While many manufacturers have struggled with logistics surrounding their supply chains throughout the pandemic, UK-headquartered legacy parts manufacturer Ontic benefited from relying on a largely local supply base. However, Ontic had also learned lessons from its reliance on a base of small suppliers, some of which were single sources for materials, according to CEO Gareth Hall.
Ontic—which produces and/or supports more than 7,000 parts for aircraft ranging from the Sikorsky Sea King and Bell 206 to the Gulfstream IV and Boeing 777 and engines such as the Pratt & Whitney Canada JT15D—faced a range of uncertainties when the pandemic spread globally.
Its first focus was managing the employment base: ensuring that those who could work from home do so, enhancing cleaning guidelines (Hall called those helping with that effort the “unsung heroes” of the pandemic), and employing practices such as bubble groupings to limit virus spread opportunities.
Ontic determined that it was deemed an essential business, but it did shut down for a day “really just to kind of assess what we needed to do and make sense of the guidance because it was emerging. It was less than clear at the time,” Hall said.
However, its focus quickly turned to maintaining its supplier base, he noted. “Once we realized we could stay open and we can keep our people safe, our next concern is obviously the supply chain."
With advancements in logistics, many manufacturers have turned to a global supply base and just-in-time delivery to keep down costs. But Ontic, which has operations in the UK, California, New York, and North Carolina, has largely relied on a regional and national supplier. “There’s a lot of debate around supply chain,” Hall said. “Having a localized supply chain was counterintuitive pre-pandemic because people wanted to use low-cost regions as a solution. But because our business model was basically low volume, high mix, high complexity, our supply chain is almost without exception localized.”
That turned out to be a “huge initial bonus for us” because Ontic did not have to navigate around cross-border restrictions. Ontic executives were able to visit most of its suppliers early on and “really get a sense” how the pandemic was affecting them.
“I wouldn't say we weren't impacted,” Hall added, but the primary concerns of obtaining the necessary materials and components for its manufacturing operations were reduced. However, the biggest risk revolved around the impact of the pandemic on smaller shops and the potential for closures from either the virus or financial constraints.
Worried about its suppliers suffering from cash-flow issues, Ontic approached its smaller suppliers and offered them prepayment to help get them through the initial part of the pandemic. “It was a really interesting response, not one you would expect,” Hall said. Roughly two-thirds turned down the offer, saying they did not need the prepayment at the moment but that Ontic should use that upfront cash to support others that were in need of it.
“I think that's probably a different behavior than you would normally see,” Hall said, but he added that the response “probably defined the mood at the time.”
Ontic did end up making some significant investments with certain suppliers, relying on trust and goodwill, but it was “by far the right thing to do,” he said, adding that it has paid dividends both in terms of maintaining supply and helping businesses survive.
Ontic did lose one machine shop that closed permanently, Hall said, adding, “They had been in business for a long time.”
But overall the company was able to minimize that impact. Having said that, Hall also noted that the experience did cause an evaluation of how to approach its supply base. Ontic did consider acquiring some of the smaller, at-risk operations but concluded that that wasn’t necessarily a solution. As the major business for small suppliers, Ontic typically received really good service from them, he noted. “The downside was that during these circumstances, they became high risk because they didn’t have flexibility,” he said. “It made us go back and reassess which suppliers we have that could represent a single point of failure.”
Ontic is now looking at possibilities for multiple suppliers to build in redundancy and balance risk.
Hall was encouraged that taking some of the proactive steps to protect its supply chain will help the company come out in a strong position.
While Ontic relies on a supply base, it too is a supplier of parts that OEMs no longer support. But Hall said the company did not encounter the issues that some large-component suppliers faced. Since Ontic primarily produces small batches of relatively small parts, finding transport options was a little easier.
Regarding business demand, Ontic did not see “too much degradation” in its business aviation work, with most of the drop coming from its business involving airliners. However, military demand picked up, Hall said, and Ontic found that by cross-training its technicians, it was able to shift work to where demand was.
Ontic also saw customers moving up orders as it navigated through the pandemic and priorities changed. This caused some challenges to ensure it could meet shifting demand, Hall said. In addition, OEMs have begun to “rethink their strategies” toward their in-house product portfolios. This has spurred multiple conversations about transferring some of that work to Ontic, he said.
What might be more of value to them to keep in-house pre-pandemic may be different post-pandemic, Hall said. “There’s a number of organizations going through that review. Because of our unique position in the market and the relationships that we have with the OEMs, we are in a good position to participate in those conversations and then offer a solution.”