Is Supply Chain Pain Ebbing?
Exposure to the arts and to new opportunities is fortuitous. Exposure to cyberattacks and disease is unfavorable—or a revelation. In other words, “being exposed to” can be a good or bad thing.
That’s the crux of the aviation supply chain: Several of the exposures—sole-source suppliers, congested MRO shops, production delays, labor shortages, parts that need rework—fall into the negative category. Simply put, there’s a lot of risk exposure.
“The entire supply chain is stretched, stressed and distressed,” says Kin Chong, Evergreen Aviation Technologies (EGAT) executive vice president. Costs for raw material, parts, labor, fuel and logistics are all up post-pandemic—and throw in big production ramp-ups for Airbus and Boeing, and geopolitical tensions to aggravate things. “I personally don’t see an equilibrium for the next five years,” he said at Aviation Week’s MRO Asia-Pacific Sept. 27. “I believe that the high costs that we are seeing post-COVID is structural and are here to stay.”
Chong, like other panelists during the event, highlighted several supply chain pain points and offered ways to build strength into the system.
• QUALITY CONTROL The industry reacted quickly when news surfaced that AOG Technics parts were not what their paperwork claimed—but several big airlines had flown engines with falsified parts. From supplier audits to receiving inspections and documentation verification, now is the time to make sure quality systems are solid.
• TIER 1-4 SUPPLIERS Pre-pandemic, the “supply chain became so efficient” and was lean, but at the Tier 4-5 levels, several companies were small, family-owned businesses building sole-source parts in big volumes, says Desmond Goh, Eaton’s managing director for aerospace in the Asia-Pacific. “We’re in the transition phase of rebuilding those links in the supply chain,” he says.
• LONGER-TERM CONTRACTS Airlines traditionally have had a “shopping mentality” for base maintenance, said Gerald Steinhoff, HAECO chief commercial officer. The MRO is seeing airlines looking longer-term—18-24 months—to secure slots. “In turn, that changes our strategy” for holding slots, Steinhoff said.
And long-term partners get priority when there are disruptions, noted EGAT’s Chong. Long-term partnership usually benefit both sides if there’s trust.
• PROXIMITY Several OEMs forged deals with Asian airline aftermarket suppliers at MRO Asia-Pacific to bring repair capabilities closer to customers. This diversifies aftermarket networks, adds capabilities and brings those capabilities closer to customers, which decreases logistics costs and turnaround times. Doing this also should increase customer service satisfaction.
• FORECASTING & DIGITALIZATION Aligning with customers to understand needs—and using digital tools and predictive maintenance as much as possible to forecast repairs needs—is imperative. For Tier 1 OEMs, the challenge is to align resources and ramp-ups with aftermarket needs. Understanding these priorities is critical to relieving supply chain pressures.