Navigating Aerospace Procurement: Effective Strategies for Success

May 18, 2023 | Procurement in manufacturing industries

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May 18, 20233 mins

In the aerospace industry, procurement plays a key role in achieving success. With its complex and regulated nature, challenges like supply chain complexity, cost pressure, and talent management require strategic solutions. Strong supplier relationships and digital tools are important factors that can help address these challenges and ensure success in the industry.

The aerospace industry is a highly complex and regulated industry with a vast and intricate supply chain. From raw materials to finished products, procurement plays a critical role in ensuring the success of this industry. However, with the unique challenges of this sector, aerospace companies must be strategic and innovative in their procurement approaches. In this article, we will explore some of the procurement challenges that aerospace companies face and the solutions they can use to overcome them. 

What are the procurement challenges & solutions in the Aerospace Industry? 

Supply chain complexity

The aerospace industry has a highly complex supply chain, with numerous tiers of suppliers involved in the production of aircraft and related components. This complexity can lead to issues such as delays, quality control problems, and supplier risk. According to a report by Deloitte, companies in the aerospace industry can address this challenge by building strong supplier relationships, implementing supplier performance metrics, and leveraging digital tools such as supplier portals and analytics. One example of a company that has successfully addressed supply chain complexity is Boeing, one of the world's largest aerospace companies. Boeing has implemented a digital platform called Boeing AnalytX, which provides real-time data analytics and insights across its supply chain. This platform has helped the company optimize its supply chain operations and reduce production costs. 

FactWise offers a range of prescriptive and predictive analytics across key supplier metrics to help organizations be more strategic and fact-driven in their procurement processes, minimize risk, and maintain high-quality standards. To optimize procurement organizations, FactWise offers a wide range of analytics into RfX, supplier performance, inventory status, and team performance, and empowers teams to strengthen supplier relationships and supplier base via improved supplier management and increased supplier diversity. 

Cost pressure

The aerospace industry is highly cost-sensitive, with tight profit margins and intense competition. According to a report by McKinsey, companies in the industry can address this challenge by optimizing their procurement processes, reducing supplier costs, and implementing value engineering. An example of a company that has implemented effective cost-saving measures is Airbus, a global leader in the aerospace industry. Airbus has implemented a procurement transformation program that includes cost-saving initiatives such as strategic sourcing, supplier consolidation, and process optimization. As a result, the company has achieved significant cost savings and improved supplier relationships. 

Innovation and new product development

The aerospace industry is constantly evolving, with new technologies and materials driving innovation in aircraft design and production. According to a report by Gartner, companies in the industry can address this challenge by collaborating closely with suppliers, leveraging digital tools such as 3D printing and simulation, and implementing robust new product development processes. One example of a company that has successfully implemented innovative procurement processes is Rolls-Royce, a global provider of aircraft engines and related technologies. Rolls-Royce has implemented a digital procurement platform that enables it to collaborate closely with suppliers on new product development and design. This platform has helped the company reduce time-to-market for new products and improve overall product quality. 

Regulatory compliance

The aerospace industry is subject to strict regulatory requirements and standards, which can create procurement challenges related to compliance and risk management. According to a report by Accenture, companies in the industry can address this challenge by implementing robust supplier risk management processes, using advanced analytics to monitor compliance, and collaborating closely with regulatory agencies. One example of a company that has successfully addressed regulatory compliance challenges is GE Aviation, a global provider of aircraft engines and related technologies. GE Aviation has implemented a supplier risk management program that includes rigorous due diligence processes, ongoing supplier monitoring, and comprehensive risk assessments. This program has helped the company manage regulatory compliance risks and ensure the quality and safety of its products. 

Sustainability and environmental impact

The aerospace industry is increasingly focused on sustainability and reducing its environmental impact. According to a report by PwC, companies in the industry can address this challenge by implementing sustainable procurement practices, working closely with suppliers to reduce environmental impact, and leveraging digital tools to track and manage sustainability metrics. One example of a company that has implemented sustainable procurement practices is Boeing, which has set ambitious sustainability goals for its supply chain. These goals include reducing greenhouse gas emissions, conserving water, and reducing waste. To achieve these goals, Boeing works closely with suppliers to identify and implement sustainability improvements and uses advanced analytics to track progress. 

FactWise empowers procurement organizations to prioritize preferred vendors and discover new, pre-vetted, well-rated vendors that meet their quality and ESG requirements, and to define their item specifications and logistics/delivery requirements in detail on POs. 

Talent management

The aerospace industry requires highly skilled procurement professionals with specialized knowledge of the industry and its supply chain. According to a report by Hays, companies in the industry can address this challenge by investing in training and development for procurement staff, building strong relationships with universities and other educational institutions, and leveraging digital tools to support procurement talent management. 

One example of a company that has implemented effective talent management practices is Honeywell Aerospace, a global provider of aircraft components and technologies. Honeywell Aerospace has implemented a talent development program that includes training and development opportunities for procurement staff, as well as partnerships with universities and industry organizations to attract and retain top talent. 

In conclusion, to remain competitive and overcome challenges in aerospace procurement, companies must develop effective procurement strategies that prioritize collaboration, innovation, and digital transformation. By leveraging procurement tools like FactWise for advanced analytics, building strong supplier relationships, investing in talent development, and prioritizing sustainability and regulatory compliance, companies can achieve greater efficiency, reduce costs, and stay competitive in this highly dynamic industry. Ultimately, a strategic and innovative approach to procurement can drive success for aerospace companies and help them navigate the complexities of this vital industry. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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