Managing supply chain challenges

The news is full of stories about disruptions in the global supply chain that range from microchip shortages slowing automobile production to Christmas toys being stranded on container ships waiting to be unloaded. With the return of domestic air travel reaching pre-pandemic levels, I wondered what long-lasting supply chain issues are having the most impact on aerospace manufacturing. I found some answers in How to survive and revive amid commercial aerospace supplier distress.

I asked for more details from the report’s lead author, Stephane Lagut, posing the question, “What’s emerging as the most critical supply chain challenge in aerospace manufacturing as we look to 2022?”

Lagut, who leads EY global advanced manufacturing & mobility assurance and global aerospace & defense (A&D) sectors replied, “Commercial aero companies have avoided the significant supply disruption we’ve seen impact the automotive and industrial sectors, mostly due to the lower production levels. However, supply chain constraints will hit commercial aerospace as companies begin ramping up production, particularly in narrow-body aircraft. Other challenges include volatile production schedules, labor (vaccine mandates, employee shortage, retention of key talent following deep cuts in 2020), and supplier health, particularly in the lower tiers. These are challenges we’re seeing across the entire advanced manufacturing and mobility industry market.”

Lagut warns of another risk. “Single sourcing is a recurring practice in A&D and is an ongoing bottleneck when disruption hits. There’s a long lead time to source and qualify suppliers to support A&D production.”

Multiple sourcing options significantly minimize the risk of supply disruptions but potentially at a greater unit cost. “It’s worth noting that many aero companies have implemented dual-source programs but with the reduction in build rates in 2020, dual-sourcing wasn’t viable, and many components continue to be single source and may remain single source for some time, given available capacity,” Lagut explains.

The EY report cites as a specific concern the ability of suppliers to fund inventory and working capital necessary for airliner production ramp-up.

“In the past, suppliers have built and held inventory to mitigate supply-chain disruption,” Lagut notes. “Again, operational rigor supported by real-time information on customers’ requirements and lead times will allow best-in-class suppliers to minimize working capital.”

Lagut adds success will require collaboration with the original equipment manufacturers (OEMs) for robust demand-forecasting, and clear orders and contracts to enable funders to support the supply-chain’s inventory and capital expenditures (capex) requirements. “The advantage will lie with suppliers who have scale, operational leverage, and access to funding [to make them] resilient partners.” – Eric