The stringent demands of Airbus's Power8 restructuring plan could provide the impetus UK companies need to get behind the Society of British Aerospace Companies' SC21 supply-chain initiative. The Airbus upheaval, which has dominated the industry for the past year, has added to the sense of urgency for small- and medium-sized enterprises that have realised they need to increase their efficiency and deliver cost savings if they are to stay in the game.
Even without the Airbus upheaval, UK aerospace companies are facing tougher challenges than ever. On the surface, the industry is in the middle of a gold rush, with commercial orderbooks bulging and military operations in Iraq and Afghanistan fuelling defence spending. But they and their customers are struggling to overcome a range of obstacles, from the effects of the weak US dollar to rising raw material prices.
There are two other major challenges, according to SBAC president Chris Geoghegan: the threat from emerging, lower-cost economies able to offer original equipment manufacturers cheaper products, and a UK public policy environment that is "distinctly less favourable than in France or the US". In this difficult environment, SC21 is more important than ever, the industry association argues.
While the association is active in campaigning for a more supportive public policy environment for aerospace, SC21 provides an opportunity for its member companies to ensure their businesses get the most out of the current aerospace environment. SMEs are moving up the supply chain, increasingly providing a more complete, more complex product to their customers as primes look for more efficiency and lower costs. It is for this reason that SC21 will put the issue of strategic positioning within the supply chain firmly in the spotlight. The scheme was launched in July last year with the aim of improving the competitiveness of its signatories. It has gathered plenty of support from major players - high-profile OEMs are among the 135 signatories (see top graph) and the UK Ministry of Defence sees it as a key tool for the implementation of the Defence Industrial Strategy.
But the initiative is particularly significant for SMEs, which are inevitably hit harder by the challenges faced by the industry as a whole. By far the greatest number of members of SC21 comes from the SME category.
Moreover, the aims of SC21 tie in perfectly with the Airbus drive to cut costs and improve efficiency, with Power8 emphasising the "absolute urgency and need" for a supply chain rationalisation initiative. "If ever there was a justification for SC21 this is it," says Geoghegan. The urgent need to implement Power8 could be the catalyst the industry needs. "A new cash-conscious behaviour is key across Airbus," agrees Airbus UK vice-president procurement, Dave Micklewright.
But how much progress on SC21 has been made so far? The establishment of a "key customers group" including Airbus, AgustaWestland, BAE Systems and other UK-based primes was the first step in streamlining supplier relationships with manufacturers. This group is planning initially to focus on cutting waste and duplication with the aim of improving the efficiency of the accreditation process and cutting down on the number of audits and customer improvement programmes suppliers are required to carry out. Improving relationships between customers and suppliers and improving process efficiency are also key targets.
The key customers group is also developing a co-ordinated approach to helping suppliers develop and move up the supply chain, while better communication will improve relationships and lead to increased productivity.
Key to the success of the programme is greater trust and a better developed spirit of collaboration across the supply chain, the SBAC says. The association is adamant that 2007 should be the year SC21's measures are implemented, improving life for the UK supply chain as a whole.
SC21's aims may not be innovative - lean manufacturing, risk-sharing partnerships and SME visibility have been industry buzz- words for some time. But the recognition that implementing the changes is now compulsory for the health of UK industry sets SC21 apart. With all the major companies now signed up to SC21, "the difference is that there's a broad base of agreement that this is absolutely necessary", Geoghegan says.
Source: Flight International