Aftermarket Grapples With Slew Of Supply Chain Travails

CHICAGO—Despite robust demand for MRO services, the commercial aviation aftermarket faces a bevy of supply chain problems detrimental to business operations, panelists said on April 10 during the second day of Aviation Week Network’s MRO Americas conference here in Chicago.

During a panel focused on the engines market, panelists were asked to rate the state of their respective supply chains one a scale from one to 10, with 10 being the best. Jim Berberet, AAR Corp. senior vice president of component services, gave a rating of 4.5, significantly below the 7-8 that he said usually characterizes AAR’s supply chain. “We’re trying all different ways to adjust that,” he said.

Ann Ni, managing director of supply chain engines at Delta Airlines, said that the situation is “really, really bad.”

For the engine segment, top supply chain issues include parts availability, OEM production rates and program durability issues, as well as a shortage of skilled labor. In response to a survey taken at the panel, 56% of attendees cited parts availability as their top supply chain challenge.

At the Singapore Air Show in February, some of the world’s largest aerospace companies highlighted component shortages along with delivery delays as two of the top issues weighing on the global aviation sector. Airbus said that it was deploying large numbers of engineers deep into supply chains to free up bottlenecks, while Lufthansa Teknik said that it was stocking additional spare parts to reduce delays. However, it may take two years for the issues to be resolved.

In a recent report about supply chain challenges in commercial aviation, the Government Accountability Office (GAO) said that nine of the 15 companies that it interviewed which supply components to Boeing and Airbus have had difficulty filling orders given a post-pandemic surge in demand. Manufacturers attributed their production travails to workforce and material shortages and are working to mitigate them. Fifteen of the 17 manufacturers surveyed by GAO said they or their suppliers “have had difficulty hiring enough skilled workers to enable them to satisfy the demand for their products.”

One way to potentially ease the components shortage in the engine segment would be to increase the use of Parts Manufacturer Approval (PMA) parts. A PMA designation from the FAA demonstrates that a company is authorized to manufacture aircraft components that meet industry standards. The quality of the PMA part is determined by this approval process. Compared to OEM components, PMA parts are typically 20% to 80% cheaper.

“Delta has always endorsed PMA,” Ni said, adding that “OEM new parts availability is a big problem.”

She also sees an opportunity for PMA parts in the so-called “non-critical” segment that are not essential for an airplane to fly. “I see less control from the OEM perspective on those parts,” she said.

A panel conducted by consultancy McKinsey and Company at MRO Americas also addressed supply chain bottlenecks in commercial aviation. While acknowledging the numerous challenges the supply chain faces today, the consultancy believes that the situation was already problematic before the massive shock delivered by the pandemic. Its research found that 40% of aerospace suppliers were weak pre-COVID, increasing to 50% afterward. Just 30% were healthy prior to the pandemic, and this figure fell to 20% post-COVID, McKinsey found.

“We often see companies focus on single, isolated strategies to increase supply chain resiliency,” a strategy that falls short of addressing all root causes of supply chain weakness, said Henry Marcil, McKinsey associate partner of manufacturing and supply chain, during the panel.

McKinsey believes a multi-pronged approach that is more collaborative, incorporates data and analytics and assesses risks proactively can better strengthen supply chain resiliency.