Special Report: Challenges ahead for aerospace supply chain

THE aerospace industry within the West Midlands is one of the region’s great manufacturing success stories, even though the area lacks one vital ingredient – an original equipment manufacturer or OEM. Nevertheless, around a quarter of all those employed in the UK’s aerospace industry work in the region making its supply chain and research and development facilities among the most important anywhere. In his latest Special Report, Manufacturing Editor Duncan Tift examines the supply chain that continues to fuel this important sector.

Working on a different strategy to the region’s other vital industrial supply chain – automotive – the aerospace supply network has important needs of its own.

To help get a true picture of the industry, TheBusinessDesk.com asked a series of industry specialists for their views on the sector and to determine where future support should be focused.

How aware the OEMs are of the issues facing their suppliers is an area many SMEs felt could be improved.

Suppliers working in Tier 2 and below say their customers are not aware of the challenges they face because they have to look at a much bigger picture.

Glynn Bellamy, (left) Partner – Aerospace & Defence, KPMG, said: “The supply chain within the aerospace sector is becoming more consolidated. There’s a specific skills set there and it needs investment. Firms have to think about where to position their business in 10-15 years’ time.  

“At the moment everyone is benefiting from the success of the sector and from companies like Rolls-Royce and Airbus but you need time and investment to consider other opportunities.”

He said unless suppliers worked more closely with their customers then it was unlikely they would retain the levels of business they wanted.

Mike Andreae, Technology & Improvements Director, Aerospace division, Avingtrans outlined the situation from his own perspective.

He said: “We’re doing a lot of work around composites at the moment and that will eventually form a fundamental part of our aerospace operation.

“However, there is no commercial necessity for this at the moment. This is unlike the situation in automotive, where parts requirements change far quicker.”

He said building long-term relationships was key to Avingtrans’ needs.

“We went through a tough time a few years ago. However, the work we have done has paid off and we have just secured a major contract with Rolls-Royce on one of their new engine projects. Now we are on the first rungs of the technology ladder then they are much keener to talk to us,” he said.

“The extra work is likely to mean investment in China and elsewhere. There are changes but I’m sure we’re not alone in that. The volumes are beginning to creep up – the XWB for instance, the numbers Rolls-Royce is talking about are staggering.”

Bellamy said SME suppliers should be making the most of the resources available within the supply chain and developing the intellectual property that was likely to attract the OEMs.

“They are not always easy customers to deal with but they are attracted by good design,” he said.

Tim Lake, (left) Partner, DLA Piper said: “There is an issue here about the visibility of the OEMs into the supply chain. Below Tier 1 they tend to lose visibility and won’t know exactly what’s going on.”

Dr Paul Marshall, Head of Research & Knowledge Transfer, College of Engineering & Physical Sciences, University of Birmingham said many of the issues faced by SMEs were simply down to the size of their business.

He said many tier 2 suppliers would like to work with the universities and other organisations developing their products but they simply lacked the resources – both financially and personnel wise – to commit to large scale, long-term development projects.

“The OEMs have the resources available to work with the universities but the SMEs don’t. We are constantly trying to find ways of working with the SMEs but it’s a challenge,” he said.

Craig Fletcher, managing director of Sutton Coldfield-based drone pioneer, Cubewano, said he acknowledged this was the case.

“Such an undertaking would be a massive overhead for an SME,” he said.

Marshall said the universities, in conjunction with the OEMs and tier 1s were collaborating to develop not just the products of tomorrow but also the techniques which would hopefully make like easier for generations of SMEs.

“Future trends are likely to be around composite materials and the use of technology such as 3D printing. It means people (firms) that were previously unable to manufacture complex components can now do so far more easily,” he said.

“It means not so much will have to be out-sourced because it can be handled in-house and less expensively. I can see this really delivering over the next five to 10 years. We are a knowledge-based economy and we can really take advantage of things like that.”

He said organisations like the Advanced Manufacturing Catapults were attempting to bridge the gap between getting products out of the development stage and into full production but this would take time.

