Aerospace Supply Chain Faced with Daunting Backlog

The aerospace industry experienced a substantial boost last year after a sizeable increase in commercial aircraft orders, but now is faced with an equally sizeable backlog. The news comes as part of a report released by AlixPartners, a global business advisory firm, analyzing the current and future state of the aerospace and defense industry.

"Right now, beneath the surface, every level of the aerospace and defense supply chain is
scrambling to accelerate in terms of performance, on-time delivery and service levels,” said Eric Bernardini, managing director at AlixPartners and head of the firm's global Aerospace & Defense Practice.

2011 witnessed a number of exciting developments in the field, including the launch of the Airbus A320neo and the Boeing 737 MAX. To meet increased demand – the biggest challenge facing the industry in upcoming years – production rates must be ramped up by 45% in volume by 2015, according to the study.

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Fuel instability and various degrading economic factors mean the future profitability of the airline industry will remain uncertain and net profits have been squeezed to an all-time industry low of 0.5% of revenues worldwide as a result of rising operating costs, fierce competition in the industry, and overcapacity-related revenue pressures.

On a brighter note, the study concludes, the aerospace and defense industry as a whole is in better shape than last year, namely the commercial aircraft sector, which was fueled by a roughly 5% growth in airline and cargo traffic. Moving forward, Bernardini said, “Companies need to ask a lot of questions in order to make sure they are in total control of the ramp-up and have the insight to anticipate any issues."