Supply Chain Struggle: How One Manufacturer is Attempting to Combat Rate Hikes
UTC Aerospace Systems (UTAS), operating under United Technologies, is one of the world’s largest suppliers of aerospace and defense products. UTC develops, manufactures and delivers parts to some of the biggest names in the aerospace industry. As a premier Boeing parts supplier and Airbus parts supplier, UTC has been hit hard with increases in production rates demanded by these OEMs.
UTC’s CEO, Greg Hayes, said during the company’s first-quarter 2018 earnings call,
“At Pratt & Whitney we are at rate 55 with geared turbofan engines...and we have committed to take the rate up over the next couple of years. But for the second- and third-tier suppliers, I question if the sub-tiers really have enough capacity. If we are going to see big jumps in A320neo and 737 production rates, it will be a problem, so you will see big bottlenecks.”
One of UTC’s major issues with this increase is not just a shortage of available materials, but the company’s deficiency of skilled production personnel who are capable of handling orders of this magnitude. OEMs including Airbus and Boeing, and other UTC-related companies, are showing backlogs as long as seven years for narrowbodies, which will be a near-impossible feat to complete without a strong production team.
UTAS’s electronic systems are generating lower margins for new-generation aircraft than they do for older generation aircraft. The newer systems use fewer moving parts, making them more reliable overall, but less than expeditious. Recently, UTAS’s CEO stated the company is “very focused on lean manufacturing techniques to continue to take margins out as older aircraft are replaced by newer, lower-margin” ones.
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Posted on May 31, 2018