Aerospace OEMs Are Facing a Working Capital Crisis – This Can Help

By Logan Wamsley

Most aviation-related manufacturers run at tight margins even in the best of times, so the shock of the COVID-19-related shutdown of many supply lines has been difficult to overcome, to say the least.

It is worth noting that the current crisis also comes at a time when aviation manufacturing is already struggling. Parts suppliers, component assemblers, airlines, and plane manufacturers are already absorbing losses as aircraft production lines are slowed due to the issues related to the 737, as one example. Taken together, the cumulative impact of these factors on aviation has been nothing short of devastating, and few if any industry players have the financial resources to ride out the crisis without help.

But supply chain disruption is secondary to a larger, more important issue: the toll on the human workforce. As social distancing measures look to remain in effect until May at the earliest, many workers — most of whom are unionized — have been barred from returning to factories to work. In order to avoid mass layoffs, manufacturers on tight margins will have to find creative ways to keep payroll going so they can hit the ground running when the economy eases back into normalcy.

Facing this reality, the biggest need at this time is on-hand working capital.

One solution that has the ability to free up working capital to spend on more pressing needs such as the OEM workforce is the Partstat EOL Last Time Buy Solution. As factories in China look to open back up relatively quickly, manufacturers are expected to rush to place orders to compensate for depleted inventories, even if that capital has other uses in these trying times. The EOL Last Time Buy Solution allows manufacturers to place such orders en mass without any loss of working capital. Instead, Partstat will put up its own working capital to purchase all of the inventory necessary for manufacturers to sustain production five, 10, or even 20 years into the future.

Working capital preservation is only one benefit of the solution. Once purchased, all inventory, regardless of size or quantity, will be stored in Partstat’s own secure, industry-leading facilities just outside of Orlando, FL. This minimizes the need for international shipping and keeps all needed inventory available within U.S. borders, immune from international disruption such as what is being currently experienced.

These times will pass and normalcy will be restored, but disruption will always occur in some form or another. There is only one option available if aerospace OEMs wish to keep both domestic and international disruption mitigated, and that is to fundamentally alter their traditional supply chain strategies.