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Aviation History
2004
2004-09 - 2521.PDF
Production CHAIN REACTION The downturn in the industry has forced aerospace prime manufacturers to shake up disjointed supply chains, consolidating and outsourcing parts logistics MARK BURSA/ LONDON No industry is as sensitive to eco nomic and political forces as the aerospace and defence business. In the 21st century, those forces have become ever more turbu lent, forcing the business into a period of dramatic change. At the same time, customers - govern ments or airlines - are demanding that manufacturers bring new projects to the market faster at lower costs, while continu ing to meet the aerospace industry's strin gent quality and performance requirements. These factors are dramatically affecting the way aerospace and defence companies are organising their supply chain - or rather chains, as traditionally the supply chain that serves the production line has not nec essarily been linked to the equally vital sup ply chain providing after-market parts sup port to keep customers' aircraft in the air. Supply-chain management is a complex business. It encompasses production plan ning, material sourcing and management of transport, warehousing and demand. The supply chain links the manufacturer with its materials and parts suppliers, and its cus tomers - taking in distributors, transport and software providers. In the aerospace industry, the supply chain also has a num ber of features that differ from most other manufacturing businesses. The aerospace industry does not have high volumes, but does manufacture complex products. Safety - and therefore product quality - is of para mount importance. Consolidation within the aerospace busi ness has left a smaller number of aircraft manufacturers, usually with multiple busi ness units and manufacturing locations. This is a recipe for a disjointed supply chain. Bombardier Aerospace achieved a strong position through acquisition of companies such as Canadair, de Havilland Canada, Shorts and Lear jet, but found itself with a disjointed supply chain, both for manufac turing and service support. "Our acquisi tions were previously standalone companies that had their own methods of operating," says Des Bell, vice-president of parts logistics for Bombardier Aerospace. "Over the years we had successfully integrated these compa nies, but we had not focused enough on ser vice parts operations." New structure A new organisational structure was announced in April, streamlining the organisation into four business units, but this did not solve the underlying problem with the supply chain, especially for service parts. "Our conclusion was that we should create a single parts-logistics network," Bell says. "We needed to standardise." The deci- Rolls-Royce used to depend on 300 suppliers for around 15,000 low- cost parts; with UMECO R-R now has just one point of contact sion was also taken to outsource a large pro portion of the operation to a third-party logistics company, Caterpillar Logistics. Caterpillar took responsibility for parts warehousing, one of the costliest elements of the supply chain. "That's where we quickly realised our greatest efficiencies could be achieved," Bell says. The decision was made to close some facilities, and open central warehousing sites in Europe and North America. Bombardier selected Chic ago, Illinois for its North American facility, and is closing warehouses in Detroit, Kansas, Michigan and Wichita. Chicago was chosen because of broad international cov erage, attractive FedEx air freight drop-off time, international flight coverage, and per centage of deliveries that can be made within 8h. Frankfurt, Germany was chosen as the site of the Europe/Middle East opera tions for many of the same reasons. Materials planning and service parts IT were outsourced too, but Bombardier retained responsibilities for materials man agement and setting strategic targets for fill rate and inventory levels. It also continues to manage customer service, procurement, technical support and pricing. Bombardier aims to deliver aircraft-on-the-ground orders to the majority of its customers in 12h or less, and improve off-the-shelf fill rates by 20%. The total transformation pro ject is expected to take two to three years. "The parts business is a significant sales and margin generator in a business such as ours," Bell says. "When more executives understand this, the supply chain will get the industry attention it deserves." The 11 September terrorist attacks brought home to manufacturers and suppli ers just how precarious the supply chain had become. The sudden collapse in demand for new airliners meant life became difficult for many small specialist suppliers, and when these companies started to go bust, the entire chain was disrupted. The UK Department of Trade and Industry's 2003 report on the future of the UK aerospace industry spelled out the risks for smaller suppliers: "As supply chains rationalise, the route to market for smaller companies is changing. If they are not sup ported in repositioning themselves in the global supply chain, they will be 'boxed out' by more effectively organised groups." These groups - companies with global scale and reach - have been created by mergers and takeovers among suppliers. Large groups such as the merged Honeywell-AlliedSignal business have cre ated "Tier 1" suppliers with greater exper tise in product integration. These compa nies are able to assume greater responsibility in the management of the supply chain, delivering large subassem blies or complete systems to the prime 30 30 NOVEMBER - 6 DECEMBER 2004 FLIGHT INTERNATIONAL www.flightinternational.com
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