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The Contracts Fall Guy – Aerospace Supply Chain Issues

Written by Ed Nurse on . Posted in Contracts, Supply Chain

Caught in the Middle of the Aerospace Supply Chain

The new families of commercial aircraft have led to unprecedented pressures on the aerospace manufacturing supply chain.

The Dreamliner is now fully operational once again following its now infamous battery issues and Airbus’ new fleet of A380, A350 and A320 NEO have seen a surge of orders from operators. British Airways is just the latest operator to commit to a fleet overhaul by placing fixed and firm orders for 18 A350s – Airbus’ new long haul jet – with an option for a further 18 aircraft.

Many aerospace component manufacturers across the UK will be celebrating big contract wins and their place on the much coveted new generation programmes but becoming a valuable cog in the supply chain machine can bring about its own business pressures.

Supply chain members often target the holy grail of 95% on time in spec parts but OEM speakers at recent UKTI ADS conferences tell a different story. The 747-400, for instance has 6 million parts. 5% of parts late or out of spec means 300,000 potential problems for the OEM. A build rate of 2 per month means over half a million potential issues each month. Couple that with the risk of production line suspension and you’re already reaching for the paracetamol.

The numbers speak for themselves and it’s perhaps understandable why contract wins come with ‘phone book sized contracts. The contracts aren’t an optional extra either. They’re all part of the contract win package.

To perform under the customer contract you’ll rely on your own suppliers but will you ensure that the contracts with your suppliers are as robust as the programme contract?

Can you be sure that the claims you might face from your customer for late delivery under one of the many thousand programme contract clauses can be passed to your supplier……the same supplier who has let you down and has led to you facing claims from your customer, bills for overtime, expedited freight and the night shift which you’ve had to start for the first time in your company’s history.

If your contracts with your suppliers don’t protect you in the same way that your customer has protected itself with the programme contract you’ve just signed then you’ve just unwittingly become the supply chain fall guy.

Contracts with your suppliers don’t have to be war and peace however. A succinct but bespoke set of purchasing terms and conditions can protect your business against customer claims which you may face and the costs to your business of rectifying the failures of your suppliers.

It’s an often overlooked fact that your entire business’ turnover relies on your suppliers and the strength of your supplier contracts and protecting your business with purchasing terms and conditions represents a valuable business investment.

It’s time to let someone else be the supply chain fall guy.

Ed Nurse is an aviation expert and regularly writes on aerospace supply chain issues and the aerospace sector. Ed has been involved in all current programmes with a range of OEM and Tier 1 manufacturers and is a Director of BHW Solicitors in Leicester.

You can contact Ed on 0116 281 6230 or by email at Ed@bhwsolicitors.com.

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