Integrating the procurement process

Xchanging Procurement's client services director, Nigel Kidd explains how procurement can play a significant role in bringing clarity, understanding and control to the aerospace component purchasing environment.

The aerospace industry has been grabbing some high profile headlines all year, with Airbus and Boeing continuing to battle for supremacy. The grounding of Boeing's Dreamliner created a question mark around the safety of the aircraft and a challenging PR situation, but it also brought the supply chain into focus and put it on the front page. As the industry strives for even greater efficiencies in design and production, the supply chain is playing a more prominent role in contributing to those goals.

At the recent Paris Airshow the industry once again paraded its latest gadgets on the ground and in the air. Behind all the flags, ceremony and smiles there belied an aerospace sector under increasing pressure to find ways to reduce costs and re-engineer and streamline production processes, without compromising the safety or the quality of its products and services.

As Boeing recovers from the aftermath of the Dreamliner issues and Airbus' A350 completes its inaugural test flight, the global economic slowdown continues to chasten demand for their products, which unfortunately has a knock-on effect down the supply chain. These high profile failures highlight the need for even greater reliance and collaboration with the whole of the supply chain, whether it's engines, batteries or any one of the millions of components that go into the modern airframe.

Empower the supply chain

Maintaining a competitive edge against a backdrop of increasing raw material costs and smaller margins, all adds further pressure to a sector that is already stretched. This is the business environment where procurement can excel and play a significant role bringing clarity, understanding and control to the purchasing process. Aircraft designers, engineers and technicians are as meticulous in the manufacturing process as procurement should be in the purchasing process, empowering the supply chain and looking for opportunities to make things better, improve designs, change processes and behaviour.

The complexities and diversity of the components required to deliver a fully-functioning airframe is immense across a similarly diverse supply chain. Procurement has to meet the needs of its internal customers and the end-to-end supply chain, bringing a similar level of structure, rigour and diligence to the purchasing cycle as that used in the manufacturing process. There is strong argument to suggest that the procurement process is a critical component to the manufacturing process to delivering a quality product.

There remains the question; how can procurement evolve in an industry in such a way as to make a positive contribution? How can procurement help to future proof the sector and move on from the traditional mechanistic approach it has utilised for so many years?

The industry is likely to face some consolidation over the coming years, and therefore it is vital that procurement remains close to the action to secure and maintain supply chain integrity. Aerospace companies are switching on to the importance and reliance on supply chain partners. Earlier this year in its results statement, Rolls-Royce said: “Close collaboration with our suppliers is critical to our continued success. Around 70% of our manufacturing is conducted within our supply chain. Our partners and suppliers are also investing significantly to deliver future growth and improve productivity”. Procurement has a responsibility to deliver against these metrics and to ensure a sustainable supply chain is in place to enhance the success of the business through improved financial performance.

As aviation components and composite materials evolve procurement must elevate itself from a business function by adopting a professional service orientated mindset. Procurement should be a catalyst for innovation; bringing together, nurturing and fostering a more collaborative approach harnessing the power of the purchasing cycle. Bringing the supply chain together under a single banner and truly understanding the total cost of ownership could provide an opportunity to take fresh approach to supply chain collaboration.

Taking the holistic view

If procurement as a service and a function is to contribute to future business success, delivering sustainable and credible change, then it must seek to adopt a total supply chain management approach to understand the whole of the supply chain, ensuring the business is best placed for growth when the economic recovery takes off.

An integrated approach to procurement has to bring together and capture more of the end to end supply chain, not just the direct manufacturing of component parts but also drawing in the supplier's supply. By identifying commonalities of resources, processes and practices, procurement can help to realise previously untapped and unexplored efficiency opportunities. For example, bringing together the purchasing of raw materials or indirect business support costs to deliver a more co-operative solution can leverage volume and scale while also bringing the added benefit of a more integrated supplier relationship, reducing risks around market volatility and reducing the costs of component manufacturing.

Rolls-Royce has stated that approximately 70% of its manufacturing is bought in. Therefore, is the company and many others like it, not in a basic sense, integrators already? It stands to reason then that the real opportunity to future proof the industry, reduce supply chain risk and drive step change innovation is an integrated supply chain solution for greater control and visibility, enabling more robust planning for the future.

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