Suppliers now immersed in role as integrators
The quiet revolution that sped through the airliner supply industry over the past decade has become mainstream doctrine: no longer can subsystems suppliers rely on the lead OEM to assume the design and integration responsibility for their products, at least according to the companies that occupy the upper tiers of the supply chain.
“If you’re talking to a company that provides components only, they’ll probably tell you, ‘No, nothing has changed.’ But if you’re talking to companies higher up the food chain that do provide subsystems, as we do, there’s no question in my mind that there’s been a fundamental shift,” said Doug Wright, head of Curtiss-Wright Controls Engineered Systems (Hall 3 Stand B18).
“It used to be that the Boeings and the Airbuses would control the systems integration level quite closely. Now, as I see it, the systems integration is the complete responsibility of the integrator, for the life cycle of the airplane,” said Wright. “The integrators have to step up to that challenge and provide the complete package. As a subsystem partner to the integrators, we must also be ready for the challenge.”
For example, Airbus’ Power8 initiative is a process whereby the company plans to streamline the firm, reduce costs and make its products more competitive in a world where the low price of the dollar is helping U.S. aircraft manufacturers like never before. It calls on the airframer not only to reduce its supplier base, but to ensure that those suppliers take on more of the subsystem design, development and integration work.
Contrary to popular perception, passing down development and risk burden to suppliers isn’t a recent phenomenon, according to Keith Hayward, head of research at the Royal Aeronautical Society. “It’s not a new trend at all,” he said. “The origins are very much in the recognition in the aerospace sector of the experience of the automotive industry.”
Car factories pioneered so-called “lean manufacturing,” a process in which waste gets eliminated from aspects of production to reduce cost. “Rationalizing supplier chains and evoking lean manufacturing were two sides of the same coin,” argued Hayward. However, only in the last decade have airframe builders fully embraced the idea.
Even Russia’s Sukhoi, maker of the new Superjet 100 regional jet, has begun thinking along the same lines. “We were selected in 2005 to be the sole supplier of a very large avionics suite for most of the functions needed to fly the Sukhoi Superjet 100, including the navigation systems, the flight management system and the autopilot,” said Gil Michielin, head of commercial aircraft solutions at Thales.
“We are also responsible for integrating the functionality of products coming from other major subsystems suppliers,” he said. That requires the supplier and airframe builder to work together closely. “The higher up the food chain you go, the more content and the more responsibility you have, and of course the more risk you accept,” noted Wright. “As a subsystems supplier and partner we often sit down with the customer, whether they are a tier-one or a tier-two supplier and we offer design options that subsequently are incorporated into the final systems design.”
Although Boeing’s 787 became known as the poster child for the trend, subsystems suppliers will absorb around 50 percent of the design effort for the Airbus A350XWB–another program in which tier-one suppliers have taken responsibility for integrating large pieces of the airplane. Still, Boeing’s approach to the 787 amounted to perhaps the boldest departure from convention. Hayward calls the 787 “the most dramatic example of outsourcing and risk transfer. What has made the 787 different is the extent to which Boeing has outsourced critical components, such as the wing box to Japan, and large chunks of the fuselage,” he said.
Moreover, the subsystem suppliers themselves have developed partnerships with other companies to provide the aircraft builders with fully designed and engineered products. “For those pieces that are not in our portfolio, we will obviously put in the necessary partnerships with external suppliers,” said Michielin. “We are cooperating with Diehl Aerospace in the avionics and the cabin domain. We have established a center of very strong competence with Diehl Aerospace in terms of graphic generation and all of our graphics generation solutions.”
Voices in some quarters have raised concern that a deeper search for cost-effective suppliers who can assume more of the subsystem design and development work will lead airplane makers beyond their traditional supply base in Europe and North America toward lower-cost sources in India and China. The suppliers, however, in many cases welcome partnerships with firms in low-cost countries that can collaborate on product design and development. “For us, low-labor-cost countries are not a threat,” said Michielin. “We consider them an opportunity. We’ve been working with India for more than 50 years. We have more than 250 people working in that country. It’s a long-standing relationship that has enabled us to benefit from a lot of local competencies.”
Wright agreed. “There has been a concern about low-cost-economy outsourcing for years, and I believe there will continue to be certain pressures in this regard,” he said. “To be competitive in the future environment, a company must have a robust supply chain that includes low-cost-economy sources.” In fact, suppliers willing to assume more of the risk today–risk that includes extending their own supply chains to developing markets–might find themselves benefiting tomorrow, he suggested.
“You look at the platforms that are coming in the future,” said Wright. “We’re developing new technologies and new ways to do things cheaper, better and faster, that we would like to offer up to the next platform. You’ve got a network of suppliers and integrators ready with the next level of technology up front. You need to bring new ideas to the table because if you don’t, and if you haven’t got a proper priority focus as to where your technology is going, you will have a difficult time competing in the future.”