New survey of the global aerospace supply chain

By Manfred Hader, Rachel Hugo, Stephan Baur, Antoine Kimmel and Siyi Hao

After years of disruptions and challenges, the aerospace supply chain in Europe – and worldwide – had been showing clear signs of improvement. Then the conflict in the Middle East broke out. Immediately before these ongoing geopolitical developments, Roland Berger joined with the French, German and British aerospace associations to conduct the fourth in its series of annual surveys, taking a close look at 95 suppliers and OEMs – a representative sample of the overall industry in Europe and its current state.

The survey investigates how companies from SMEs to multinationals, from Tier-3 suppliers to OEMs, are dealing with the struggles they have faced in recent years. It looks at where progress is being made and what remains to be done. It examines the extent to which industry players are ready for scheduled production ramp-ups. Suppliers’ relative resilience is explored, alongside a discussion of what best practices are being harnessed to strengthen it. And it details the many and varied risks for which industry players are already bracing themselves. In response to developments in the Middle East, the survey concludes with a scenario-based deep dive into the potential repercussions of this conflict for the entire aerospace sector and its global supply chain.

Ramping up – Ready or not?

Aerospace players of all shapes and sizes have long been locked into what is now an imminent ramp-up trajectory. At the same time, they are also preparing for next-generation aircraft and system developments that should come on-line around the late 2030s.

More than two thirds of the companies surveyed claim to be well placed for the impending ramp-up. The survey documents those key factors – human resources and skill sets, production capacity and adequate investment funding – that determine whether this is indeed the case. It also asks what consequences could face the industry if the other one third of its players are not fully prepared and cannot meet their production obligations.

Despite evidence that financial constraints have eased in many cases, the survey nevertheless finds that more than half (56%) of respondents are still struggling to get the right number of people in the right jobs at the right time. A series of other operational issues – including unreliable planning input from OEMs – are also discussed, alongside the impact of increasing demand for defense systems.

From firefighting to stable operation and resilience

One very positive trend observed in this year’s survey is the proportion of companies that are no longer caught up primarily in reactive crisis management, or “firefighting”, in response to serious and immediate disruptions.

As the chart shows, more and more industry players are gradually emerging from full-blown crisis management. Many are now in a more considered process of stabilizing their operations, and over 30% have reached a level of supply chain resilience that lets them proactively prepare for future changes and developments.

That said, with more than half of respondents yet to resolve what can only be described as serious issues, the survey raises two important questions:

• Why do so many companies pay lip service to the benefits of programs such as Aero Excellence International but then fail to sign up and realize those benefits?
• Why do large numbers of players fail to adopt recognized best practices in everything from the design of their supply chain networks to the organization and quality of those supply chains?

In the past, overblown expectations have fueled perceptions that some best practices did not necessarily lead to hoped-for improvements. Be that as it may, the survey makes a strong case that suppliers and OEMs alike must be more consistent and realistic in making use of these valuable tools.

Expectation of material shortages – One of several key risks

Anticipating shortages of both raw materials and some semi-finished parts, many industry players have elected to diversify their supplier base. Others are actively boosting their inventories. The survey examines the reasons for these expectations and essentially acknowledges the sound logic behind these and other strategies. However, if the inventory build-up continues for too long, it can only add to the pressure on what, in many cases, are already razor-thin margins.

Above and beyond these very valid concerns, current geopolitical tensions have also prompted suppliers and OEMs to adopt timely countermeasures on a number of fronts. The survey explores how, in response, different companies are reorganizing their supply chain setup and even their internal production footprint.

Three scenarios

In light of all that is happening in and around the Middle East right now, the survey closes with a detailed look at the possible repercussions for the global aerospace supply chain. These repercussions hinge largely on how airlines – and hence production demand – are affected by the ongoing conflict. And this impact will be determined to a great extent by the duration of the current tense situation. Roland Berger thus spells out three crisis scenarios, each depicting a different timeline and varying levels of escalation. The survey then draws conclusions from each scenario for potential developments in the wider industry.

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