From high metal prices, to a shortage of skilled engineers, from the shift towards new composite technologies to currency fluctuations, the long list of challenges faced by the thousands of small- and medium-sized enterprises (SME) making up a large part of the aerospace supply chain is well documented.
But these challenges are all linked by a single theme: visibility. Flight International’s Strengthening the Supply Chain in Aerospace conference, taking place on 8 November in Manchester, UK, will look at the challenges aerospace companies face in various different areas of the industry, and allow delegates to gain the visibility they need to stay competitive.
Developments that have taken place throughout the aerospace supply chain as the industry has staged its recovery since the last major downturn have changed the way SMEs interact with their major customers, and reduced their visibility along the way, affecting not just how they operate today, but also the way they will go about winning contracts in the future.
As primes increasingly push value down the supply chain to tier 1 players that take on more and more integral roles in programmes, the type of customers SMEs are dealing with is changing, and it is consequently becoming harder for smaller players to maintain the visibility they need across the market as a whole. “Because of the issues the supply chain faces, both in terms of rationalisation and globalisation, it is important to maintain both top to bottom, and bottom to top communication,” says David Bailey, executive director supply chain excellence for the North West Aerospace Alliance (NWAA), who will speak at the conference.
SMEs also add more value to programmes than they used to, and as they move up the supply chain, there has been a spate of consolidation and a drop in the number of SMEs operating in the sector as smaller businesses struggle to find the funds they need to invest in new technologies and leaner manufacturing processes alone.
“It is important companies understand their position within the tiering structure and what it is they have to be good at,” Bailey adds. As these changes take place, it is vital for tier 1 players to improve their supply chain management ability, says Bailey, while tier 2, 3 and 4 players must become experts in manufacturing process excellence.
But for smaller players, the shift away from dealing with the primes directly can lead to headaches. Where once an SME would have dealt directly with the programme prime contractor, it is now much more likely to deal with a subcontractor. Not only does this change the way the SME does business in the short term, further ahead it means the SME may gradually lose contact with the aircraft manufacturer, placing it at a disadvantage when it comes to future programmes as its knowledge of the prime’s strategy and focus in the market is gradually eroded. Suppliers run the risk of lower chances of success on future contracts if they lose track of their customer’s wider strategic focus.
The shifting importance of global markets is something SMEs also have to address. Flight’s Strengthening the Supply Chain in Aerospace conference will cover outsourcing to low-cost economies such as China and India as well as “near-shoring”, to regions such as eastern Europe. The conference will also look at the other side of the coin – how companies that do not decide to take the outsourcing route can maintain profitability and keep winning contracts, and what tools they need to maintain visibility.
In a wider context this gradual loss of visibility could affect a company’s ability to predict developments in the industry’s cycle, and ramp up production capacity accordingly, leaving it unable to take advantage of opportunities for new business when they arise.
Smaller players must get their heads round the “make versus buy” dilemma, deciding which core elements they keep in-house, and which non-core elements are better subcontracted. The key, Bailey says, is “getting companies to understand what it is they do really well and then positioning themselves in the supply chain to do that.”
Source: Flight International
