How aerospace manufacturers and suppliers are navigating post-pandemic supply chain disruptions

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Lingering supply chain issues are keeping Canada's aerospace sector from soaring to where it can given the rise in demand.

By Nicolette Beharie

As Canadian businesses recover from the economic effects of the COVID-19 pandemic, the aerospace industry—among the hardest hit—continues to face significant challenges, grappling with emerging trends and requirements. In turn, that is translating into both challenges and opportunities for the Canadian shops serving the aerospace industry.

Peter Graham, KPMG’s national industry leader for aerospace and defence in Canada, says the organization’s aerospace clients are finding it difficult to fill their orders for parts and materials, and receive on-time deliveries. 

“In 2020, demand dropped very quickly for many aerospace manufacturers,” says Graham. “Now, we have the complete opposite. Not only do they have demand that is strengthening, but they have clients and customers who are encountering supply chain problems.” As a result, manufacturers are supplying both the current needs of their customers and their future needs by increasing their inventory levels.

“It’s almost double demand,” explains Graham. “It becomes a problem in the supply chain—you just can’t seem to get reliable supplies on time.” Ongoing skilled labour shortages, inflation and a scarcity of raw materials continue to impact manufacturing timelines in Canada and around the world.

In some cases the growth among aerospace manufacturers is quite dramatic. For example, Airbus recently announced plans to recruit more than 800 new employees in Canada in 2023, including approximately 500 for the creation of new positions, reflecting the growth of its operations in Canada. The hiring spurt is required to support the ramp-up of its A220 commercial aircraft production and to meet opportunities in the helicopters, defence, and space fields, Airbus says. Airbus’ presence in Canada already generates nearly CA $2 billion in revenues for around 700 Canadian companies.

In 2021, the federal government launched the Aerospace Regional Recovery Initiative (ARRI) with an investment of $250 million over three years. The national program aims to help Canada’s aerospace industry navigate the post-pandemic economic recovery and continue to compete on the global stage. Aerospace businesses—and the organizations that support them through supply chains—can secure ARRI funding for projects related to sustainability, innovation and improved productivity.

Cyclone Manufacturing Inc., an aircraft parts manufacturer based in Ontario, received a $9 million investment from the Government of Canada through the ARRI earlier this year. 

“Small- and medium-sized aerospace businesses, like Cyclone, are developing new and innovative products that will position Canada as a leader in this field. With investments into businesses like this, our government is helping to create and maintain thousands of jobs, contribute to a growing economy, and find new ways to reduce Canada’s carbon footprint,” says Filomena Tassi, the minister responsible for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario). 

Cyclone plans to expand its facilities, including a heat treatment oven at its Milton location and a temperature-controlled production area at one of its Mississauga facilities. The investment will help Cyclone to include more environmentally-friendly technologies, become more productive and enhance the company’s ability to create new and larger parts. 

“The Aerospace industry was one of the hardest industries to pull through 2020 to 2022,” Robert Sochaj, Cyclone’s vice president, comments. “This FedDev Ontario assistance will help Cyclone go back to its history of investments and continue to be one of the top suppliers in the aerospace industry.”

Mike Mueller, president and CEO of Aerospace Industries Association of Canada (AIAC), says sustainability is front and centre for the aerospace industry right now. From developing zero-fuel aircrafts to producing stronger and lighter materials, aerospace OEMs and suppliers alike are exploring new ways to reduce carbon emissions and improve efficiency.

Graham says many KPMG clients in the aerospace industry are now developing sustainability scorecards. Before entering a work agreement, manufacturers give their suppliers a rating based on ESG (environmental, social, and governance) standards. “You may have the best product at a reasonable price, but you could lose that contract if you don’t score high enough,” explains Graham. “Companies have to really think about adopting sustainable practices where they can and as soon as they can.”

Hope on the horizon

Ilan Dishon is the president of Dishon Limited in Vaughan, Ont., which supplies precision machine parts to Tier 1 companies in the aerospace industry. He suggests that businesses within the supply chain need to take advantage of technology to stay competitive.

“I think Canadian suppliers need to automate,” Dishon says. “They need to ensure they have skilled talent, and they need to bring their costs down through digitization and automation. That’s the only way.”

Evan Butler-Jones, vice president of product and strategy at Equispheres Inc. in Ottawa, says the adoption of additive manufacturing, also known as 3D printing, is increasing in the aerospace industry. “Lightweighting has always been critical for aviation and aerospace,” he says. “Whenever something is going to fly or launch, the weight has a massive impact on the cost. That’s one of the things driving people to look at additive manufacturing.”

Equispheres, which produces aluminum powders for additive manufacturing, recently announced a collaboration with Morf3D Inc., a California company that specializes in technology optimization for high-volume additive manufacturing—especially in the space, aviation and defence markets. Together, the companies aim to drive performance improvements in the aerospace industry. 

“Any part that goes onto an aircraft or spacecraft is critical,” says Butler-Jones. “You need to be able to count on it, it needs to be very reliable, but it still needs to be cost effective.”

Equispheres and Morf3D will work together to demonstrate the benefits of powders optimized for high-volume printing and increase applications for end-use parts.

Although additive manufacturing helps to make processes more efficient, certification can be challenging within highly-regulated industries like aerospace. 

“It’s harder to get something qualified, but the advantages when you do it are really significant,” says Butler-Jones. Lightweighting, parts consolidation, and the optimization of design and performance are among the solutions additive provides.

Additive manufacturing, along with other technologies available to aerospace suppliers, requires skilled labourers to be successful. But labour shortages have been an ongoing concern in the industry for several years—and parts suppliers are still recovering from job cuts made during COVID-19 lockdowns. 

Mueller warns that getting new talent back and fostering new talent continues to be a substantial challenge. But in recent months, the AIAC has been sounding the alarm on a new tax that could threaten more jobs.  

Last fall, the federal government introduced a luxury tax on the sale of new vehicles and aircraft valued above $100,000. In a research report conducted by an independent third party, the luxury tax was found to be counterproductive and will result in lost sales and employment for manufacturers, their suppliers and MROs (companies engaged in the maintenance, repair and overhaul of aircraft and its components). According to the report, which was commissioned by the AIAC, at least 2,000 direct jobs will be lost.

“It doesn’t make any sense,” Mueller says of
the luxury tax. “It’s going to cost jobs, potentially hurt and devastate that sector of the industry, and it will affect the whole supply chain—not just the big manufacturers.”

Now more than ever, manufacturers and suppliers are looking to the next generation of workers to provide skilled labour so the aerospace industry can thrive for years to come. 

Dishon says more investment is needed in apprenticeship programs, and the industry needs to attract young workers from colleges and universities. “They are interacting with high-end technology, sophisticated robotics and computer-controlled equipment,” he says of aerospace workers. “It’s a fascinating industry.”

But if Canada is to compete with other countries vying to be aerospace leaders on the global stage, Mueller says strategic action from the government is also needed. 

“The next 30 years will bring more radical and rapid change than current generations have seen in their lifetimes,” Mueller said in an op-ed published in The Hill Times. “We must ensure we seize the full potential of what’s to come with a sector-specific national aerospace strategy guiding the way—thereby ensuring continued Canadian pride and economic prosperity through our nation’s significant aerospace achievements.” SMT

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