Aerogistics : Creating value in the Aerospace Supply Chain

STEADY-STATE PRODUCTION

Changing competitive environments, globalisation and technological innovation have been increasingly driving organizations to derive competitive advantage through the management of their total supply chain rather than individual companies.

Traditionally, OEMs and Primes only interface with their first tier suppliers. Their expectation is that they send a purchase order and receive delivery of the completed product, therefore passing the sub-tier supply chain management and project management responsibility onto the first tier companies. This propagates inefficiencies throughout the supply chain as smaller companies do not have the expertise or systems to optimise their supply chains nor do they have the scale to leverage price reductions.

The Aerogistics value proposition for steady-state production orders is to combine the one stop shop advantages of horizontal clustering with the streamlined benefits of vertical clustering.

HORIZONTAL CLUSTERING

Due to its broad customer base, Aerogistics has developed stronger relationships with cluster suppliers than a single OEM or Prime has the ability to leverage. This has driven continuous price reductions and improved delivery. Aerogistics also adds value through its one stop shop kitting service and KANBAN inventory management.

Aerogistics takes cost out of the supply chain by partnering with closely integrated cluster of multi-commodity suppliers. The cluster development programme eliminates non-value adding processes and imbeds lean manufacturing principles.

VERTICAL CLUSTERING

Aerogistics differentiates itself by also collaborating with the suppliers of its cluster members. This has had a major impact in the following three areas:

	Raw Material - by aggregating raw material and Aircraft General Spares (AGS) spend, Aerogistics compresses lead-times, leverages price reductions and reduces the effect of minimum order quantities.
	Sub-contractors e.g. Treatment House - Aerogistics have partnered with a small number of preferred suppliers to provide the sub-contract operations for the cluster companies. By aggregating the demand and working closely with the sub-contractor, Aerogistics have reduced prices by increasing volumes and enhanced delivery by improving demand visibility.
	Component Suppliers – Aerogistics have streamlined inter-cluster movement by providing capacity visibility and schedule transparency. Economies of scale and logistics developments have enabled Aerogistics to take cost out of the supply chain whilst improving schedule adherence and compressing lead-times.

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