It is a headache for many mid-size aerospace groups that have grown fast by acquisition. Strategic purchases of niche businesses deliver exciting technologies and new customers. But integrating them into a top-down organisation can be tricky.
Imposing central discipline in purchasing, IT, or marketing is tempting for CEOs seeking savings and synergies. But too much interference from HQ can crush the entrepreneurial culture that made the firm attractive in the first place.
As our Top 100 commentary by Neil Hampson and Simon Young points out, this is a dilemma facing many CEOs of Tier 2 and 3 suppliers as they strive to match margins and shareholder returns achieved by their customers higher up the rankings.
A few years ago, these bosses may have thought they were doing enough by introducing lean manufacturing practices, cutting waste and inventory. But the bar has risen. Slick production processes are now a no-brainer the focus has moved to driving out procurement costs.
Doing this smartly is the challenge. Having one metal supplier makes sense, but not if you have plants in Buffalo, Budapest and Beijing. A travel department purchasing airline tickets for 5,000 staff is going to get a better deal than one buying for 50, but if it works UK office hours it won't win fans in the outpost in Adelaide.
Source: Flight International
