I had an opportunity to meet with the executive team at Honeywell Aerospace in Phoenix this week, and learned a great deal about the interesting challenges that exist in the aerospace supply chain. As can be expected, Honeywell has only a few major customers (Boeing, Airbus, Embraer, etc.) in commercial, and a slightly larger amount in defense. The development cycles on products is very long, and once the product is delivered and installed, the product life cycle is also very long (in some cases, up to 40 years of after-market support services are required). This makes for some very interesting inventory and supply challenges.
One example discussed was the situation where airlines are holding onto the planes for much longer than expected due to the post-9/11 economic impacts of capital investment in the air transport industry. In some cases, airlines need to support cockpits with 40 year old technology. They have to find ways to support planes with cathode ray tubes and 486 chips! One manager shared with me that they were now “harvesting” 486 chips from older aircraft, and prying them off the boards. The integrated circuit boards for some of these planes is even more challenging to source for the aftermarket replacement parts.
HQ is also in the process of redesigning their supply chain to ensure a more integrated delivery system. We discussed maturity models around the DESIGN SOURCE MAKE DELIVER SELL SERVICE framework within SCOR, and talked about the current and best in class practices around each of these elements, and how they applied to the air electronics industry. The team was especially interested in some of the best practices around design for manufacture, target cost management, SKU complexity reduction, and other opportunities to improve delivery systems across the extended value chain. These are areas that will continue to become more important with the growth of the aircraft industry going forward.