MHI Solutions Improving Supply Chain Performance
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As an industry, aerospace plays a starring role in commercial travel, shipping and national defense. That makes the effectiveness of its supply chain integral to stability and everyday life in the United States and across the globe.
“The aerospace supply chain is vital not only to our economy but also to U.S. national security,” said Di Reimold, vice president of civil aviation for the Aerospace Industries Association. “Our products ensure the safety of flight and uphold our national defense, demanding the highest standards.”
A look at the state of the aerospace supply chain today shows an industry that is as critical as ever—but that is facing an array of obstacles that are undermining progress.
Challenges and Disruptions
In recent years, the aerospace supply chain has contended with a variety of disruptions, starting with plunging demand for aerospace products at the outset of the pandemic.
Still, according to an April 2024 report from McKinsey, the commercial‑aerospace sector had climbed back to 97% of its pre‑pandemic levels by December 2023, with expected annual growth between 5 and 10% through 2026. The report pointed to new aircraft orders reaching an all‑time high of approximately 15,700 last year—with an open‑order backlog that would take 13 years to address at 2023 delivery rates.
The report noted that such a heightened level of demand was encouraging, but commercial‑aerospace original equipment manufacturers (OEMs) and suppliers have struggled to meet the demand because of quality control issues, new regulations, talent shortages and a splintered geopolitical environment. Meanwhile, supply chain shortages in the industry have been persistent, according to the report.
“Since 2020, OEMs have struggled to obtain adequate quantities of many components essential to aircraft manufacturing, including raw materials, finished castings and forgings, semiconductors and electronics components,” the report said. “In consequence, production lines have slowed or stopped, the fleet age is climbing and repair and overhaul times are sometimes significantly off target. Adding to the challenge, many suppliers provide components and materials for both original equipment and the aftermarket. If they have only a limited supply of parts and components, they may have to make production trade‑offs between supplying OEMs and servicing the aftermarket.”
Lisa Anderson, founder and president of LMA Consulting Group, said the struggles of the industry’s heavyweight suppliers particularly have had wide‑ranging impacts.
“Both Boeing and Airbus have had some issues, and it’s had a ripple effect on the supply chain,” Anderson said.
The latest disruption to the field came when 30,000 machinists went on strike in Boeing’s West Coast factories on September 13, stopping the production of the company’s 737 MAX and 767 and 777 wide‑body programs. An Associated Press article noted that the halt created challenges throughout the company’s substantial supply chain, which already was contending with issues such as a MAX safety grounding after two fatal crashes and output curbs placed on the company after a door plug blowout in January.
The AP article noted that some Boeing suppliers rely almost exclusively on the company, while Airbus, Boeing’s rival, has been unable to boost its output to take advantage of Boeing’s issues.
Aerospace manufacturing is a narrow field but with multiple tiers of suppliers, Anderson said. She said Boeing previously had notified suppliers that they were expecting high growth and to step up production to help them meet their targets, but then Boeing ran into its mix of issues, hindering those growth plans.
The Boeing strike is “bound to create further disruptions in the aerospace supply chain,” Anderson said. Some suppliers will struggle to weather those disruptions without reducing their workforce, which will then make them less equipped to ramp productivity back up when conditions improve.
For those in the aerospace industry, current disruptions make it difficult to forecast the future.
“What I’m seeing across the board is orders are being put on hold,” Anderson said. “They’re not necessarily canceling, but they’re putting them on hold, which is in essence the same as canceling. Because when you ask, ‘When will you need them?’ and you hear, ‘I don’t know, two years from now?’ That’s not too helpful. It basically means it’s canceled for now.”
Still, Anderson said, the spigot has not been turned completely off—”the volume hasn’t disappeared,” she said. “People are still traveling, and there’s a need for commercial aircraft and defense.”
“The tier one aerospace suppliers are not going to want their supply chain to disappear, because that’s going to be an important factor for starting back up,” Anderson said. “At the same time, though, who can afford to not have sales and be under all this cost containment? It’s difficult. Because you have to deal with current reality, so it’s a very uncertain environment.”
Struggling to emerge from a slowdown has happened to the industry in its recent history. A Financial Times article noted that aerospace manufacturers were unable to adequately scale production back up quickly when demand for aircraft abruptly rose coming out of the pandemic.
Reimold said inflation, workforce challenges and geopolitical disruptions are issues that have significantly affected the aerospace supply chain.
“To meet current material demands, suppliers need better access to capital for small businesses and public policies that reduce the regulatory burden on aerospace and defense companies and suppliers,” Reimold said.
With that in mind, Reimold said the aerospace industry needs policy and regulatory help to thrive.
“Our domestic aerospace and defense industry is vibrant, innovative and continuing to grow, but maintaining this status is not guaranteed,” Reimold said. “While the U.S. enjoys a competitive advantage partly due to our robust supply chain, we need supportive policies to sustain this edge.”