How To Alleviate Aviation Supply Chain Bottlenecks
What is going on in Boeing’s parts sales and distribution business could be illustrative of steps the aviation industry could take to solve some of its supply chain challenges.
Let’s break it into pieces:
- First, Boeing’s distribution business is operating on different enterprise resource planning systems (from the legacy Aviall and KLX businesses), and it will start implementing the latest version of SAP in the first half of 2023. Being on a common platform will allow the two former entities to further integrate and leverage the scale of the combined operations.
The distribution business is the first part of Boeing Global Services (BGS) that is migrating to SAP S/4HANA; the rest of BGS will follow.
While new ERP systems are not a panacea for all supply chain problems—they are expensive and can take a long time to implement—companies should think about their digital foundation as they position themselves for the future. And without the right culture and processes, the technology will not be as good as it could be.
- Second, Boeing is further integrating the legacy Aviall and KLX businesses to drive efficiencies and productivity. It is “bringing these two businesses together under a common leadership structure” and examining the “people, processes and tools,” says William Ampofo, Boeing Global Services senior vice president of parts and distribution services as well as supply chain. “We’ve got to get the people, the culture and the processes more robust and integrated. Because that’s a precursor to any technology platforms, including SAP, that we bring to bear.”
This same exercise could be helpful for companies that have grown through acquisitions or are considering mergers and acquisitions now.
- Third, and perhaps most important, Boeing and its suppliers are taking steps to create a more transparent supply chain. Ampofo says its suppliers and customers’ “willingness to share is unlike what I’ve seen before,” and this two-way communication should lead to better business outcomes for both sides.
For example, a couple of airlines linked their platforms to Boeing’s parts business so each could gain access to certain real-time information. Ampofo says this is a “win” and is much better than in the past, when the data conversation was: “Why do you want it? What are you going to do with the data? Who owns it?” He thinks the industry is starting to get past some of those challenges with transparency. “I’d say there’s a greater degree of trust, quite frankly,” he notes, because companies now understand “we’re trying to get data to help us drive more productive and efficient operations and a more stable reliability system between us and our customers.”
Providing stability in our industry is critical to the recovery, and Ampofo says as value is delivered, those old data questions become “less of a centerpiece of conversation.”
- Fourth, Boeing established a Global Field Operations group of seasoned employees who deploy to distressed suppliers that are “challenged with producibility issues.” The embedded team “looks at processes with any given factory to help them accelerate their journey to producing quality parts the first time,” Boeing says.
That collaboration has to build goodwill.
For suppliers that the ops group could not help, Boeing has tried to onboard new ones and/or absorb fabrication in-house. However, for older parts, Ampofo says it is not as easy to transfer some of that to new suppliers because “we’re finding there’s a lot of hidden factory, if you will, in the supply chain.”
- Fifth, Boeing is investing in its e-commerce platform to make it more user-friendly so customers can consistently search, find and make transactions involving parts orders online. Amazon has changed consumer experience and expectations, and sites that are clunky lose business. How many times in your personal life have you abandoned an online purchase because it was not as easy or predictable as one from Amazon?
When asked to rate the health of the aviation supply chain, Ampofo says it is yellow, like the yellow of a green, yellow and red traffic light.
While yellow is a cautionary color, and much work must be done to address labor shortages in aviation that are hindering growth, Ampofo is encouraged that the actions and investments outlined above can help to transition “from yellow to green over the coming months and years.”