The aerospace supply chain is ripe for consolidation. Those who survive the pandemic may thrive.

The bigger they are, the harder they fall is a maxim that fits global aerospace supply chain players, coming to terms with ground realities after the Covid-19 induced slowdown in the industry.

Though habituated to ups and downs every 10-15 years, it is the unforeseen dips that have stumped the supply chain. The slowdown is one such Black Swan moment. The first challenge for many in the industry is to just survive.

Notwithstanding a semblance of vaccine-stimulated revival, it is at least a three-year correction for the sector. But analysts say it will take from five to seven years for airline traffic to return to pre-Covid-19 levels. This is both a bane and a boon for companies in this space depending on where they are in the pecking order, and how geared they are to handle shocks.

Even as Original Equipment Manufacturers (OEMs) cut back severely, the aerospace supply chain appears ripe for a massive rejig that could see many mid-to-large players either folding up or consolidating. But smaller players, including those in India, may be in a relatively better position.

A typical aerospace supply chain involves thousands of suppliers and subcontractors who supply raw materials, parts and subassemblies to OEMs and tier 1 and tier 2 suppliers. These companies use highly technical and specialised engineering resources, complex equipment, unique engineering, and deep sub-supply chains of their own.

Indian aerospace and defence suppliers have built considerable capabilities in engineering R&D and electronics systems design and manufacturing over the last decade. The growth has been helped by the emergence of a local aerospace ecosystem, bolstered by a domestic defence procurement drive.

OEMs have also been seeking Indian companies selectively. However, the current realignment will drive them to outsource more work to the latter. Those firms able to survive this phase will be in a position for a smart revival later.

However, to revive business prospects, they will have to get their sales, inventory and operations planning into shape on priority. Conserving cash and holding on to engineering talent are the immediate tasks, apart from keeping a watch on demand signals.

Continuing to grow, perhaps five years from now, is what will be the bigger challenge. Companies will have to plan for it today. They will need to transition to new working styles, evolve new processes and protocols, and set up agile production lines to cater to shifting customer demands. Getting closer to the customer to tap new opportunities will be the key as will be continuous upskilling of the workforce. In other words, adapting on a continuous basis to dynamic industry needs will be the new normal.

Rajeev Kaul is MD & CEO, Aequs Aerospace

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