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Ohio Aerospace Supply Chain Supports Global Demand
By: Mary Meldrum

One would think that with the draw down in Iraq and the end of the war in Afghanistan, along with sequestration and budget cuts, that the industrial base of United States aerospace industry would be under a lot of financial pressure. While those fiscal realities factor into the overall equation of the industry, there is a lot of brainstorming and innovation percolating in the Ohio Aerospace and Aviation sector that is powerfully revolutionary. From the vibrant demand to replace older aircraft to the latest darling of aviation, Unmanned Aerial Vehicles, Ohio is setting the stage and setting the precedent for this industry sector. That precedent goes far beyond the coordination of hundreds of thousands of high-tech and highly regulated pieces and parts needed to get just one aircraft off the ground safely, but let us start with those pieces and parts.

The complexity of the supply chain for the Aerospace and Aviation industry makes it a difficult topic to comprehend. Vigilant logistical management of a kaleidoscope of various companies, systems, parts and processes is a daily task in the recipe and orchestration of aviation production. This is no small feat in an environment of keen regulation.  The choreography involved in synchronizing electrical, hydraulic, software, hardware, fuel systems – to name a few – to complete the production and upkeep of just one aircraft that must pass rigorous reviews and inspections is a massive undertaking. How it all comes together in an organized protocol to create a high-functioning, reliable aeronautic wonder is the result of a highly coordinated effort on the part of competent supply chain experts in Ohio with vision, passion and patience, and a lot of entrepreneurial spirit. The stakes are high for this industry, and the energy around innovation is nothing short of spectacular.

One of the matchmakers bringing together the manufacturing components that ignites the Ohio aerospace and aviation industry is the Ohio Aerospace Institute. For 20 years, OAI has been a main force in networking, promotion, coordination and organization of Ohio’s aerospace and aviation resources and talents. OAI’s main offices are in Cleveland.  Ohio is also home to other aerospace giants, such as the NASA Glenn Research Center in Cleveland and the Air Force Research Laboratory in Dayton, as well as excellent research universities, a vast spectrum of large and small aerospace companies, and a relative newcomer, the National Additive Manufacturing Innovation Institute in Youngstown, Ohio.

Don Majcher of OAI puts the size of the supply chain support system in Ohio in perspective, “What makes the supply chain so hard to get a handle on is that all the aircraft that flies represents over $1 trillion of the industry. You have the OAI merchant equipment, but you also have airports, infrastructure, the maintenance, repair and overhaul, and the air traffic control. And that only covers just basic aircraft.” 

Breaking that down a little further, Majcher says, “There is general aviation aircraft, commercial aircraft, spacecraft and commercial spacecraft. So it is a very big market to wrap your brain around because it is such a diverse industry with so much technology.” To make it even more complicated, small to medium-sized businesses manufacture between 70 – 80 percent of all aircraft parts, which mean there are many cooks in the kitchen.

Don Majcher is the Vice President of Technology and Innovation Partnerships for OAI.  Majcher was also recently elected to the Board of Directors of the Aerospace Industry Association in Arlington, Virginia. He also sits on the Supply Chain Manager’s Council of the AIA. This council works on a national level to coordinate issues related to aerospace manufacturers and suppliers in improving the customer-supplier relationship.

David Salay, Senior Program Manager at OAI, is head of a supply chain committee helping to engage and support small to medium-sized companies in the industry. OAI is looking to educate and certify these smaller partners, and introduce them to what suppliers need to know for the FAA Production Certification process.

“Our supply chain committee started out with just small businesses, and then began including larger companies,” explains David Salay. “We have had good luck with small and larger companies working together, and the larger companies are helping to mentor the smaller ones…We have had some great discussions and connections.” 

