Industry
Manufacturing
Future-Ready Manufacturing: Partnering in your journey to a sustainable manufacturing enterprise
Highlights
- The ongoing geopolitical tensions have hobbled the revival of the aerospace industry’s supply chain when the industry was getting back on its feet post the devastating effects of the pandemic.
- Unavailability of critical minerals, delay in shipment of important spare parts, and high shipping costs are some of the reasons why airplane makers are unable to meet the demand of their customers.
- Aircraft manufacturers must look at upping their use of digital technologies such as artificial intelligence (AI) at critical points of the supply chain, as well as explore ways to near-shore production and diversify the supplier base to tide over the crisis.
On this page
A volatile world order
Geopolitical crises severely impact the aerospace industry’s supply chain.
This results in delayed delivery of aircrafts, uncertainties in planning, difficulties in cost management, and reduced cash flows for aeroplane makers. The ongoing conflicts are unarguably a setback for the industry at a time when it was on track to recovery after the brutal effects of the pandemic. The risks thereof range from immediate disruptions to long-term implications for the industry. Parts shortage, price fluctuations, inflationary pressures, and regulatory uncertainties because of the volatile political environment are some of the long-term impacts that are poised to create a ripple effect across the supply chain network. Manufacturers need to frame alternate strategies and diversify their supply chains to ensure resilience and stay somewhat insulated from such volatilities.
The supply chain conundrum
Aerospace parts suppliers were already struggling with a stretched supply chain since the pandemic.
The ongoing conflicts have only exacerbated the situation. Original aircraft manufacturers (OAM) are actively exploring alternative tier vendors and evaluating smart supply chain solutions with AI-optimized production facilities to tackle the situation. Some of the major factors that have affected the aerospace and defense (A&D) supply chain are:
Scarcity of critical minerals: The war in Europe has affected the supply of critical minerals like titanium and platinum. The supply of aerospace-grade titanium, used in jet fan blades, fuselage frames, turbine blades, landing gears, and bolts, has been heavily impacted because most of it – about 60% - used to be exported from Russia. Russia is also a major producer of platinum, which is used to make fuel cells and turbine blades. Other minerals include nickel used for armor plating and rocket engines and lithium and silicon for batteries and semiconductors. Most of the problems stem from the monopoly of supply and the fact that volatile geopolitical situations strain supply chains. A&D companies like GE, Pratt & Whitney, Rolls Royce, Boeing, and Airbus continue to face significant production delays due to such raw materials shortages.
Dearth of spare parts: Geopolitical tensions have shut down several A&D facilities that held the lion’s share in the global supply chain. For example, French aerospace company Safran halted its joint venture with Sukhoi in Russia which produced engine for regional jets. While newer facilities are being opened in other parts of the world, it will take some time for those to become fully operational and recreate the supply chain.
The ongoing conflict in the Middle East has also delayed the availability of spare parts as ships – which is how they are typically transported – have to either navigate around the Cape of Good Hope and avoid two key maritime routes, the Red Sea and the Strait of Hormuz.
Inflationary pressures: The spike in crude oil prices, higher cost of aerospace raw materials, longer maritime routes, and closure of manufacturing facilities have increased the cost of manufacturing. For example, aluminum and nickel prices are yet again on the rise after the US and the UK introduced fresh sanctions on trading of Russian supplies at two of the world’s largest exchanges.
Technology will help solve some problems
Even as supply chain disruptions continue, aircraft manufacturers are intensifying their efforts to wade through the crisis.
Industry players are looking to:
Use artificial intelligence (AI) for predictive maintenance: Regulatory authorities such as the Federal Aviation Administration (FAA) and European Union Aviation Safety Agency (EASA) require operators to practice preventative maintenance of critical parts. By doing so, an aircraft can maintain its airworthiness certificate. However, with AI-powered aircraft maintenance, the industry can hope to address supply chain challenges. It will help eliminate over-maintenance, improve safety, and minimize downtime. AI can be used for real-time health monitoring of aircraft as algorithms can predict equipment failure and scheduled maintenance. AI systems track historical data on usage of parts and breakdown and predict when a part needs to be replaced. That information will help manufacturers order those items on time and in bulk to ensure economical procurement and minimize delays.
Leverage data insights for on-condition maintenance: This refers to maintenance when the need arises, by using real-time data to prioritize and optimize maintenance resources. Typically, this maintenance is performed after one or more indicators show that an equipment is going to fail, or its performance is deteriorating. At present, this maintenance philosophy is being followed only for ground systems installed with fail-safe components and non-critical aircraft components. Various toolkits, which include low-cost software deployment process for trending, analytics, and prognostics; intelligent data collection; and knowledge management are in use and being developed. Increased use of such applications for early detection of faults combined with actionable intelligence will enable a reduction in troubleshooting time. It will also improve operational availability in case of breakdown maintenance for aircrafts.
Gain a comprehensive understanding of the market: Automated conversations through systems can preempt customer demand. That will help manufacturers take stock of requirements early in the cycle, and also keep track of variations that may arise due to breakdown maintenance or other operational needs. This will help manufacturers plan, which will, to some extent, iron out supply chain issues.
It will also enable the delivery of solutions to match changing customer needs, thereby enhancing customer experience. Chatbots, phone trees, automated emails, and automated ticketing, can all be used to provide customers with streamlined, 24/7 service.
Rethinking the chain will do the rest
Besides technology, aircraft manufacturers need to reorganize their supply chains to tackle the challenges posed by external developments and disturbances.
Some ways to reengineer and restructure the existing supply chain construct:
Diversifying supply chain: Diversifying suppliers across multiple regions can provide buffers to manufacturers from the current problems. For example, while Russia was the leading exporter of aerospace-grade titanium about two years back, the conflict in the region has forced companies to look at alternate supply sources such as China and Japan for titanium and South Africa for platinum group elements (PGE). However, building new supply chains is not easy; it often takes years for a network to become efficient, reliable, and compliant. Hence, it is imperative for manufacturers to conduct regular supplier assessments and audits to ensure a timely supply of parts and raw materials. Blockchain technology can go a long way in providing visibility into the supply chain and traceability of critical minerals.
Near-shoring production: Airplane manufacturers can offset supply chain risks by nearshoring processes or having suppliers of critical components closer to the final assembly plants. That will also help them improve supply chain efficiency and lower transportation costs. For example, Mexico has emerged as a key near-shoring destinations for plane makers in the US over the years. This is due to the proximity between the suppliers and the final assembly lines as well as the lower import duty resulting from the US, Mexico, and Canada trade agreement. The Mexican aerospace industry is expected to double to $23 billion by 2029, from about $12 billion in 2024, growing at a CAGR of 15%. Airbus, which has one of its 12 final assembly lines in Alabama, USA, has 36 Mexican suppliers while Boeing has 26. Airbus’ European near-shore suppliers, which include those from France, Germany, and the Great Britain, have also helped the company better manage its risk management capabilities.
Exploring alternate trade routes: The ongoing crisis at the Red Sea has highlighted the risks at one of the world’s busiest trade routes. It has also created the need to have an alternate route. The India-Middle East-Europe Economic Corridor (IMEC), announced last year, has attracted a lot of attention for its geopolitical significance and being a cost-efficient alternative for moving goods from India to Europe.
As volatile conditions persist and the economic outlook remains uncertain, the aerospace industry needs to relook at its supply chain to plug the gaps. Proactive measures will ensure operational continuity, adequate risk management, and help the companies remain competitive. That will help aircraft manufacturers build a resilient supply chain to create a buffer against complexities and constraints that may arise in the future.
