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Japan quake hasn't yet affected U.S. aviation
April 14, 2011
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  • By Molly McMillin
    April 10, 2011

    Wichita planemakers say the devastation from Japan’s earthquake and tsunami hasn’t impacted supplies of aircraft parts and components – at least not yet.

    “We just don’t know,” Teal Group analyst Richard Aboulafia said of whether the industry will feel the hurt. “Historically, Japanese industry bounces back pretty fast. The problem is, of course, it’s a global supply chain, and you’re only as strong as your weakest link.”

    Another aviation analyst, Loren Thompson of the Lexington Institute, said it is inevitable that aviation manufacturers will face consequences from the problems in Japan.

    “Of course there’s going to be an impact because the United States has gradually offshored many industrial parts that once were produced domestically,” Thompson said.

    So far, most of Wichita’s are unaffected.

    Cessna Aircraft has had no disruptions in the supply chain, “but it is still too early to tell for sure,” said spokesman Bob Stangarone. “As you go further down the supply chain, we may experience difficulty.”

    Suppliers are making provisions and doing “workarounds,” Stangarone said, “so that they continue to provide the parts… we need.”

    One of Cessna’s component suppliers, for example, operates three plants in Japan. Two were damaged and won’t be back online until fall, Stangarone said.

    “But they are finding capacity elsewhere for 60 percent of that production, and they are still working on temporary solutions for the other 40 percent,” he said.

    Spirit AeroSystems is monitoring the situation closely, said spokesman Ken Evans.

    It has employees in Japan, some of whom are stationed at suppliers’ operations. Their safety and well-being is the primary concern, Evans said.

    “We have experienced no delays or other impact to our business,” Evans said. “Our supply base in Japan continues to operate with minimal or no disruption, and we will continue to monitor.”

    Spirit’s Tulsa plant builds the leading edge of Boeing’s 787 wing and ships it to Mitsubishi Heavy Industries, which builds the wing. Those shipments are proceeding on schedule, he said.
    In the meantime, the company is monitoring potential issues in Japan such as rolling blackouts, access to power and raw materials, Evans said.

    Japanese airframe manufacturers – which include Mitsubishi, Fuji Heavy Industries and Kawasaki Heavy Industries – build 35 percent of Boeing’s 787 structure. Mitsubishi also builds portions of the Boeing 737, 767, 747 and 777.

    “We have not seen any impact to our production system,” said Larry Wilson, Boeing spokesman for supplier management. “There are areas of risk within the supply chain that we’ve identified.”
    Right now, there’s no risk involving Mitsubishi, Kawasaki or Fuji, he said.

    Instead, the risk involves “sub-tier” suppliers, companies that supply Boeing’s major suppliers.
    “We’ve gotten it down to just a few,” Wilson said. “But we’re still working our way through those.”

    Boeing should know in about a month whether there will be an effect, and if so, its extent, Wilson said.

    Hawker Beechcraft isn’t expecting an effect.

    The company receives two major assemblies from Japan – the wing of its Hawker 4000 comes from Fuji Heavy Industries and a flight control surface for the Premier business jet comes from another Japanese supplier.

    “Those suppliers were not directly in the affected area,” said Scott Shepherd, Hawker Beechcraft vice president of integrated supply chain.

    Hawker Beechcraft is tracking the situation carefully and is in ongoing contact with suppliers.
    “We’ve had those discussions, and for us, we don’t expect any issues further down the value stream… at this point,” Shepherd said.

    Lack of preparedness
    The earthquake and its aftermath underscore a broader issue the U.S. must face in regard to outsourcing, said Thompson, the analyst: The U.S. is ill-prepared for a major disruption.
    “We don’t know how close we are to a shutdown or a major disruption in the economy because of these sorts of events,” Thompson said.

    Congress must authorize a study to understand where the U.S. stands in terms of offshore dependency, he said.

    For example, China controls 97 percent of “rare earth” elements that go into producing a variety of products such as guided missile seekers, radar equipment, smart bombs, Blackberries and iPods.

    “We can’t get essential materials if the Chinese cut them off,” Thompson said.

    The last U.S. plant capable of making key ingredients for antibiotics has closed. And the U.S. must turn to other countries for supplies, he said.

    “Our theory has always been if we had a borderless global economy, everybody is better off,” Thompson said. “But what we’re discovering in some ways, we’re worse off.”

    The government has not put in place a mechanism for tracking such dependencies, Thompson said.

    It also brings scrutiny to Japan’s model of just-in-time manufacturing and lean inventory control adopted by manufacturers.

    “The model of efficiency that is used in manufacturing enterprises today is based on parts arriving just before they are used,” Thompson said. “And that results in a supply chain where there is no slack and no room for error.”

    When everyone receives parts on time, the model is good, he said.

    “But if there’s an earthquake or there’s a war, then you have a big problem,” Thompson said.
    If companies are concerned about not having enough supplies on hand, the fix is easy, said Aboulafia, the Teal Group analyst.

    “If you’re concerned about disruptions, you modify your just-in-time expectations and allow for a bigger inventory,” he said.

    The problem, he said, is that no one likes a lot of inventory because it’s an expense on the books.
    “The question is how comfortable should people be with allowing for a greater buffer,” Aboulafia said.

    http://www.kansas.com/2011/04/10/1801704/japan-quake-hasnt-yet-affected.html#ixzz1JF1PRU00

    Source: THE WICHITA EAGLE
    Date: 2011-04-10