Risk and Reward in Your Aerospace Supply Chain

Driven by increased travel demand and decreased fuel costs, the aerospace industry is perfectly poised for a new era of growth and expansion. In a recent study, the aerospace sector grew by 2.4 percent in 2016 alone, with a total revenue nearing $674 billion.

With such opportunity, however, aerospace leaders such as Boeing and Airbus are putting increasing pressure on their supply chains to not only design new complex and efficient aircraft-based technologies, but to fulfill the massive demand for their products among consumers.

Despite reporting unprecedented revenue in 2016, for example, Boeing still reported 5,715 undelivered orders, while Airbus reported 6,874. These figures reveal a healthy market and quality products, but they also imply that these supply chains are currently not optimized to meet the needs of their expanding marketplace. Granted, this is a good problem to have (it is much easier to increase output than it is to create consumer demand) — but if left unchecked, such a trend can, over time, take a heavy toll on a brand’s hard-earned reputation. This is why, in the race to remain on the cutting-edge of their industry, it is important for OEMs operating in the aerospace sector to not overlook their supply chain and take every measure to mitigate risk.

Much of this risk stems from the tendency for aerospace OEM products to have extended life cycles. The Boeing 747, for example, known for ushering in a new era of comfortable and affordable air travel, has only just been retired by Delta and United Airlines – almost 50 years after its introduction in 1969! While that number is certainly remarkable, adhering to original projections to support such an extended cycle in regards to pricing, product redesigns, and, most importantly, the acquisition of critical components from reliable OCMs is a monumental task.

Nearly every industry suffers from a life cycle mismatch between OEM products and the critical components necessary for their production, but no industry illustrates how extreme this gap can be more than the aerospace industry. Even with long-term contracts in place, an aerospace OEM will be hard-pressed to find a manufacturer willing to fulfill orders for a single component longer than five-to-seven years.

Even worse, these projections also rarely consider the additional variables that too often hinder an OCM’s ability to meet the rigorous demands of OEM supply chains. Such variables include political instability in the OCM’s location, natural disasters that result in the destruction of manufacturing equipment, workforce shortages, or even something as simple as the OCM choosing to exit the market altogether. The old idiom that you never assume anything holds very true — but for an OEM wishing to support a new aerospace product for 15 or 20 years, they often have no other choice but to assume their sources for critical OCM components remain stable.

What are the consequences of these assumptions? Typically, the only option left to OEMs facing the unexpected discontinuation of a component is the use of third-party vendors (who sell components at significant markups), an immediate product redesign, or, in hopeless cases, the discontinuation of their product.

The key to surviving in the aerospace industry is supply chain flexibility. At a moment’s notice, you need to be prepared to take whatever measures necessary to ensure that your product will be supported. This sounds simple in theory, but in such a competitive field, OEMs often struggle with pivoting their obsolescence management strategy to accommodate circumstances that deviate from their initial projections. Aerospace supply chains, in fact, can be every bit as bulky and immovable (on the ground, anyway) as the birds they create.

This is where the aid of a trusted supply chain partner can be of tremendous value. Partstat, for example, has long built its reputation on helping OEMs avoid the financial setbacks involved with component obsolescence with our unique Last Time Buy Solution.

Our Last Time Buy Solution has been proven time and again to be the best way to ensure long-standing OEM and OCM relationships remain positive and prosperous, regardless of industry. These two sides of the supply chain depend on each other, and when they are in sync, everyone from the raw materials supplier to the final customer tightening their seat belt stands to benefit.

Operating in the aerospace industry comes with risk – but if you are capable of establishing a supply chain infrastructure capable of reacting to the unforeseen challenges that inevitably occur, the rewards are more than worth it. After all, what’s more rewarding than watching man conquer the skies?