Aerospace is one of the few industries where U.S. manufacturing is a net exporter.  This industry alone makes up more than the total net exports of the high-tech manufacturing across all sectors.  Providing a pathway for U.S. manufacturing companies to sustain the level of logistical expertise needed to survive in the aerospace and aviation supply chain has been a critical initiative in this competitive industry. Communication, education and collaboration within the industry have helped to make aerospace and aviation a powerhouse in Ohio. Promotion of information access and knowledge transfer between commercial entities that comprise Ohio’s aerospace supply chain is a core initiative for Aerospace & Business Aviation Advisory Council as well as OAI. OAI’s calendar of events for the coming months covers topics such as sustainable green aviation, designing space missions and systems, and trade finance for aerospace exporters. There are also professional development series for computational heat transfer, and air breathing engines, to name a few. Staying on top of FAA requirements is an important aspect of remaining competitive, so OAI offers forums for shepherding members through this process. For instance, recently Matt Tomsheck from the FAA was invited to speak about the FAA certification process. This included information on such things as training and inspections.

Don Majcher and OAI are creating think tanks and networking venues for aerospace applications.  These are opportunities for companies to meet and utilize all of the obvious and not-so-obvious talent and resources out there. “We began recently working with the Department of Commerce to help companies in Ohio to access global markets,” states Majcher.


While it’s true that OAI would like companies, groups and people to work with them on the supply chain in Ohio and the Midwest, they are also connecting to national and international professional aerospace networking groups. There are several clusters of aviation specialists offering expertise to the industry mix outside of Ohio. Some of these clusters include Rolls Royce out of Sonora, Mexico, and Aerospace Valley in Toulouse, France, which is the group that is organizing central Europe around Air Bus.

At the forefront of the OAI international outreach is the Aerospace Export Growth Market Development Program. The specific goal of this program is to boost aerospace exports from Ohio to Canada, Europe, Brazil and India by $90 million in the next 3 years. OAI recently hosted a Canada – Ohio Aerospace Summit to provide an opportunity to learn more about green aviation and the supply chain. The summit cultivates a collaborative format for sharing of research and technology that would supplement Ohio supply chains. Canada’s geographical proximity and favorable trade environment are key features for developing a strong relationship and value proposition for both countries.

Expanding connections for the aerospace community is generating pioneering opportunities for Ohio manufacturers. “One of the real values of being an OAI member,” explains Majcher, “is if you are a smaller company involved in MRO for aircraft or materials, composite metals, ion fuels, we want those companies to work with OAI because we can help them highlight their capabilities.”

OAI is instrumental in promoting its membership to the industry community in many ways.  One of those includes a member book that highlights the capabilities of companies, and this opens doors to new markets. Larger companies not have the resources or time to evaluate the abilities of smaller suppliers to discover and utilize their talents. OAI is a strong networking hub connecting all sizes of companies, both nationally and internationally. They offer a core capability matrix highlighting what expertise, skills and capabilities each member has, whether it is metallic components, tooling, research, or electronics. Maintaining a catalog of the talent streams available in this core group allows OAI to help match the manufacturing need the supply chain might have with the right manufacturing partner solution.

Collaboration is becoming a proven remedy for solving supply chain logistical problems by shortcutting lengthy processes in production. The prominent atmosphere of collaboration has helped Ohio become a magnet for manufacturing innovation and supply chain development. The National Composite Center in Kettering, Ohio secured an agreement with Airbus in October of 2012 that will inject Airbus investment dollars into the Kettering Technology Transfer Hub and incubator.  Lisa Novelli, President of the National Composite Center, and Airbus Vice President of Procurement, David Williams were key in structuring this agreement. It all germinated from a simple conversation in which Ms. Novelli shared her history working at a tool and die shop.  In turn, Mr. Williams shared Airbus’ interest and need to find new suppliers, technology, materials and innovation with Ms. Novelli. The conversation sparked an idea that eventually grew into a Memo of Understanding between the two companies to create an incubator for unique technologies in Ohio to produce new products, lower costs, and develop technical expertise for the industry. Airbus and the National Composite Center will collaborate to develop suppliers who can bid for aviation and aerospace work.  Ohio is established fertile ground for development of advanced materials, nanomaterials and composites, and has a deep talent pool for machining as well. The State’s prominent manufacturing abilities make Airbus’s commitment to the region a solid choice of convenience and merit. This new collaboration has a goal to create a Materials Manufacturing Technology Hub in central Ohio that will concentrate on supply chain development, workforce training and development, as well as business analytics and materials processing. Airbus’ interest in the success of Ohio’s manufacturing business is not just meetings and talk. They are firmly invested. “Airbus spent $13 billion in the U.S. in 2012, and $5 billion of that was spent in Ohio, which makes Ohio the number one state for Airbus in 2012,” commented Williams. 

