Aviation suppliers under pressure

Aviation suppliers under pressure
Aviation suppliers under pressure

Harald Knoke, head of the Aviation Business Unit at the management consultancy, Staufen provides this Aviation Study 2015: Aviation Suppliers under Pressure.

Confronted with a huge price war, frequently changing and sometimes contradictory customer requests as well as the desire for shorter delivery times, the German aviation industry constantly has to rethink its own operating processes.
This is revealed in a joint study conducted by management consultants Staufen, in partnership with BDLI, the German Aerospace Industries Association. More than 100 of the sector's top managers participated in the survey.

The competition witnessed between the airline companies has extended to aircraft builders and their suppliers. For example, the German aviation industry finds itself exposed to tremendous pricing pressure: 86% of those surveyed say this is a central challenge. Added to that is the compulsion on companies to issue fixed-price bids, even though the customer requirements are not yet adequately known. Pricing pressure and fixed-price bidding are superimposing themselves over every other problem experienced within the industry. System suppliers are particularly affected and are having difficulties passing the costs onto those companies downstream in the supply chain.

Suppliers are finding themselves in a quandary in relation to their operating activities. Companies are being asked to deliver more cost-effectively, with more quality and speed at a time when their processes are becoming increasingly complex; a situation from which no company can escape. Small unit numbers, individual customer requests, demands for innovation, for example lower energy consumption and belated change requests on the part of airline companies, are phenomena experienced by practically every aircraft construction project. At the same time, customers are pushing for a reduction in the timeframe between the placement of the order and the delivery of the aircraft. And the sustained boom in aviation is leading to more increases in output figures.

The balancing act needed on the operating side is one that many companies are unable to perform using current concepts. 38% of those surveyed regard customer demands for shorter throughput times as one of the top challenges they face, while a further 39% see these issues as very important. A similarly serious issue comes in the form of belated changes on the customer side and short material lead-times. The reduction of procurement times will become more relevant if companies are to successfully respond to customer production requirements at short notice. After all, the final assembly operations of the major manufacturers are performed in ‘takted' lines, which demand the reliable supply of materials and components, together with a consistently high level of quality. However, the stipulations in relation to speed are not so easy to reconcile with change requests received belatedly from the customer.

The problems occurring on the operative side are felt more acutely by tier 1 suppliers: For example, 47% of those surveyed declare belated change requests to be a top challenge, while this factor is significantly less important to OEMs and tier 2 suppliers at 28 and 25% respectively. There is a similar result to the question concerning the individuality of customer projects. This is perceived to be a central challenge by a significant portion of tier 1 suppliers. The reason: suppliers in the first level are increasingly functioning as system suppliers, which is why change requests are so disruptive to their processes. The consequences on the manufacturer's side are contrastingly less severe.

Of greater importance to aircraft builders is the complexity of the processes: 22% of them describe this issue as a top challenge, whereas only 17% of tier 1 suppliers do so, while just 6% of tier 2 suppliers agree. The latter result isn't surprising, as these companies mainly tend to supply individual components.

Wherever they are found in the supply chain – all companies are currently searching for solutions to these challenges. High on-time delivery performance, a zero-defect strategy and absolute quality standards are a must for any company seeking to be a long-term market player. Many are looking to use traditional Lean management methods. The intention is to optimise processes right across the value-creation chain, enabling the enterprise to become faster, more flexible and cost-efficient. However, it's recommended that the implementation takes place quickly, because the pressure exerted by the market has already extended to every link in the supply chain.

www.staufen.ag

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