It is no understatement to say that the Aerospace industry has been hit hard, what with three monoliths (Rolls Royce, Airbus, and Meggitt) in the sector announcing significant redundancies, and a sizeable proportion of the supply chain being at risk. The Teal Group estimates a quarter to a third of civil production could disappear, and that it could take up to four years to return to 2019 levels. A quarter of the UK’s aerospace workforce could be lost in the meantime.
With this sobering prediction, we were delighted to be joined by Andrew Mair, CEO of the Midlands Aerospace Alliance (MAA), to lead what became a fascinating debate on what companies can do to recover, and how to create a prosperous supply chain for the future.
Andrew, an economist and academic by background, and who has led the MAA (which supports 300+ Midlands based aerospace companies) for over fifteen years, shared his thoughts to a community of senior leaders in the civil aerospace industry. Andrew started his talk at the macro level describing how foreign-owned groups are looking to move work back from the UK to their home countries, stating it will be a ‘dog eat dog’ competition for any overseas projects.
Andrew stated that we cannot fix the overall travel, airline and aircraft orderbook marketplace overnight. However, he presented five key activities, in order of importance, taken from a recent survey by his members, as to how the industry can recover:
People and safe/productive workplaces
- Despite reduced workloads, try to retain skills with new systems/processes.
- Utilise a programme called ‘Talent Retention Solutions’, designed to circulate key capabilities within adjacent sectors; i.e. from aerospace to rail or other government related programmes.
- Identify ways to attract diverse and young talent, if the apprenticeship programme closes.
- Invest in employee retention, to compete against tech and retail industries offering attractive salaries and more agreeable working conditions.
- Request furlough extension from Government for sectors like aerospace.
- Subcontractors to focus on market intelligence to understand where the future opportunities lie, by taking a proactive approach, rather than waiting for the phone to ring.
- Identify and build relationships with key decision makers in the supply chain.
- Diversify: companies investing in both civil and defence will be better positioned to recover.
- Many SMEs don’t have much debt, and once immediate cashflow issues are resolved they expect a return to normal in 2021. However, they should not rest on their laurels to ensure they remain competitive and maintain their market share.
- We have seen some attempts by customers to reduce prices, encouraging consolidation by increasing pressure on suppliers. This is not deemed the best strategy for the long term though.
- Similarly, online auctions are taking place looking at low cost single-sourcing abroad, driven by procurement teams under pressure. However, it remains to be seen whether this is a wise strategy.
- Bounce back loans are likely to be written off by Government.
Supply Chain resilience
- Lack of visibility of future requirements from customers is impacting MRP systems in the supply chain. Working in partnership will help incentivise the supply chain on existing contracts and allow companies to ramp up/down more efficiently as visibility of pipeline is improved.
- Currently, there is a likelihood of supply chain consolidation and less robust companies will not survive.
- Perception that this is driven by the larger firms. Need to make sure smaller companies are more involved in early stage R&D, rather than simply undertaking sub-contract work on big R&D programmes that flows down.
- Innovative thinking required to ensure slimmed-down work force reaches productivity levels to that of pre-COVID: investment in AI and autonomous systems.
- Support for ‘green aircraft’ initiatives from Government would be welcome but need to involve supply chain more.
- There is debate as to the order of these five priorities, depending where you sit within the supply chain. However, the overriding message that emerged across all these points is that UK Government, OEMs and SMEs all need to act collectively and collaboratively; our supply chain is immensely complex and, if we work together, then there is a strong chance we will emerge from this crisis healthier and more prosperous.
Other points discussed with Andrew from questions raised amongst the audience included:
- How companies are trying to retain skills and capabilities for when they need to expand again; many are desperately trying to avoid redundancies.
- Opportunities for organisations to diversify into adjacent sectors that demand the same precision, safety and quality.
- The industry’s work on the Ventilator Challenge being publicised insufficiently, in the fact that the large companies and bodies have rightly been congratulated but they have rarely mentioned the support they received from small companies and lauded the wider SME supply chain.
- How can SMEs better promote their value-add and be recognised as key partners, after all they make parts that are integrated into critical systems?
- Regional clusters of excellence make supply chains more resilient as the ecosystem is more diversified with sharing of knowledge and best practice.
- Many supply chain issues are related to cultural barriers and class division around what levels of education different industry leaders (OEMs vs SMEs) have reached.
- Business development and innovation should go together, and suppliers should see the latter as the route to the former. The lower down the tiers, the less visibility of what the market requires, therefore creating an opportunity to upskill and support the SMEs in the supply chain through innovation.
- ’Crises create opportunities’. Although some organisations are resistant to innovation and diversification, a large proportion of organisations are open to new manufacturing capability and new technologies in order to survive long term.
Categories: Manufacturing & Engineering Recruitment