SCALING

Long-term forecasts show a great deal of promise, with certain segments of the aerospace industry projected to grow at rates between 150 to 300 percent greater than the overall national economy.  Many are scrambling to become qualified suppliers in light of this robust forecast. In some instances, it is becoming unmanageable to have so many suppliers in the pipeline.  Some established primary suppliers are cutting back on outsourcing, and integrating their production in house for closer oversight of their supply chain. For some companies it makes sense to reduce the number of suppliers, streamlining production and going to market from a systems standpoint. Packaging components together, such as wheels, landing gear and brakes, ensures that those systems that are manufactured together should work seamlessly together. MRO for those systems can be a one-stop-shopping experience as well. 

“In terms of managing growth,” says Don Majcher, “I don’t see that anyone is looking for any new suppliers to deal with the challenge of the growth. What they want is for the established suppliers to get better and bigger and broader.” 

The number of suppliers is being cut back from thousands to hundreds. The work is still there, and the jobs are still there, but consolidation is king. Both Don Majcher and David Williams echoed the desire for consolidation in the supply chain.  In an effort to grow market share and stay within margins, prime suppliers are inviting smaller supply companies to become risk-bearing partners. That can be a challenge and an opportunity for smaller companies. It might mean that a smaller company might have to open up operations in China or Brazil in order to remain in the production stream. The reality is that the supply base in aerospace is very small and very technical. The trend toward consolidation is a resilient strategy to stay lean and competitive in these economically fickle times.

COLLABORATING WITH NAMII

There are many countries competing for aerospace and aviation profits, putting a lot of pressure on the U.S. to set the pace and stay ahead. A big part of that pressure is to support and maintain domestic manufacturing to prevent fracturing of the U.S. supply chain and the industry as a whole.  Many Representatives in the House and Senate from industrial states, including Ohio, were keenly aware of this pressure, and brought it to the forefront on Capitol Hill last year.  In March of 2012, President Obama addressed this issue announcing revitalization plans for U.S. manufacturing by creating 15 centers for National Network for Manufacturing Innovation.  The first phase of this was to establish a pilot program to act as a NNMI prototype.

After review of many proposals, an Advisory Board selected the National Additive Manufacturing Innovation Institute, housed in the National Center for Defense Manufacturing and Machining facility in Youngstown, Ohio in August of 2012 as the first NNMI prototype and headquarters. NAMII’s goal is to advance additive technologies to the U.S. manufacturing sector by encouraging collaboration with additive research and information, as well as technology. A great deal of attention is also going to specialized education for students of manufacturing to foster a complementary workforce.  These initiatives in turn should increase domestic manufacturing competitiveness. OAI’s David Salay is very active in NAMII, and brings all of OAI’s resources to share. One of the focuses of NAMII is the concept of developing research, manufacturing and training of the workforce concurrently. Making manufacturing an attractive career choice is also an objective to draw youth with a high aptitude for manufacturing processes into this industry. “As students are making their career choices, they look beyond some of the more common attractive career paths, such as video game designer, astronaut or NBA player and choose manufacturing,” explains Majcher.

