SUPPLY CHAIN RESILIENCE - OBSERVATIONS

The last few years have revealed the degree of vulnerability of supply chain networks in the aerospace industry. The story developed up over the past fifteen years as OEMs (Original Equipment Manufacturers) have reduced the “make content” of aircraft, to increase the “buy content”. Spinning-of internal manufacturing capabilities and entire factories has been observed: subsidiaries or independently run companies, with their own profit and loss accounting, became an extension of the OEMs, in a competitive setting. Major Tier-1 suppliers (Direct suppliers to OEMs) equivalently increased their outsourcing ratio to meet capacity requirements and to benefit from best-source country opportunities to stabilize margins. This means that nowadays the buy content of a typical aircraft is in the range of 70-80%. OEMs focus on design, integration, and diversified revenue.

For the most part, over the past fifteen years, supply chains were able to deliver: provide appealing new products through NPI (New Product Introduction), meet constantly increasing rates, augment quality standards, increase environmental awareness, and drive down cost, in a globalized setting.

But what happens to supply chains when an external shock to their system occurred?

The months between 2020 and 2022 have seen numerous isolated events with global impact, such as: the continuing COVID-19 pandemic, lockdowns and zero-COVID policies, surging inflation across Western Europe and North America, raw-material shortage, unobtainability of critical electronic components, energy shortages in China and Europe, the blockage of the Suez Canal, the military invasion by Russia of its neighbor, Ukraine, and rising tension between Formosa Island and the Continent.

DEFINITION OF RESILIENCE

A frequently used definition of resilience - that we adopt - is the ability of an organization that has been impacted by an external shock, to bounce back, within a reasonably acceptable time, to a state comparable to the one prior to the shock.

A pictogram is that of bamboo, that during a storm can bend and sway and absorb the low, medium or high level of energy, and then returns to the initial state. The physical properties promise a high degree of?flexibility, or resilience.?

We now come to the critical point of the discussion: how intense is the external shock and how long does the shock persist?

...come back for more next week...