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Commercial aerospace supply chains continue to face headwinds as both OEMs and suppliers deal with shortages, new regulations and an uncertain geopolitical environment. According to a new McKinsey & Co., assessment, the disruptions aren’t expected to wane anytime soon. In “Addressing continued turbulence: The commercial-aerospace supply chain,” the firm says the sector is “dealing with multiple challenges in parallel.”
“These include quality control issues, new regulations, talent shortages, and an increasingly splintered geopolitical environment,” McKinsey points out. “One of the more pressing issues—and one frequently cited by commercial OEMs and suppliers—relates to persistent supply chain constraints.”
McKinsey’s analysis shows that aerospace executives were about 18 times more likely to mention supply-chain-related terms, such as “shortages,” during earnings calls in 2022 than they were in 2014. It says those are well justified: Since 2020, OEMs have struggled to obtain adequate quantities of many components essential to aircraft manufacturing, including raw materials, finished castings and forgings, semiconductors and electronics components.
The commercial aerospace supply chain is likely to face continued turbulence in the near future, the company concludes, but companies can start to reverse the trend by delivering greater insights to address disruption proactively and keep production on track. “With better preparation and solid planning to avoid and address shortages,” it says, “commercial aerospace companies may finally find clearer skies.”
Wanted: More Flexible, Risk-Proof Supply Chains
In “11 Supply Chain Trends That Will Shape Ecommerce (2024),” Shopify lays out a laundry list of issues related to the e-commerce supply chain. Some of its insights relate to B2B supply chains, including the increasing prevalence of supply chain executives in the C-suite, the need for better supply chain agility and the sustainable supply chain movement.
“A healthy supply chain sometimes requires organizational-level improvements to business agility: your company’s ability to adapt and respond to rapid change,” the company points out. Citing a recent KPMG report, it also says that 67% of organizations view meeting customer expectations for speed of delivery as a critical factor affecting their supply chains over the next 12 to 18 months.
“Business agility and a responsive supply chain are inextricably linked ideas,” Shopify says. “Investing in supply chain agility means adopting strategies like safety stock, buffer inventory, and inventory optimization to manage fluctuations in supply and demand. It also means building a network of suppliers, both local and international, to reduce dependency on one single source.”
On the sustainability front, Shopify says B2B buyers have set their eyes on sustainable procurement, and organizations are meeting them there. In fact, more than half of them want to increase their focus on sustainable sourcing in the coming year. “Buyers are investing in new technology like automated approval workflows, expense management controls, and guided buying capabilities to meet goals and improve operations,” the company adds.
Global Semiconductor Trends
The Semiconductor Industry Association (SIA) announced global semiconductor industry sales totaled $46.2 billion during the month of February 2024, an increase of 16.3% compared to the February 2023 total of $39.7 billion, but a decrease of 3.1% from the January 2024 total of $47.6 billion.
“Although month-to-month sales were down slightly, global semiconductor sales in February remained well ahead of the total from the same month last year, a continuation of the strong year-to-year growth the market has experienced since the middle of last year,” said John Neuffer, SIA president and CEO, in a press release. “Sales in February increased on a year-to-year basis by the largest percentage since May 2022, and market growth is projected to persist during the remainder of the year.”
Regionally, year-to-year sales were up in China (28.8%), the Americas (22.0%), and Asia Pacific/All other (15.4%), but down in Europe (−3.4%) and Japan (−8.5%). Month-to-month sales were down across all markets: Asia Pacific/All Other (−1.3%), Europe (−2.3%), Japan (−2.5%), the Americas (−3.9%), and China (−4.3%).
In other semiconductor news, the White House and the Department of Commerce reached a preliminary agreement with Intel to provide up to $8.5 billion in direct funding along with $11 billion in loans under the CHIPS and Science Act. The initiative will support the construction and expansion of Intel facilities in Arizona, Ohio, New Mexico and Oregon, creating about 30,000 jobs and supporting many more “indirect” jobs.
