The Future of the Aerospace Supply Chain – Insights from the Aviation Forum Hamburg 2016

by Kai Keppner

Last week I had the opportunity to attend one of the most distinguished supply chain conferences of the aerospace industry – the Aviation Forum in Hamburg. Hamburg is home to one of the major Airbus sites as well as several suppliers, and also serves as an important international logistics node, which makes the city one of the natural choices when it comes to hosting a conference for the aerospace industry.

With more than 600 attendees and many industry-renowned speakers, the Aviation Forum is the perfect event for networking with supply chain professionals and getting valuable insights regarding the future of the aerospace supply chain. Since it is one of the major trends of our time, digitization served as the guiding theme that ran like a thread through almost every presentation, workshop, panel discussion and conversation on the exhibition floor. While this suggests a digital future for the aerospace supply chain in general, the coming years will show some more specific trends emerging that also, more or less, have to do with digitization. I want to highlight three particular topics that I found to be quite interesting at the conference: Integration of suppliers, 3D Printing and Agile Optimization.

Defining new relationships with suppliers

From the perspective of OEMs such as Airbus, Boeing or Bombardier, the distribution of responsibility regarding development and manufacturing of aircrafts was very one-sided not so long ago. OEMs were responsible for most of the work and had to manage a very high number of suppliers on their own. Over time, suppliers took more responsibility and a Tier 1 / Tier 2 structure was formed. Today, most new aircraft programs are developed with the help of a relatively small number of major Tier 1 suppliers. For instance, Airbus relies on a global network of about 7,700 suppliers in total, while directly dealing with only about 200 major Tier 1 suppliers. This has several advantages, but also poses a certain risk as Nico Buchholz, CPO of Bombardier, pointed out. Because the manufactured products are so complex, the OEMs now heavily rely on these suppliers, which calls for a new way of engagement with them. Thus, a two-way-integration is key. Buchholz said that Bombardier leverages their suppliers’ expertise and helps them improve their operations and design. This is supported by an elaborate supplier governance process. According to Buchholz, it is also necessary to have a high level of transparency between OEM and Tier 1 supplier. This means, for example, that the OEM needs to make its financial goals clear to its partners, while on the other hand obtain detailed insights into the maturity process of supplier products. Both sides must be able to check if the OEM’s goals are matched by current developments in order to ensure both parties benefit from the arrangement.

3D printing

Since the OEM’s goals drive developments at the suppliers in general, they also will shape the development of 3D printing in the aerospace industry. This was one thesis at a panel discussion which I attended on the first day of the conference. All of the experts agreed that new ideas in this area will only become a reality if they provide a solution to a current problem in the OEM’s business, and thus will not be the main responsibility of the suppliers.

Since all members of the panel discussion were providers of 3D printing technology or active users in the aerospace industry, their outlook was very optimistic. Dr. Karl-Heinz Dusel, who works for MTU Aero Engines, stated that revolutionary designs, which can only be fashioned in an ALM (Additive Layer Manufacturing) fashion, will have a disruptive effect on the aviation industry as a whole. Gerd Weber from Premium Aerotec boiled this down to a short statement: “Complexity is for free”. Parts can become smaller, lighter or more pressure-resistant. The future potential is huge. Also, the general way in which new products are developed will change dramatically from slow incremental design to out-of-the-box thinking. But this will not happen overnight, since today’s engineers are still developing in the traditional way and need to be trained in using the ALM technology. Bart van der Scheuren from Materialise pointed out that this does not necessarily mean that the training of engineers needs a radical pivot, but that the providers of software design tools need to make their products as user-friendly as possible.

Since the panel discussion included answering questions from the audience, critical perspectives on the technology were also evaluated. For example, the question about quality issues divided the panel into two opposing groups. One group thought that quality control might be a major obstacle for 3D printing of flight-critical parts, and thus manufacturers will start with the non-critical ones. The other group was of the opinion that the assessment of quality is not different to traditionally manufactured parts and the concerns about safety are founded in the usual fear of new technologies that can have a disruptive effect.

Agile Optimization

But disruptions do not always have a positive effect on the supply chain. Coming as small unpredictable events (or so called “micro-disruptions”), they can have a very negative effect on various company operations. Since major business challenges of our time, such as individualization, connectivity, acceleration and volatility spawn an increasing number of these micro-disruptions, companies need to find the right answer to be compatible. The concept of Agile Optimization offers an IT-supported solution, especially if a business-critical process involves high complexity (like manufacturing aircraft turbines) and high unpredictability (e.g. induced by ad-hoc orders, volatility, time pressure).

This management strategy presented by Adrian Weiler, CEO of INFORM, optimizes complex business processes in an “agile” way, with algorithms that enable operation managers to make smart and fast decisions and thus counter the negative effects of micro-disruptions. This way, companies keep operations reliable and efficient despite growing business challenges. Weiler stressed that this does not mean that algorithms will replace production planners or supply chain managers in the future. With Agile Optimization Systems, users still keep ultimate control at all times, since domain expertise cannot be fully mapped to bits and bytes. In the end, in a disruptive event, an optimal decision can and should only be made by an experienced professional.

Weiler gave several examples of Agile Optimization application. In typical MRO processes like hangar maintenance, about 50% of tasks are actually unplanned work, yet the schedule still needs to be optimized for on-time completion. In make-to-order manufacturing, the workload for a single product can reach over 1 million individual tasks with many inter-dependencies. If disruptions occur, Agile Optimization systems are able to re-schedule the vast amount of tasks within a night, in order to start the next day with an optimized plan and stay on schedule for on-time delivery. Another example Weiler gave was inventory management, which is a very important issue in aviation – whether it is spare parts used in MRO operations or purchased parts at manufacturers. With the help of Agile Optimization systems companies are able to make themselves more resilient against disruptions like stock-outs or ad-hoc orders, thus boosting service levels while reducing total inventory.

Final Thoughts

It is safe to say that most attendees deemed this conference to be very successful – whether regarding the new perspectives they gained on the aerospace supply chain or the new contacts they made. I am certainly looking forward to coming back next year.



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About the author

  • Kai Keppner

    Starting as a knowledge manager responsible for documentation at INFORM in 2008, my approach to supply chain topics was initially quite technical. During my early years on the job I gained significant insight into the heart of optimization and began thinking about the bigger picture of supply chain optimization and how technological development will shape the future. Today, my interdisciplinary skills allow me to take a unique perspective, as I continue to expand my knowledge in the multifaceted world of inventory management, inventory sampling and demand planning. 

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