Aerospace Vertical Integration: Where Does Our Last Time Buy Solution Fit?By Logan Wamsley
The frequent exhaustion aerospace OEMs face relying on suppliers has had an influential impact within their supply chains. With high demands for production, this should entail an equally high level of quality that exceeds customers’ expectations. But, sadly, this is not always the case. Constantly depending upon others may take away the OEM’s ability to produce as efficiently as possible.
In order to obtain this proper level of performance, aerospace OEMs must adopt a new system into their operation to ensure that all steps within development are met. Instead of counting on the dependability of service providers, these manufacturers are seeking the means to control and trace their own parts.
An ideal solution has been proven in order to resolve this critical situation: implement vertical integration within your supply chain. This action has benefits that offer several advantages, such as being more in control of your supply chain, being able to offer lower prices, and having increased market control. With these clear benefits in mind, vertically-integrated companies also have the advantage of independence from suppliers, as well as an increase in product knowledge and marketability.
A prime representative who has successfully launched this action into their supply chain is Boeing.
Following Boeing’s Lead
As the world’s largest aerospace company and America’s biggest manufacturing exporter, Boeing has of late been a vocal proponent of vertical integration within their own company. This was not always the circumstance they were in. As recently as 2007, Boeing relied heavily on outsourcing during the production of airframes for their 787 Dreamliner. Those suppliers ended up taking years that were filled with production mistakes and delays, and the cumulative effect these inefficiencies were casting upon Boeing left a lasting impression.
“After aggressively outsourcing design and production work in the early 2000s, Boeing has now turned its focus toward doing the work itself, giving [itself] what it considers more control over its supply chain and opportunities to make money in aftermarket sales”, said Dan Catchpole from AINonline.
By eliminating the middleman, Boeing has enhanced their production and continued to be the top name within the industry, all because they recognized their ability to perform better over their former suppliers. But, with greater power comes greater responsibility. Since Boeing now acquires many of their own products, they decided that in-sourcing through their own network of authorized suppliers works best for them, leaving them solely responsible for an excess amount of parts. These were formerly handled by their Tier 1 and Tier 2 suppliers, but a new solution was needed to secure their financial future.
A Partstat Last Time Buy Solution is positioned to be a perfect complement to a vertically-integrated market approach.
The transition toward vertical integration does not come without its pain points. After cutting loose ends with suppliers due to vertical integration, OEMs such as Boeing will now have a more difficult time sourcing certain components and to maintain their current fleets. If a critical piece of navigation equipment grounds an aircraft, these companies will only be able to look within their own network of authorized suppliers. While this network is by no means small, it is still limited compared to a more open business model – and such limitations increase the probability of experiencing delays during the fulfillment process.
Going even further, these OEMs now suddenly will have a surplus of products that they may not necessarily know how to properly handle or store. Without the former specialized suppliers on hand to manage this responsibility, proper warehousing processes for sensitive electronics have now become a significant weakness in their supply chain – at least until their infrastructure is given time to adapt.
The Last Time Buy Solution gives our aerospace OEM customers the ability to purchase end-of-life components at the front-end of the production process without the need to sacrifice working capital. This provides a seamless transition towards a more vertically-integrated business model, and ensures both proper long-term storage and quick-response global fulfillment capabilities.
As a Boeing-authorized supplier, Parstat has played a valuable role in their supply chain as they continue to adopt a more vertically-integrated approach toward the manufacturing process. And with our ability to store and fulfill this inventory for 10 years or more, we have granted aerospace and defense OEMs a degree of supply chain continuity never before seen in the industry.