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Demand & Supply Chain Management Evolution




11 Mar 2020
Logistics and Supply Chain Management Challenges for Aerospace

Hollingsworth
Hollingsworth

A 2020 study by Deloitte reveals a complicated picture of the aerospace and defense (A&D) industry: While the defense sector continued to grow in 2019, commercial aerospace took a temporary hit.

Intensifying security threats ensured the growth of the defense sector in 2019, as governments around the world were forced to increase defense spending. This trend is expected to continue in 2020, with defense expenditures increasing by 3 to 4% (primarily in the U.S., China, and India) and reaching an estimated total of $1.9 trillion. 

Production-related issues were a primary reason for commercial aerospace’s decline in deliveries in 2019. While order backlog decreased from its peak of 14,700 aircraft in 2018 to 14,000 in August 2019, aircraft manufacturers will likely continue to struggle to meet demand in 2020.

In fact, commercial aircraft is expected to recuperate from its recent decline this coming year and beyond, with an estimated production of 40,000 units over the next 20 years.

As aircraft companies struggle to keep up with demand, adapt to changes in the industry, and compete for a bigger share of the market, aerospace logistics and supply chain management will only become more complicated.

Now is the time for aerospace logistics and supply chain decision makers to brace themselves for their industry’s predicted growth — and prepare for certain expected challenges.

 

Raw Material Sourcing

Aircraft manufacturing requires many different kinds of metals, including aluminum, copper, steel, titanium, manganese, chromium, nickel, and more. Because these materials are found not in one place but instead all over the world, sourcing them can be difficult, and late delivery or insufficient quality can hold up production timelines.

Additionally, nonmetal raw materials (including chemicals, rubber, wood, plastics, and textiles) further complicate the procurement process.

When finding suppliers, aerospace procurement managers must consider variables such as costs, material specifications, delivery timelines, transportation modes, and recent changes in international trade agreements. For example, a post-Brexit UK could renegotiate trade agreements with countries both within and outside of the European Union, creating uncertainty for A&D players who do business there.

Aerospace procurement directors need to decide what makes the most sense not only now, but as far as 10 years from now in order to set their companies up for long-term success.

 

Supply Disruption Risks

Insufficient supply — whether related to the supply of the raw source materials or the supply of the product itself — is always a risk for aerospace because of the essentially limitless potential disruptions: incorrect demand and pricing forecasting, political and geo-environmental issues, design changes, and more.

Most recently, the aircraft supply disruption has come in the form of the order backlog caused by the aforementioned production-related issues as well as increasing growth in passenger traffic and the replacement of technologically obsolete aircraft

A two-pronged approach is necessary to prevent, or at least reduce, supply disruption. Short-term, aerospace procurement directors should plan for purchases on a monthly, quarterly, and annual basis. Long-term, they should try to secure five- to 10-year contracts with primary and secondary aerospace suppliers.

Aerospace procurement directors should also try to forge a positive long-term relationship with their suppliers, which starts with understanding the supplier’s business and ends with working together to review market trends and cost drivers to reduce inflation-related risks. 

 

Emerging Technologies and Modernization

The aerospace industry struggles to keep up with modern advances such as standardization, artificial intelligence, and automation, especially as the potential consequences of failure are so extreme. 

On one end of the spectrum, new products or parts may have to be recalled and replaced, as happened with Pratt & Whitney’s geared turbofan engines in Airbus Group SE’s A320one jets. While this software glitch was at least caught before much damage was done, it still put the aerospace company behind on future production and likely had significant financial and reputation costs.

On the other end of the spectrum, a failed new technology can prove fatal, as happened with the 2018 Lion Air and 2019 Ethiopian Airlines crashes because of a faulty new computer-controlled stability system on the Boeing 737 Max

Fortunately, one of the predicted aerospace trends for 2020 is investing in low-risk, high-impact technologies.

 

Lack of Skilled Workers

As demand for aircraft continues to increase, a shortage of skilled workers presents another roadblock to ramping up production. The current workforce has limited expertise, and training simply takes too long, making it difficult for aerospace manufacturers to get new programs off the ground.

Most aerospace growth will continue to center around technological innovation, but aerospace companies would do well to invest in their human capital as well, particularly by providing training in key emerging technologies — starting with smart automation, machine learning, blockchain, and additive manufacturing (3D printing).

 

Large Materials Handling and Storage

This last challenge, although potentially easier to address, is still significant: Countless components and parts are necessary in the aerospace industry, and they tend to vary widely in size. The (not so) simple task of safely lifting, inspecting, and storing the larger and heavier parts can require a great deal of space and even specialized equipment.

The aerospace industry also tends to need these parts on short notice, meaning that storage organization and accessibility are key. 

 

Aerospace Solutions From Hollingsworth

Production logistics are clearly a key driver of success and cost-effectiveness in the aerospace industry — and also clearly quite difficult to manage. 

Hollingsworth has been providing aerospace logistics and supply chain management solutions, including the following services, for the past 30 years:

  • Aerospace warehousing: Hollingsworth has the warehousing space and inventory management capabilities to support any degree of complexity for aerospace companies. Integrated SAP technology and RFID tracking ensure organization and save time.
  • Just-in-time (JIT) delivery: Meet demand quickly with guaranteed on-time delivery when it matters most.
  • Aerospace kitting: Hollingsworth’s aerospace kitting services include purchasing, receiving and inspection, strategic stocking, picking, sub-kitting, final kitting, and shipping logistics.
  • Aerospace program management: Let Hollingsworth handle all aspects of your order fulfillment, from warehouse inventory optimization to just-in-time delivery.
  • Aerospace fastener management: Rely on our complex fastener management services and get access to a network of fastener suppliers and parts manufacturers.

We’re proud to support numerous aerospace contracts, including the largest military contract in the history of the United States. For this contract, Hollingsworth provides warehousing, kitting, and delivery to support the build of an advanced fighter jet. 

“We have multiple KPIs for this program and each allows for a very small margin of error,” explains Matt Ginter, Hollingsworth’s vice president of operations. “Despite these stringent requirements, we continue to meet or exceed customer expectations.”

Read more about Hollingsworth’s aviation logistics and supply chain management solutions or contact us for more information.

 

 

 

 

 









 
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Last update 6 Aug 2020
U.S. manufacturing operating conditions improve for the first time since February
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