Andreae said bodies such as the Manufacturing Technology Centre were doing great things but it the process still seemed to be dominated by Tier 1 companies.

“They just seem to be doing large scale projects. There doesn’t seem scope for smaller companies to get involved,” he said.

“Nevertheless, I’m sure what a lot of being done now will eventually filter down.”

Fletcher said that in the sae of his own business, no large manufacturer appeared to be developing UAV (unmanned aerial vehicle) technology and were content to allow the smaller firms to pioneer the work before marching in and simply buying them out.

Bellamy said that firms looking to sustain operations for the next 20 years and beyond – such is the nature of long-term supply contracts within the aerospace industry – were having to look at new centres of production such as those in the emerging markets.

“The interesting thing will be when China starts to produce its own planes in considerable numbers. At the moment it can’t compete with the like of Boeing or Airbus. However, in 20 years’ time there will be a challenge,” he said.

“The smart operators such as GE and UTC are manoeuvring their way into that process now with the prospect of benefiting later. They are making sure that they can share in this growth. From a UK perspective we aren’t seeing so much of that investment in China. That will be one of the challenges ahead, about how we tap into that and into the local industries.”

Many SMEs have continually cited a lack of financial support for their growth strategies, although several of the panellists said this was now changing.

Jeremy Taylor, Investment Executive, Finance Birmingham said his organisation – the funding arm of Birmingham City Council – had various options available to firms needing investment.

“We have the ADS, which is a £23m fund designed to help aerospace businesses. This is a fair proportion of the AMSCI (Advanced Manufacturing Supply Chain Initiative) fund,” he said.

“We have a few aerospace firms on our portfolio but would like to see more coming forward. We are about to launch a new £100m fund aimed at manufacturers, either working as part of a collaboration where an OEM or Tier 1 works with a smaller company. That is around and available. The main automotive OEMs such as Jaguar Land Rover and Toyota seem to be more proactive in working with their supply chains than the more flat structure we get with aerospace.”

Charles Garfit, Head of Manufacturing for Santander said the increase in the annual investment allowance as announced in the Budget was welcome, especially in a sector such as aerospace where high capital investments were required.

“It’s just a shame this can’t be increased above the £0.5m level,” he said.

Away from funding, he said the skills issue was also one that needed to be addressed quickly.

“Maybe the industry should capitalise on its success to try and encourage more people to take up a career in manufacturing,” he said.

Fletcher said the skills agenda was one very much occupying the thoughts of politicians – although he tended to be a maverick when it came to the issue of apprentices.

“There’s the call to take on more apprentices; now I’ve taken on apprentices in the past and graduates and I can assure you that graduates are 10 times better than the apprentices,” he said.

“I wouldn’t dream of taking on an apprentice now. I look for different things to others. My business isn’t just about manufacturing, it’s very innovative so the kind of people I take on have to have the education and the technical ability to innovate which they can only get from a degree.

“They also have to the hands-on practical skills. One guy I have taken on has been building his own racing hovercrafts for the past five years. I have guys that race boats, bikes; they are guys that have an engineering aptitude. They have got the capabilities and the education from their degree but you don’t get that with an apprentice.

“Many people going into apprenticeships don’t always have an engineering aptitude. They have done it because their parents did it.

“You have to excite their interest. Engineering in this country is not promoted as fun but you go to Germany and boy, do you get respect there.”

Bellamy said the problem was a system that had been in place for the past quarter century or more when graduates were encouraged to go into the legal, finance or banking sectors – anything but manufacturing.

“It’s slowly starting to change but it will take a while. At the moment we’re not seeing the benefits of that change; it’s going to be a 10-15 year gap before the benefits are felt. In the meantime what we should be doing is getting the kids excited by talking about the end products ie the planes,” he said.

Fletcher added: “We should tell the politicians to ensure children are educated at a much earlier age about the importance of manufacturing and engineering.

“Also, we need more help funding products to market. We should try and work out a way of setting up an arm of government for business support. They would get a lot more support from small businesses if they did.”