Alberto Robles
Latam Strategic Supply Chain Manager
General Electric Infrastructure Queretaro (GEIQ)
Expert Contributor

A Multi-Business Approach for Aerospace Supply Chain Development

By Alberto Robles | Wed, 09/15/2021 - 15:00

It is no secret that the development of supply chains is mainly triggered by OEMs and Tier-1 companies. The aerospace industry is no exception. OEMs and Tier-1s are usually the big companies that concentrate most of the purchasing power. Additionally, big companies set the industry standards and they also foster most of the innovations that eventually become trends.

On the other hand, we have the small and medium-sized enterprises (SMEs) that are the core of the industrial muscle in Mexico and that represent the vast majority of the formal businesses established. SMEs are the main source of formal employment, which is why their relevance in the local industrial ecosystem is unquestionable.

Are the SMEs in Mexico ready for the Aerospace Challenge? Most of these companies are not. They need help and support from the government and academia but mainly from the OEMs and Tier-1s. Nobody is in a better position to influence the development of our supply chain than the big companies, especially companies that participate in more than one industry or business segment.

Big and diversified companies are able to create synergies between their different divisions that allow them to increase their probabilities of success when engaging with potential suppliers. Having a wider vision gives big companies the ability to better appreciate the big picture and connect the dots to identify more and better business opportunities.

When the vision and scope are limited, companies simply approve or reject potential suppliers. However, when big companies become more strategic and take advantage of their scale and resources it is possible to offer other opportunities that can serve as the development platforms for less qualified suppliers.

At this point, you should be asking, well, what’s the point? How can I take advantage of my scale and resources? In general, the approach is simple. Big and diversified companies can use their different divisions as development platforms for SMEs that have demonstrated good potential. The diversified company needs to profile its different divisions from low to high complexity.

Complexity can be a function of several aspects, such as industry certifications, safety, advanced and difficult manufacturing processes, capital intensity, skilled labor availability and entry barriers.

Once the company has completed this analysis, it needs to create a readiness assessment to diagnose the current situation of the SMEs that could potentially become approved suppliers. Depending on the assessment results, supplier developers and supply chain professionals can decide what should be the entry point for those vendors and delineate the different lines of development for potential suppliers.

This approach has several advantages. Big companies can avoid instant rejection of SMEs and can possibly offer a different business opportunity based on current needs from a different business division. This represents a win-win situation because the big company fulfills a real business need and the SME has the opportunity to start doing business right away. Additionally, the OEM or Tier-1 can use that first business interaction to start developing that particular supplier until it gets the readiness level of its most complex business division.

An approach like this requires a long-term vision and commitment. In highly complex and capital-intensive industries like aerospace, it can take several years for SMEs to become fully developed and skilled to participate in the industry. Sometimes, the SMEs need to put in the blood, sweat and tears to completely navigate the development process, while OEMs and Tier-1s need to have the commitment to join efforts with the suppliers being developed and sometimes help them to get access to valuable resources that are vital.

The participation of the government, SMEs and big companies is instrumental to catalyze the development of the aerospace supply chain. Academia also plays a very important role by developing critical talent for the aerospace industry. Diversified companies can bring a lot of value to the table by impacting not only the aerospace sector but also adjacent industries by developing SMEs in different sectors that can eventually make the leap to aerospace.

My call to action for SMEs is to be aware of their readiness level by connecting with industry experts, business accelerators or specialized industry clusters. Then, deep dive into the specifics of the aerospace industry. After that, start connecting with OEMs and Tier-1s, especially those that serve more than one industry. Be open to discussion and to feedback. It is good to have a long-term vision but be willing to go through the process and learn, learn and learn.

Finally, my message for the OEMs and Tier-1s is to change their mindset. A plug and play approach will not always yield the best business results. Supplier development is a good investment not only for your business; you will also be contributing to the development of our regional supply chain.

Photo by:   Alberto Robles