Biggest problem for aerospace industry buyers: Deliveries
By Kevin Fitzgerald -- Purchasing, 12/10/1998
Purchasing professionals at companies that supply the aerospace industry are not happy with suppliers' delivery performance and spend too much time working with suppliers to improve deliveries.These are some of the conclusions that can be drawn from the results of a survey done by Ladish Inc., Co., a metal forger located in Cudahy, Wis., that does 85% of its business in the aerospace industry. Ladish has surveyed purchasers at aerospace suppliers for the past two years in an effort to better understand the needs of its customers, and to adjust its own business strategies accordingly.
Other highlights of the survey include:
* Nearly two-thirds of survey respondents believe they're paying higher prices than they should. Only 15% indicate that prices are "just about right."
* Most purchasers working at aerospace suppliers think long term. Nearly 80% indicate that "long-term agreements with one or two strategic suppliers" is their most important supply strategy for receiving cost-effective supplies. Far away in second place at 14% is "competitive bidding with many suppliers."
* Seventy-nine percent of survey respondents say they have a formal supplier-evaluation program.
* Supplier consolidation is not yet complete in this industry segment. Twenty-nine percent indicate that their supply base this year is smaller than it was last year.
Ladish's survey includes responses from 54 companies, 17 of which are located outside the U.S. Fifteen companies manufacture engines, 11 produce airframes, and 25 are suppliers to engine or airframe manufacturers.
Delivery problems abound
When asked what supply issues are consuming the majority of their time with suppliers, a whopping 53% say delivery. This is quite significant, especially when compared to the next most-mentioned issue--pricing/cost, which finished a distant second, at 22%.
Possible results of the delivery problems are that this year 92% of survey respondents indicate that they are asking suppliers for faster deliveries than they were last year. And 57% indicate they've asked suppliers to deliver smaller shipments, more frequently.
Further evidence of how pervasive delivery problems are in this industry segment: Quality and delivery ran neck-and-neck--64% and 63%--when purchasers indicated the three most important performance factors included in their supplier-measurement programs. In virtually all other surveys of this type that Purchasing has conducted in other industries, quality typically outpaces delivery by a significant margin when buyers indicate what gets measured in supplier tracking systems.
The most important company-wide objective of surveyed firms is to increase customer satisfaction, named by 27% of survey respondents. Last year, customer satisfaction ranked a close second to increased market share, which fell rather dramatically this year--24% named increased market share as the most important objective, and only 10% name it this year.
Gary Vroman, VP sales & marketing at Ladish, believes this change is due to the cyclical nature of the aerospace business. "The market is strong, and these companies are saying 'we must keep this business,' so the shift is toward customer satisfaction." Vroman says that when the market turns, aerospace companies will again aggressively try to build market share.
The vast majority of buyers surveyed also believe that aerospace supply chains need a lot of improvement. Fifty-three percent indicate their supply chain is working better than in the past, but could be improved. More than one-third--35%--say their supply chain is working "not nearly as well as it should." Only 6% indicate their supply chain is working effectively.
Long-term agreements sought
Not only do buyers in aerospace supplier companies believe that long-term agreements are their most important strategy for acquiring cost-effective supplies, but 83% say that establishing long-term agreements is their supply strategy used to smooth out the cyclical nature of the aerospace business.
Far back in second place (9%) are the price buyers, who indicate their strategy is to pay the lowest price during industry downturns, then try to minimize the premium they pay during good times.
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