Despite this accomplishment with NNMI, there is ongoing concern about the U.S. supply chain base functioning in the face of the converging storm of political and financial circumstances.  However, Don Majcher is quick to point out, “We all know that the industrial base is under a lot of pressure. However, on the supply chain side, there is real opportunity for companies to look across aggregate demand and find ways to get more efficient.”

In macroeconomic terms, aggregate demand is the demand on all goods and services supplied by an economy, rather than focusing on one industry.  Strong adverse and advantageous events can shock the system, causing sudden and large-scale disruptions in demand, output and employment. Examples of some of these events include global financial crisis, recession at home or with a main trading partner, an adjustment in exchange rates, a housing market slump, and big alterations to taxation or fiscal policy. However, in the shadows of these rising and falling events lies supply chain opportunity for those businesses willing to flex with the change.

To take a closer look at this hidden opportunity in aggregate demand, Majcher offers the story of a small U.S. company, Marlin Steel Wire Products, who used to make wire baskets for frying bagels in the food industry. In 2000, a Chinese competitor could produce and ship finished wire products to the U.S. market cheaper than U.S. based Marlin Steel Wire could procure raw materials. This left Marlin Steel Wire unable to compete effectively.  Marlin owner, Drew Greenblatt, introduced engineers into his business, paid them for new ideas and applications, retooled his factory to implement new technology in a new industry. Today Marlin Steel Wire is an aerospace buyer, identified as one of the 150 fastest growing businesses in the world.  An icon for American grit and ingenuity in the face of a shifting aggregate demand, Drew Greenblatt has become a recognized outspoken advocate for the U.S. manufacturing industry, testifying in the House of Representatives on behalf of the U.S. Chamber of Commerce as well as the National Association of Manufacturers.  In the summer of 2011, Greenblatt joined Curtis Richardson of Spirit AeroSystems in briefing the House Robotics Caucus concerning manufacturing growth and the U.S. jobs future with regard to robotics. 

OAI has entered into a memorandum of understanding with Michigan Aerospace Manufacturer’s Association to study the aggregate demand model that the Pentagon is examining. The small margins in manufacturing need protecting, so cross-industry diversity is a good way of looking for ways to reduce costs without putting too much pressure on small companies at the end of the food chain.
On the technology side of the supply chain, things are in a tremendous shift. Traditionally, to get technology to market, you would first seed it with research in universities. Then invest in new areas for a long time, and hope that in the future business would see the new technology as a solution to an industry problem. Success at the end of this long process would mean adoption of the new technology. The longer-term hope was that a major player, like Lockheed, would buy it and install it as part of a major program.

That process is somewhat antiquated. With Moore’s Law in full bloom in aerospace and aviation development, the processing speeds, memory capacity and sensor abilities of microchip components in all aspects of production is improving at exponential rates. The need for speed in this new technological environment is critical. In many cases, the traditional pipeline route is too long. In this technologically competitive age, diminishing time from concept to implementation is the equation everyone wants to leverage.

The Air Force and The National Science Foundation have been working on adapting a new strategy around manufacturing readiness. The overall plan is to move things to market by developing technology on site, and getting it infused into companies early on. Called sustainable manufacturing, this method for prototyping and validating new technologies is far more efficient. A great example of the success of this new method is NASA’s new commercial launch, which is going to market in one-third of the time at one-third of the cost with new technology. 

The key to staying competitive in these changing economic and political times has been for companies to shift up the way they think, and remain flexible to change, which is coming at break-neck speed. “The key to success is continuous innovation drive,” says David Williams. “Airbus now relies on the suppliers, and expects suppliers to contribute to innovation of new products.” Companies need to bring on new skills and new capabilities. “Instead of just machining a block of aluminum like they did in the past, now they are making families of products, and are buying thousands of parts.  So they do need a procurement organization, a supply chain organization, configuration management,” Williams says.  This change brings a whole set of new challenges that a company needs to contend with. “Change management is an area that we (Airbus) find that companies trip over.”  According to Williams, about 80 percent of the problems incurred by Airbus relate to badly managed change in supply chains. Solutions include incorporating new creative applications for raw materials and assembly process in the supply chain.  More companies are bringing research and development under the same roof as production, and infusing it early into the process. These strategies allow the companies that are driving the industry to work on applications, work on getting costs down, and work on getting products to market quickly and successfully.

