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					                                           Aerospace and Defense




Der unterschätzte
Chief Operating Officer

                  Internationalization and
                       Competitiveness of

            Aerospace
             Suppliers

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                                                       Internationalization and Competitiveness of Aerospace Suppliers   03




Preface


Ladies and Gentlemen,

Increasing globalization is intensifying the pressure placed on the aerospace industry supply
chain.

Today, most of the suppliers in Europe are on Tier-2 and -3 level for new aircraft and helicopter
programs. Tier-1 is increasingly occupied by large, international, usually multi-system equip-
ment suppliers. These corporations increase the competitive pressure on SMEs (small and
medium-sized enterprises); on the other hand, they are new customers for these suppliers.
Likewise, the production ramp-ups for the A350, A320neo, and B737MAX programs make
considerable industrial and personnel demands on the supply chain.

In the long term, SMEs can only become suppliers with attractive work packages in future
international aircraft programs if they have the skills needed to do business internationally.
They have to be able to offer the technology competence expected by OEMs and Tier-1 compa-
nies in the form of own innovations, and they have to display commercial capabilities such as
accepting risk sharing partnerships as well as management of sub-suppliers. To what extent
aerospace suppliers already have this competence is investigated for the first time in this
study on the basis of an exhaustive criteria set on a broad database.

It is my hope that the results of the study would lead to a further intensification of the discus-
sion between OEMs, Tier-1 companies, and suppliers as to what specific measures are to be
introduced to further improve the competitiveness of the aerospace supply industry.




Arndt Schoenemann

Vice President Equipment and Materials
German Aerospace Industries Association
04   Internationalization and Competitiveness of Aerospace Suppliers




                               Editorial
                               In the past years, due to the aerospace industry’s progressing globalization, the international-
                               ization capability of the supply chain, especially at levels below Tier-1 companies, has become
                               increasingly important to keep program supply chains running smoothly as well as to avoid
                               costly budget overruns and schedule delays. Although strengths and weaknesses of suppliers
                               are widely discussed, so far no systematic analysis has been performed that is based on a
                               broad sample of companies, integrating both the supplier and customer view, and assesses
                               the role of support organizations like associations or trade development agencies in the inter-
                               nationalization process of suppliers.

                               The study was initiated by ISC, the International Suppliers Center at ILA Berlin Air Show, and
                               the business consultancy h&z. The motivation behind this initiative was to contribute to the
                               ongoing discussion a systematic analysis of the internationalization capability of suppliers and
                               to find starting points for improvement measures. In addition to BDLI, further aerospace
                               associations and clusters across Germany and Europe actively supported our study. As a
                               result, 135 aerospace supplier companies took part in a detailed online survey and voiced
                               their perceptions of their company’s internationalization capability. We conducted interviews
                               with 12 aerospace OEMs and Tier-1 suppliers to identify the expectations they have as cus-
                               tomers.

                               The study team would like to thank all participants for their valuable contributions.
                               The study brochure contains an excerpt of the extensive data and interview material we
                               collected. In case you have further questions, please let us know.




                               Michael Santo                Jochen Schmid



                                                                Germany                                Europe
                                               SuPPOrTErS
           PATrOnAGE
                                          Internationalization and Competitiveness of Aerospace Suppliers   05




Contents


06                     12                          18
Global aerospace       Where is the aerospace      Size does not
supply chains need     supplier industry today?    always matter –
transformation                                     future competitiveness
                                                   portfolio




22                     28                          34
Role of support        Recommendations to          Conclusions
organizations          stakeholder groups




35
Methodology, online
survey participants,
interview partners
Global aerospace supply chains
need transformation
                                                       Internationalization and Competitiveness of Aerospace Suppliers   07




    The starting point of our study is the required transformation of the
    aerospace industry.


