Rethinking Supply Chain Management in the Aerospace Industry

thyssenkrupp Aerospace CEO Patrick Marous on the future of the aerospace industry and the role played by global supply chain structures.

If one industry has internalized the idea of globalization, it is the aviation industry. It connects people – worldwide, across all borders. Its value chains are also oriented globally to the fullest, perfectly networked, and balanced. Under normal circumstances. But COVID-19 has abruptly brought our fast-moving world to a halt. In most countries, the economy is trying to find its way back into everyday working life after the lockdown. But aviation is still on the ground – in several respects. Few planes take off. Regular operations at airport and by airlines? Not likely in the foreseeable future. The same applies to the strongly fragmented and highly interdependent supplier industry. It is already a fact: The industry is facing upheavals of unprecedented proportions. And what the future looks like largely depends on whether and how our travel habits will change "post Corona" – both privately and professionally.

Think smart and fly small

The trend towards smaller aircrafts, which was already apparent before the Corona crisis, will intensify further. This is now beyond question. The new "high-flyers", also on long-haul routes, will most likely become the more flexibly deployable single-aisle models in their “XLR” variant – to the detriment of wide body aircraft types. When a flight volume like in the time before Corona can be reached again (if ever again), is written in the stars. The ability to plan is missing. The situation remains extremely tense for the supply industry. This is especially true since the secondary market will be flooded with used aircrafts, thus putting additional pressure on the market for new ones. All this will lead to a wave of consolidation. How quickly will they come, how hard will the industry be hit? We will find out.

COVID-19 speeds up Paradigm Shift in the Aerospace Industry

The Corona pandemic and the linked changes in requirements, needs and consequences are driving these developments at an unexpectedly rapid pace. But COVID-19 is not the originator. Despite years of growth, rising build rates and full order books at major OEMs, the aviation industry has been in a state of flux for some time. Especially in the field of the numerous Tier 2 and Tier 3 suppliers, the growing price pressure along the entire supply chain has led to high (unhealthy) dependency ratios in recent years.

One thing is already certain: the structures of global supply chains will have to be rethought. The lockdown has made it clear, not only in aviation, that crises such as the current one can quickly and drastically bring global networks to their knees. This is not just about reshoring, i.e. bringing the production of particularly critical components and parts back to the home market or even insourcing. But also, about a tailor-made redesign that intelligently combines and controls local and global links in the supply chain under the new key criteria of security, resilience, and independence first.

Against this background strategically thinking partners with deep market knowledge are in demand. They need genuine customer understanding, strong networks and the right mix of versatile experience, smart IT solutions and creative digital experts. After all, their customers' supply chains not only have to be redesigned or optimized, but also controlled and securely managed.

The new Guiding Principle: Efficient Safety

As market leader for integrated supply chain solutions in the global aerospace industry, we at thyssenkrupp Aerospace were already working on the reorganization of complex supply chains intensively long before Corona. Our guiding principle: to allow our customers to concentrate on their core business to the fullest. For them, it is all about building aircrafts or the components and parts for it. We must be the ones who ensure that they receive everything they need for this under all circumstances and as efficiently as possible. No matter when, no matter where. We are convinced that digital supply chain solutions are the key to the efficient safety along complex value chains that is required today – more than ever before. Their tasks:

  • the intelligent management and control of all information and flows of goods,

  • a smart supplier management and

  • the generation, linking and evaluation of data based on which alternative scenarios can be considered, risks assessed, situations evaluated in advance and decisions made in real time.

This is precisely where "Materials as a Service", our strategy for the future comes into play: We are rethinking the supply chain. We are developing smart tools such as toii®, our IIoT platform, which connects machines of different generations and IT systems across locations and allows them to communicate with each other. This allows us to make smart recommendations for action and forward-looking management decisions with the help of our own artificial intelligence solution alfred. All this for the best individual and customized supply chain solution.

As dramatic as the current crisis is hitting the aviation industry, it is becoming a significant driving force for the urgently needed restructuring of global supply chains. And we will all need a real boost for this now. Because, as Henry Ford once said, flying is governed by its own rules:

“When everything seems to be against you, remember that an airplane takes-off against the wind, not with it.”

The headwinds are there, let the flights and our industry take off again!!