Alcoa Forging and Extrusions in Cleveland has one of the world’s largest forging presses that they rebuilt for $100 million. Built originally in the 1940’s to fabricate large military machinery for the war effort, this huge press makes things like the main wing spar for the Airbus A380. Alcoa’s press also makes truck wheels and roughly 70% of the forged part of aircraft wheels. They sell these to other companies who machine and assemble them, and sell them to both the aviation and auto industries, embedding Alcoa in two major supply chains.  Some small machine shop suppliers around Cleveland are producing 60% for the medical industry and 40% for the aero industry. Companies like that are defined as medical suppliers, but they contribute to, and are also part of the aerospace supply chain. This manufacturing diversity is a smart solution that provides a second parachute in the unpredictable trade winds of the economy, and fertile ground for further innovation with a company that is experiencing the benefits of diversification first hand.

LOOKING AHEAD

The expanded uses of UAVs have spawned generations of autonomy technology, which is becoming important to the future development of the UAV and Unmanned Aerial Systems. Some of this technology includes sensor fusion, motion planning, trajectory generation, cooperative tactics and communications. All of this improves efficiency and accuracy of UAVs, and opens new vistas for this growing and exciting sector of aviation in Ohio.

When asked about where Ohio needs to focus its resources for the future and shore up current and future issues in the supply chain, David Williams shared, “Lean supply chain management is widely seen, although I am not convinced how widely and deeply it is understood and integrated. I think there is a bit of work to do there on really understanding and really implementing the lean philosophies, not just from a company level, but across the supply chain as well, so the entire supply is connected and lean, and you get a lean deliverable.” Williams also believes that there are many hidden opportunities within other industries that are waiting to be harvested for use in aerospace. “We can all learn from each other, for instance, use of bar codes and RFID,” Williams shared. “There is a lot of benefit in recruiting skills and capabilities from other industries.” Airbus is looking at pilot projects, and in the next two to five years sees modeling of new supply chains and integrated families of manufacturing. 

There is presently a backlog of commercial aircraft orders as well as an expected global demand in the next ten years. Ohio’s aerospace and aviation community is poised and uniquely positioned to rise to this challenge. Ohio is a top global supplier to OEMs Boeing, Airbus and Northrop Grumman. Ohio enjoys expansive industry reach in aerospace, with many strong partnerships in the global aerospace market. This is partly due to something that nobody can take away from this state: geography. Ohio is within 600 miles of over 60 percent of all US and Canadian manufacturing locations, making it centrally located and a natural hub for supply chain management. This proximity to suppliers makes it easy to streamline logistics, and draws the market into the state.

When it comes to aerospace supply chain, “Ohio is a major, major contributor,” according to David Williams. “Ohio is competing, challenging and changing all levels of the supply chain.”

With regard to Ohio’s position in the aerospace community, Williams commented, “Ohio has a deep history, the capability, and is a technical leader.” Ohio has rolled out the red carpet for these markets with a profitable business climate by providing an assortment of appealing opportunities. Ohio has secured the lowest business taxes in the Midwest. Ample venture capital and loan assistance is available through collaborative efforts from organizations such as Ohio Third Frontier Wright Projects Program. A diverse and talented workforce is on hand for all levels of research, development and production. And promotion of knowledge sharing and collaborative networking with supply chain experts continue to lure avionic business to the State. Ohio’s supply chain is a quiet Goliath in the Aerospace Aviation and Defense industry, and has all the moving parts needed to confidently take its place as a solid leader in this industry, and grow opportunities well into the future of aerospace and aviation.

 

 

 


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