Key Logistics and Supply Chain Management Issues Facing Aerospace Industry

Key Logistics and Supply Chain Management Issues Facing Aerospace Industry

Metals used in aircraft production include aluminum, copper, steel, titanium, manganese, chromium, nickel, and others. Since these products are found all over the world, sourcing them can be challenging, and late delivery or poor quality can cause production schedules to be pushed back.

Fremont, CA: Deloitte's 2020 report paints a complex image of the aerospace and defense (A&D) industry: Although the defense industry grew in 2019, commercial aviation suffered a temporary setback.

In 2020, the defense sector grew as governments across the world were pressured to increase defense spending due to escalating security threats. This trend is projected to continue in 2021, with defense spending rising by 3 to 4 percent.

Commercial aircraft demand is expected to recover from its recent decline this year and beyond, with an estimated 40,000 units produced over the next 20 years.

Aerospace logistics and supply chain management will only become more difficult as aircraft suppliers struggle to keep up with demand, respond to industry developments, and fight for a larger share of the market.

Now is the time for aerospace logistics and supply chain executives to plan themselves for their industry's anticipated growth — as well as to prepare for those anticipated challenges.

Sourcing of Raw Material

Metals used in aircraft production include aluminum, copper, steel, titanium, manganese, chromium, nickel, and others. Since these products are found all over the world, sourcing them can be challenging, and late delivery or poor quality can cause production schedules to be pushed back.

Nonmetal raw materials (such as chemicals, rubber, wood, plastics, and textiles) complicate the procurement process even further.

Aerospace procurement managers must weigh factors such as prices, inventory requirements, delivery schedules, transportation forms, and recent developments in international trade agreements when sourcing suppliers. For example, a post-Brexit UK might renegotiate trade deals with countries both within and outside the European Union, creating confusion for A&D players doing business there.

Aerospace procurement directors must determine what makes the most sense not only now but also in the next ten years in order to position their companies for long-term success.

Supply Disruption

Inadequate supply — whether of raw materials or of the product itself — is always a concern in aerospace due to the virtually unlimited possible disruptions: inaccurate demand and pricing forecasting, political and geoenvironmental problems, design changes, and more.

The most recent aircraft supply disruption has been triggered by an order backlog caused by the aforementioned production-related problems, as well as increased passenger traffic and the replacement of technologically obsolete aircraft.

To avoid, or at least minimize supply disruption, a two-pronged approach is needed. Aerospace procurement directors can schedule monthly, quarterly, and annual acquisitions in the short term. Long-term, they can seek five- to ten-year contracts from primary and secondary aerospace suppliers.

Aerospace procurement directors should also strive to establish good long-term relationships with their suppliers, which begins with understanding the supplier's business and ends with working together to review market dynamics and cost factors in order to mitigate inflation-related risks.

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