“Move with the times or risk extinction”, Aerospace SMEs warned
“Move with the times or risk extinction”, Aerospace SMEs warned
Keywords: Aerospace industry, Small-to-medium-sized enterprises, UK
At a seminar held in the UK and hosted by Farnborough Aerospace Consortium(FAC), Bert Hunter, a leading consultant in the Aerospace and Defence Sector from Cap Gemini Ernst and Young, warned the very real necessity for companies within the supply chain to change or face the prospect of a rapid and terminal decline.
In a presentation which outlined both opportunities and challenges facing suppliers within the Aerospace and Defence sector, Bert Hunter presented strong evidence to support the view that in a changing marketplace, individual companies no longer compete, it is the supply chain that competes, as customers increasingly focus on worldwide markets utilising global supply chains. Standard processes and IT systems are becoming more common throughout their businesses,resulting in a growing trend for flexible alliances with partners who are responsive to change, ensuring that product development becomes a collaborative effort.
“More and more there is a need for collaboration and integration throughout the entire value chain to create a networked Value Chain (NVC),”he commented, the tangible benefits of this including increased profit and revenue, better customer service, a reduction in procurement costs, less lead time, better delivery service, reduced logistic costs and lower inventory requirements as well as improved asset utilisation and better cash flow. “Effectiveness will not just be a question of profit, but of ability to respond quickly to changes in customer demand; connectivity will be the key to responsiveness in this new manufacturing environment,” he added.
The Aerospace industry is currently experiencing a significant period of contraction, the main implication being that turnover is likely to remain flat or decline in the short term. The next 2-3 years will therefore be a challenging period for the UK Aerospace supply chain, but opportunities are there for some companies to profit from this industry consolidation. In order to compete successfully, it is vital that suppliers differentiate themselves and focus on creating profitable relationships with OEMs. Continued consolidation has resulted in a smaller number of extremely powerful OEMs looking in turn to partner with a smaller group of more capable suppliers, and with the emergence of developing countries as a new means to source materials, “business as usual” is no longer an option for UK companies.
Bert Hunter gave anecdotal evidence supporting the belief of OEMs that the UK supply chain is ripe for change, and with significant overcapacity consolidation is needed within the chain – vital for the health of the industry – with a clear need for a root and branch restructuring. Lean manufacturing has emerged as the dominant strategy to reduce costs and to improve productivity in manufacturing businesses, but “lean” on its own is not good enough, as without an explicit strategy, lean implementation efforts can become unfocused. The message is clear – survival will require companies to refocus on their core competencies and to move up the value chain. The winning companies will be those who have clearly differentiated products and services.
Bert Hunter concluded with a prediction that in the future effectiveness will not just be a question of profit, but of a supplier's ability to respond quickly to changes in customer demand. Connectivity will be the key to responsiveness, and we will see the emergence of new “boutique”supplier hubs, made up of small niche companies collaborating to provide capability to their customers.
Norman Hardie, Vice-President of Large Component Manufacturing at Airbus,Broughton, also speaking at the event, emphasised the importance of customers and suppliers working in partnership to achieve improvements in the supply chain. “Stable operations, on target with minimum variation are the key to success” said Norman Hardie. “Open responsive relationships are a must in our shared aim of improving the overall system. Large Component Manufacturing has enjoyed great improvements in its supply chain through employing this philosophy, with reduced lead- times, handling, packaging and increased schedule adherence achieved. The real beauty of working in this way is that the realised improvements provide benefits to both customer and supplier,strengthening the partnership further.”
Ross Bradley, Executive Director for FAC, concluded, “The Aerospace and Defence industry is facing a critical period of change and unless it responds the UK is in grave danger of ceasing to become one of its major players, with disastrous implications for our economy. FAC is committed to promoting a world-class supply chain capability through a focused number of structured improvements for SME companies, which include improved access to research and technology, skills and training and partnerships. Bert Hunter's presentation is a huge wake-up call to the sector – adapt or die.”
Details available from: Farnborough Aerospace Consortium. Tel: +44 (0) 1252 398212; Web site: www.fac.org.uk
