Aero Supply Chain Performance--Thrive or Barely Survive?
Guest editorial by Michael G. Beason, Supplier Excellence Alliance (SEA)
Aerospace has seen some changes. In many ways we’re following the same path that automotive followed several decades earlier. In 1986 there were 30,000 U.S. automotive suppliers and by 2003, there were 5000.
In 2002 we estimate there were 50,000 U.S. aerospace suppliers. In 2009, AIA estimated 30,000. SEA estimates we will be close to 15,000 by the end of 2015.
Why did this happen in automotive and aerospace? Two reasons: Moving production lines, which reconfigure supply chains to vertical from horizontal, and customers who want to deal with five suppliers instead of 500.
Three SEA suppliers know how to interpret the impact of moving production lines on their business. Customers want parts delivered just in time to bolt onto the aircraft—they don’t want to stock parts or pay for parts until they need them. Lead-time of 10–16 weeks for a part means more inventory, more obsolescence as parts change, and more cost. These are costs that can’t be absorbed by the supplier and won’t be absorbed by the customer.
Moving production lines shift costs to new places with new pain points. If you’re moving a $100M aircraft down a moving production line and have to stop because you don’t have a part, the cost of stopping is in the millions. So 100% on-time delivery and 100% quality are absolutely the minimum performance level. Most suppliers can’t perform at that level and therefore must add costly inventory that doesn’t always solve the problem—and prices them out of the market.
On September 20th in Wichita, three small family-owned suppliers shared their process for machining, processing, and shipping a part inside of 3–5 days. The technical terms for what they did in-house is “lean manufacturing” and for their collaboration is “supply chain integration.” Both are a part of the SEA Roadmap, a roadmap for performance improvement designed through a massive 10-year collaboration between aerospace and defense industry suppliers.
“There are white spaces/delays in-house and ways we can eliminate those through lean methods,” says Brad Hart, CEO of Premier Processing. “There are also white spaces/delays between companies and we have eliminated those by working together.”
“We can actually compete with larger operations by collaborating on integrating the actions of our three companies,” says Jason Cox, Chief Technical Officer for Cox Machine. “On most of our products we’ve reduced our lead time from 112 to 14 days and that means we’re more attractive than larger companies that have a hard time achieving the performance that our customers need.”
“Our product is very time sensitive—coatings and chemicals that have a shelf life and have to be used within a certain amount of time,” says Graco Company CEO Tim Holland. “We have to manage that shelf life and deliver exactly when Premier needs it – not early, not late, just exactly on-time.”
Here are the questions that an aerospace supplier must be able to answer today:
- How can we deliver to a customer’s pull signal within 5 days and not add inventory?
- How can we achieve 100% on-time delivery to schedule and 100% quality without adding inventory?
Companies like Cox Machine answer these questions by creating cells with very fast cycle times. Instead of locating machines all over the plant with many different people operating, these cells locate every machine required for a part in one very small area where one person can complete each part very quickly.
But the sustainability of cells like this one requires a company with the process discipline exemplified by leadership, workforce development, and operational excellence systems to support lean improvements. Said another way, in order for a the shop floor to work as a “well-oil machine,” every other part of the organization must work as that “well-oiled machine” in support of operational excellence as well.
But continuous improvement doesn’t stop within their four walls. An entire supply chain must operate like a “well-oiled machine”. The SEA Roadmap guides these three suppliers to increasing cooperation and focus on supplier chain integration.
They say that while some people are climbing the signposts of life, others are reading them. While some people call these two questions unanswerable, these three suppliers already have the answers.
In a highly competitive industry with a rapidly consolidating supply chain, aerospace and defense customers appreciate supplier examples of competitiveness. The difference can mean thriving and not just surviving.