Aircraft builders walked away from last month's Paris air show buoyed by more than $100 billion worth of new orders. But meeting all of those delivery obligations may prove to be a trickier proposition than landing them.

The onset of major production increases in existing jets just as the new Boeing 787 and Lockheed Martin Joint Strike Fighter (JSF) lines are ramping up will put enormous pressure on the aerospace supply chain during the next few years. Airbus is forecast to churn out 495 A320 narrowbody jets in 2014, up from 388 last year and 323 in 2006. And that figure could keep rising if the European airframer’s A320NEO (new engine option) remains a runaway hit. Rival Boeing also plans to boost output sharply.

The two leading airframers and many of their first-tier suppliers exude confidence that the industry is ready for the onslaught. The planned rate increases are being phased in incrementally over several years to give the supply base time to get ready. Production of Boeing’s 737 narrowbody jets, for example, is forecast to rise from 366 in 2010 to 402 in 2012 and 470 in 2014. “It’s very manageable for us to take on these added quantities in our factories,” says Parker Aerospace President Robert Barker. “We can go from 35 actuators a month to 42 pretty easily over a period of time.”

Potential Choke Points

Deeper concerns, however, lurk farther down the value chain. Two years ago, in the midst of the global economic downturn, top-tier suppliers reduced inventories in anticipation of production rate cuts at Airbus and Boeing that never came. This in turn squeezed the smaller vendors of components, such as brackets, clips and pipes, which were forced to cut staff and reduce capacity. Some went out of business. “In recent years, you’ve seen a consolidation in the supply base,” says Donald Majcher, VP-technology and innovation partnerships at the Ohio Aerospace Institute in Cleveland. “The question is, how much of an increase can it now support?”

Others ask whether original equipment manufacturers (OEMs) are doing a good enough job of looking at the supply chain in the aggregate to identify potential choke points. It is not just a matter of moving more production through existing plants. The 787, JSF and Airbus A350XWB widebody jet are underpinning demand for new products, such as advanced electronics, specialized composites and machined titanium components. Equipment to machine titanium can cost $250,000-$1 million, a hefty sum for an independent shop. And supply chain specialists say some small companies are still figuring out how to produce the new components in higher volumes.

Some composite parts are “nowhere near ready to be mass produced,” says Trent Wall, managing partner at Stream, a new firm in Cincinnati that works with aerospace OEMs and their suppliers on process improvement. “I don’t believe the majority of suppliers have figured out how to move from the art of making low-volume, prototype parts to a high-volume, cost-efficient, full-fledged production system.”

Wall says aircraft manufacturers and their Tier I suppliers still don’t have enough visibility into what is going on at second-, third- and fourth-tier vendors. “They get metrics, but these are based on past performance,” he says.

Tardy Revenue Streams

Supply chain setbacks have led to a cycle of mistrust between OEMs and suppliers. On the 787 program, for example, key suppliers failed to alert Boeing that they were falling behind schedule. This led to disruptions that pushed back the innovative jet’s entry into service by more than three years, causing financial pain across the supply base. “We all invested a lot of money in these programs in the development cycle,” notes Parker Aerospace’s Barker. “Most of our business models anticipated revenue streams that would have started a couple of years ago. It’s going to take a lot longer to get the paybacks than we originally anticipated.”

An operation like Parker Aerospace, a unit of industrial giant Parker Hannifin, has the resources to absorb such a blow. But Majcher notes that many privately owned small suppliers can have difficulty securing loans to bridge their operations through delays now that credit conditions have become more stringent.

To their credit, OEMs are not ignoring the potential problems. Airbus CEO Thomas Enders recently stressed that major investments will have to be made in the supply base to accommodate higher production rates. “The huge challenge for us over the next four years will not be to sell new aircraft, but to be able to deliver them in high quantity,” he told the International Herald Tribune.

Airbus, Boeing and their top-tier vendors say they are being exhaustive in their efforts to make sure the supply base is ready.

“I’m not saying there couldn’t be a hiccup here or there with some of our suppliers, but we pay a lot of attention to them, because the last thing we want to do is hold up the production line,” he says. “Someone will be delivering at poor quality or at a 50% on-time rate, and we will go in and teach them how to [improve] that process. They usually get back up into the 90% area. That’s really important as we increase production rates.”

And then there are companies such as avionics producer Rockwell Collins, which is still recovering from a steep decline in business jet production and eagerly awaiting the production ramp-ups at Airbus and Boeing—and the attendant additional revenues and profits. “All we are saying is, ‘Send me in, coach,’” says CEO Clay Jones. “Raise that rate as fast as you want to. What’s taking you so long?”