to-end logistics operations. The increasing costs, both fixed and variable, need to be factored in. The variable costs should include the large taxes, tariffs and local requirements, based on volume and your location.
Aerospace procurement managers are faced with the decision of finding suppliers based on clear-cut material specifications, costs, transportation modes and delivery timelines. Management needs to ask, what materials do we need to buy in advance? Do our suppliers have the capacity to supply us with raw materials when we need them? How much will the raw materials cost?
Mitigating supply disruption risks: There is the risk of supply being constrained or limited due to poor forecasting, inaccurate pricing projections, design change and geo-environmental issues such as natural disasters. You can avoid disruption using two approaches. The short-term plan takes care of monthly, quarterly and annual purchases that are often done as spot buys. The long-term approach considers lock-in contracts for at least five years with your suppliers. Understanding your supplier’s business is an important factor that helps to forge continuous relationships. Working closely with vendors by reviewing cost drivers and market trends to avoid risks against inflation is crucial. In addition, knowing the supply portfolio of suppliers is another essential aspect in raw material procurement allowing buyers to review current and future requirements.
Emerging technology: Aerospace supply chain players are struggling to keep pace with modernization technologies such as automation, robotics, and standardization. For instance, the new technologies pioneered on military aircrafts in recent decades and later transferred to civilian jets caused production delays in business commercial projects. Past implementations prove it is wise to balance reliability on human technology–and not depend too heavily on machinery alone to develop engines and equipment.
Outdated software systems: Outdated software systems present a number of challenges. They may lack the functionality to display or report the information you need. Custom reports and workarounds may be costing you time and money. Evaluating the need to upgrade backend systems is paramount to insuring the interoperability of supply chain processes. Enterprise resource planning (ERP) systems, for use in the Aerospace sector, have greatly improved over recent years. Regular evaluation and upgrade of ERP advancements and data reporting mechanisms will place the wisest businesses out in front of your competition.
Takeaway: Today’s aerospace supply chain is multi-level and global. Mistakes from the largest aircraft companies on severe supply chain disruptions should not be ignored. In the capital-funded aerospace industry, a fast and resilient supply chain, aside from efficient supply chain processes, needs large levels of focus.
To learn more about how RSM can assist you in the aerospace industry, please contact RSM’s management consulting professionals at 800.274.3978 or email us.