A perspective on the aerospace industry by Geolean founder Ludovic Ott – –
On May 5th the first flight of a Chinese-designed narrow-body jet was a thunderclap to the rest of the aerospace industry. Though commercial service introduction – planned in 2021 – seems far away, the signal is clear: there is a new competitor in the aerospace market. After decades of near monopoly in the worldwide aerospace market, Europeans and Americans will have to face the arrival of other players from emerging countries like India and China.
On this occasion, it is therefore interesting to look closer at the competitiveness of the aerospace industry, one of the jewels of French and European industry, and its capacity to face low-cost competition.
On a positive note, the aerospace industry didn’t wait for the arrival of new competition to start reorganizing based on Lean principles – the operating model created by Toyota and unanimously recognized throughout the world as creating the most efficient industrial performance. Looking closer, however, they stopped halfway, perhaps from lack of pressure. This pressure is arriving now though, and it is clear that aerospace companies show a performance below automotive in terms of productivity, restricting their ability to meet new competitive threats. Specifically, plane manufacturing lead times remain too long and the costs throughout the supply chain are not competitive. Of course, this diagnosis applies to different degrees based on the company, with some showing performance consistently superior to others.
The aerospace supply chain – unexpected improvement potential
Where is the delay in aerospace? Contrary to automotive which worked intensively to professionalize the full supply chain, aerospace suffers from a supply chain below capable performance. The original equipment manufacturers (OEMs) have reorganized their production, but the capability of the supplier network is still by many measures “homemade”.
The tier 2 and 3 suppliers are not good enough in terms of production organization, and their weakness penalizes the OEMs by increasing cost and extending production lead times. This lack of organization is more extreme when you consider aerospace benefits from excellent visibility in production planning with workload known far in advance. Consequently, the full supply chain network must adapt itself to the same discipline as automotive. This is one of the biggest principles of Lean and the only way to compress the output time cycle.
Watch out for the wrong “good” ideas, however. There will be a rush to invest and automate everything from production equipment to logistics platforms, hoping that automation will solve organizational problems with minimal effort. While this might indeed cover immediate shortages, the prohibitive costs will cancel the benefits and new industry challenges will demand organization improvements anyway. A better action would be to take the 30 years of existing improvement ideas from the automotive supply chain organization.
The production process itself also presents an important potential improvement. In aerospace, the concept of flexible production lines has not been implemented. In contrast, every automotive manufacturer builds several vehicles on the same line, which is still not a target of aerospace companies.
A better lean industrial organization could bring productivity improvements from 30-40%, together with plane production lead time improvements of 50-60%. This potential leap in industrial performance will directly impact a plane’s cost and therefore the competitive position of our industries.
An upgrade of our aerospace industry is urgent. Competition is coming…
*Featured image courtesy of GE Aviation