From the zero-Covid policy in China to the war in Ukraine, major global events continue to shake up the metal supply chain. With more than half of global aerospace titanium coming from the region, the Russia-Ukraine situation is hitting the aluminum market particularly hard. Even though the aerospace and defense industry do not use Russian material, manufacturers in the automotive, healthcare, and other industries are seeking alternate sources and, as a result, are drawing on domestic resources, creating shortages all around.
Shortages of Material and Increase in Demand
Post-Covid increases in air travel – up to 90% of pre-Covid levels, are putting increased pressure on commercial airline manufacturers to ramp up production. Boeing, for example, is calling on employees in its parts procurement operations back to the office to support its plans to ramp up production and to help resolve supply chain issues.
At the same time, strong demand for aerospace-defense systems is also expected, according to a recent report from Deloitte. In May, a joint venture of Lockheed Martin and Raytheon Technologies was awarded contracts totaling $309 million for production of Javelin missiles to aid Ukraine in its fight against the Russian invasion. The U.S. Armed Services Committee also recently authorized $1 billion for the National Defense Stockpile to be used to “acquire strategic and critical minerals currently in shortfall.”
Staying Ahead of the Perfect Storm
Clearly, stakeholders in the aerospace-defense industry are facing a perfect storm of challenges, and the situation is not likely to improve soon. In fact, major manufacturers are anticipating that the current situation will continue well into the summer of 2023. With Boeing planning to increase production as the year goes on, it would not be out of the question to see Lead Times on certain product types increase to as high as 65 weeks. This can be particularly true with certain Aluminum Extrusions. “So, the best thing to do in the meantime is to be proactive and plan ahead,” says Jamie Barron, Vice President of New Source Corporation.
Barron strongly advises customers to order the parts they need, well before they need them. “When you buy ahead of time, you can be assured that parts are available in stock when you need them,” says Barron. With today’s long lead times, buying metals on a just-in-time basis – buying just enough to meet immediate needs – are over, because that model simply puts too much pressure on supply chains.
Barron also believes that it is important to work with a distribution partner that can afford to invest in surplus inventory. “It’s hard to find a company to do that these days, because of holding costs and taxes, but at New Source, that’s our value add,” says Barron. “We’re trying to stay about 16 months ahead of schedule just to be safe and to combat long lead times and we’ve had many customers take steps to place advance orders.”
Working closely with customers about their current and future needs pays off for New Source because the planning process is collaborative. “It’s always best to have open communication with your distribution partner so that you’re better able to be proactive,” Barron says.
Taking a proactive approach to supply chain management will help everyone fare better in these challenging times. Contact us today to learn how we can help you solve your supply chain issues.