Within the industrial sectors in the state of Chihuahua, aerospace industry stands out for their products. Aircrafts manufacturing, or airplane parts, it is a trend in the state aimed to grow. Nevertheless, currently this sector faces a great challenge on its supply chain. In worlds of Rene Espinoza, president of the aerospace cluster Chihuahua, “the lack of integration to the supply chain of this industry makes projects not to be concreted.” Rene Espinosa; and Xavier Hurtado, director of the National Program of Suppliers’ Development from the Mexican Federation of Aerospace Industries (FEMIA, by Spanish initials) agree in that supply do not fulfills this sector’s demands. In interview for Mexico Industry, both industrials explained the current state of the supply chain from the aerospace sector, its challenges, difficulties and possibilities in the State of Chihuahua.
Aerospace industry: different than other industries
According to Rene Espinoza, the aerospace industry has big differences with other industries, particularly in the jobs it offers. “Despite it does not generates great amounts of jobs as other sectors, the aerospace industry generates better paid jobs. This due to the employees’ specialization, technical issues and certifications that must be managed achieves for jobs being better paid,” he explained.
On the other hand, Xavier Hurtado detailed that the difference of this sector is the nature of the contracts suppliers can achieve with companies. “While in the automotive industry, for example, contracts are per project for a short time limit and in some cases they must renew for a period of six months, in this industry, companies in case of successfully approving the process to become a supplier, they can remain with contracts as of ten years. This kind of contracts is hard in other industries,” he shared.
Nevertheless, an aspect in which both coincide is the growth of this sector: it has grown in double digits in the last 5 years. Particularly, in 2017 it grew 13 %. For 2036 it is anticipated the need of 4,600 new aircrafts worldwide. In addition, the sector has an average annual export of 1.5 billion dollars and in average of 634 million dollars of supply purchase in Mexico. “No other industry has these percentage indicators,” said Espinosa.
Aerospace industry supply grows
Nevertheless, despite the possibility of growth and the huge capitals managed in this sector, the relationship between supply and industry is far for ideal. Both industries agree in that there are few suppliers nationwide and in the state for this aerospace sector; this due to the requirements companies ask those interested in joining the supply chain. “Before becoming a supplier, companies with industrial manufacturing capability and the application of processes in flying parts first are required to be certified for then be considered. They are given testing contracts and only if they approve these tests they can obtain long term contracts,” he said.
The process for companies in becoming suppliers is complex. Among the certifications they must approve are AS91100, NADCAP, among others.
Some of this certifications take between 2 to 4 years to obtain the approval.
“Regarding machining u other processes could be faster, but I am talking about two years,” explained Espinosa.
In addition, the investment return for companies interested in becoming suppliers is of 7 to 10 years. “It is a long term model, it is not a rapidly profitable business, as metal-mechanic or automotive,” he noted.
Meanwhile, Hurtado added the following: “Something many suppliers want is that have a contract made first for then be certified. However, that will not happen. Mexico is difficult for that reason. Companies are not willing to take a risk in assuming costs for an objective that is not sure. It is understandable, but that is what the industry requires,” he underlined.
An important aspect is that the differences with other sectors are also notorious. According to Espinosa, it is not the same for a machining company to manufacture millions of pieces per month for the automotive industry than manufacturing five to 50 pieces for two months, which are the volumes that are managed in the aerospace industry sometimes.
The lack of national and state supply makes companies to seek their suppliers in other parts of the world. For Hurtado, competition Mexico is facing is strong, particularly, against the Asian southeast. “Instead of the economic revenue is going to Chihuahua or Mexico, it is going there,” he said.
Hurtado classified as high the regulations and testing that must be done to be a supplier, but for him are standards to be fulfilled due to airworthiness. “There are critical parts in the plane where you cannot play: companies need to be certified to guarantee flight safety,” he shared.
Lack of supply in the aerospace industry: a cultural issue
Besides the aspect of investment, another aspect that Hurtado detects in the supply of this sector in Mexico is the cultural aspect. For the director of the National Supplier Development Program, the problem is not the hard skills (skills to manufacture parts or operate the technological part;) the problem is in the soft skills. “We have a severe problem because we are not agile. For example, there are companies that we seek linking with suppliers, but these take a long time to respond. In other countries, in less than 48 hours they already have a quotation made to an interested company. Here in Mexico three weeks may pass and suppliers will not have a quote yet,” he explained.
According to Hurtado, another cultural difference is that some suppliers in this sector quote open book, and some Mexican companies resist, due to the fear that others will learn about their profit margins and show their operations. “However, this should not worry them,” shared Hurtado.
Chihuahua, state leader in aerospace industry
Between Chihuahua and Ciudad Juarez there are 45 certified operations in this sector, such as Cessna, Beechcraft and Bell Helicopter. These companies have aerospace certifications that provide sub-assembly, structure manufacture, piece machining, manufacture of electrical components (fuselages,) turbines, seats, harnesses, among others.
For Hurtado, the aerospace sector will grow, since in the State large companies have established which have some growth. Naturally, the troubling part for him is that the suppliers do not walk as far as the industry requires. For this, the aerospace cluster is given the task of linking suppliers and companies. According to Espinosa, the cluster works with FEMIA to find local companies that have the capabilities, mainly machined, to supply the sector.
The cluster also has conversations with the owners of the company to help them move towards the supply chain. They also offer training courses to educate companies in the aerospace field.
“The cluster is a facilitator, does not give the solution, but it can help in facilitating the link and approach through the back door with the tractors and buyers,” said Espinosa.
Industry future, Global future
Hurtado explained that markets and airlines currently buy commercial aircraft in large quantities: “there are orders for more than 42 thousand aircrafts, translated into time, this implies that at least nine years they cannot be delivered. By 2036 production is saturated,” he said.
Hurtado attributed the growth of the aerospace sector to the growth of the population: for him, there is a tendency to grow because there are many young markets with populations whose purchasing power grows. “An example is TAR, an airline that currently connects cities that were not connected before.”
For this reason, he considered that the supply in the sector should grow at the same pace as the industry. “The big assembly companies have an objective of increasing production by 30%, but they cannot do it because the supply base is not enough. It takes them longer than expected, "he said.
Also, Espinosa emphasized that if there are no companies nationally willing to join the supply chain, then they will seek to bring foreign companies to settle in the country.
“The challenge they have is to achieve identifying companies willing to join the sector. The goal is to expand and grow in a significant manner national supply,” he ended.
o It grew 13 % in 2017
o For 2036 is estimated the need of 4,600 new aircrafts in the world
o The sector exports 1.5 billion dollars per year
o They have 634 million dollars intended to supply purchase in Mexico