Maine Pointe and Michigan State University released its new white paper, “Is today’s supply base terminally ill? Have you got a back-up plan?” , which addresses the unprecedented challenges currently being faced by the aviation, aerospace and defense industry, and offers seven practical steps to overcome those challenges.
According to the white paper, pressure seen in both the commercial and defense aviation sectors is the result of a long-standing cost-down model, with the pandemic bringing out weaknesses that have been present for decades.
Industry challenges didn’t start with pandemic
While suppliers, OEMs, airlines and the DoD are all under unprecedented pressure to recover from the pandemic-driven losses and supply chain disruptions of 2020, the challenges didn’t start there. David Grasso, EVP for Aviation, Aerospace & Defense at Maine Pointe and co-author of the paper, says “the system has long been rife with inertia across the supply base and a cost-based supply chain model that is far too limiting. Today’s supply chain is a system built on short-term actions, disparate collaboration techniques and poor visibility into the supply base. For top management, now is the time to recognize that buyer-supplier dynamics have changed – and to rethink what the supply chain needs to accomplish.”
According to the white paper, the major root cause of the problem is not the suppliers, but rather, problems with collaboration, visibility and alignment. Visibility into sub-tiers by OEMs is often hindered by limited direct communication, with most companies lacking insight beyond their tier-one supply base. The result is a breakdown in availability, quality and sustainability. The authors highlight decades of short-term fixes getting in the way of a larger strategic shift, calling it “death by a thousand cuts.”
“As a result, the focus has begun to change from managing the first tier, to managing the entire supply chain, including suppliers and the second, third and fourth tiers,” said Steven Melnyk, PhD, professor of supply chain management at MSU and co-author of the paper. “Smaller downstream suppliers can significantly impact the ability of your system to deliver. To manage those smaller suppliers, you need to become a better customer. Often this involves taking a more proactive and innovative approach.”
Buyer-supplier dynamics have changed, and the supply model has to change with it
“We are at the tipping point of losing quality suppliers who will be very difficult to replace,” said Grasso. “Companies in aviation, aerospace and defense are increasingly reliant on not just their suppliers, but their suppliers’ suppliers as well. The good news is there is a way to solve these endemic supply chain issues.”
From examining strengths and weaknesses, to identifying gaps across the supply chain, the white paper outlines seven key steps that can be taken to solve the increasingly critical supply chain issues facing the industry.
“For the aviation, aerospace and defense industry to continue to innovate,” says Melnyk, “it needs to overcome resistance to change and have a new supply chain strategy going forward. Deeply entrenched problems have been hidden under the surface for years and are only now becoming visible. The time for a critical look at the supply chain and decisive action is now.”
Rethinking your supplier development strategy
“Addressing the needs of critical suppliers at the second, third and fourth tiers is always a win-win and will go a long way towards developing the visibility you need. In rethinking your supplier development strategy, Maine Pointe’s Supplier Performance Approach (SPA) offers a hybrid toolset that helps companies get consistent performance from the entire supply base without having to initiate costly, and often unsustainable, direct involvement with potentially thousands of downstream suppliers,” said Simon Knowles, Chief Marketing Officer of Maine Pointe and co-author of the paper.
SPA is based on Maine Pointe’s Supplier Risk Management, Supplier Performance Management, and Sourcing Optimization offerings. Maine Pointe’s solution to downstream visibility and collaboration also includes Supplier Sub Tier & Visibility (SSV), a hybrid offering based on Maine Pointe’s data analytics tools, TVO dashboards, and remote/offsite delivery services. “Other industries have found a way out of this situation. Consider the automotive industry; every year, the quality of supplier relationships is measured and reported back to the industry. The result? An 8.76% improvement in operating profit by the industry leaders,” said Knowles.