The aerospace industry has always been an international industry. However, up to the begin-
ning of the 21st century, aircraft OEMs were vertically integrated companies. They conducted
most parts of engineering and manufacturing in-house and sourced – with the exception of
very complex systems, such as aero-engines – primarily from small suppliers within their
home markets. Over the past 15 years, with each new program, the way of aircraft engineer-
ing and manufacturing has been gradually transforming. There are various reasons for this:

New technologies: They are needed to increase fuel efficiency and reach environmental tar-
gets. Maturing new technologies, e.g. advanced materials, software, and electronics, request
considerable investments in r&D, manufacturing machinery, processes, and employee skills.
OEMs would like to share these costs with suppliers who provide special technical know-how,
industrial efficiency, and a strong financial backbone.

Rising importance of BRIC countries: Market success of aircraft programs is increas-
ingly determined by sales in BrIC countries, especially in Asia, a key future air traffic growth
region for the next 30 years. To sell large numbers of aircraft there, localized value creation is
essential.

Shrinking military budgets: In the past, military programs contributed significantly
to the financing of civil r&D. Today there are only very few military programs in sight. Less
“co-financing” from military programs is the result. This increases the need to cut costs.

Delays and budget overruns: All current programs in Europe, north America, and China
are late and over budget. This reduces available cash in the industry, needed to make the
ramp-up of volume programs like A320neo and B737MAX possible.
08   Internationalization and Competitiveness of Aerospace Suppliers




                               KEy InDuSTry DrIVErS




                                new technologies requiring high                    rising importance of BrIC countries
                                investments in r&D, equipment, and                 as key future air traffic regions and
                                skills                                             locations to create value

                                Financing challenges due to delayed                Shrinking national military budgets
                                programs and manufacturing ramp-                   reduce co-financing of technologies
                                ups of current programs                            for civil use



                                                              Required transformation
                                                                 of supply chains

                                                                          OEM

                                                                      Tier-1 systems

                                                                      Tier-2 modules

                                                                OEM Tier-3 to Tier-n
                                                                components & parts
                                                    Internationalization and Competitiveness of Aerospace Suppliers   09




As a consequence, aircraft supply chains and the roles of OEMs and suppliers are changing.
As persistent program delays suggest, all companies involved are still in a learning curve.
OEMs focus on large system integration and the interface to the customer. To reduce their
financial burden and technical risks they outsource a considerable share of design and build
work packages to large international Tier-1 suppliers. At the same time western OEMs set up
engineering, manufacturing, and MrO (maintenance, repair, and overhaul) operations within
the dollar zone to reduce exchange rate risks and within growth regions to facilitate market
access. Global sourcing of OEMs has the same objectives. Tier-1 suppliers follow suit, also
shifting more responsibilities upstream to their suppliers and sourcing globally.




    To remain in the supply chains of existing customers and to win new
    customers among Tier-1 companies worldwide upstream suppliers have
    to develop and prove their international competitiveness.
10   Internationalization and Competitiveness of Aerospace Suppliers




                               How do aerospace suppliers become internationally competitive?

                               In cooperation with industry experts we defined a set of 22 criteria to assess the internation-
                               alization capability of aerospace suppliers.




                               22 CrITErIA OF InTErnATIOnAL COMPETITIVEnESS



                                                                                                     • Competitor and Market Intelligence
                                                                                                     • Tender Experience
                                                                                                     • Aerospace Audit Experience
                                                                           Customer
                                                                                                     • Export/Import Experience
                                                                           & Market
                                                                                                     • Operations Experience Abroad
                                                                            Access
                                                                                                     • Balanced Customer Portfolio

                 • Risk Management                                        International                     • Technology or Process Advantage
                 • IP Protection                                          Competitive-                      • Technology Co-development
                 • Legal Experience                                           ness                          • Flexibility
                 • Financing Experience                        Enabler                    Product/          • Offshore/Offset
                 • Receivables Management                     Processes                   Service           • Supply Chain Management
                 • Currency Management                         & Skills                    Offer            • Quality Management Certifications
                 • Language Skills (English)                                                                • Risk Sharing
                 • HR Capacity Management                                                                   • Pricing




                                    Customer & Market Access
                                    We ask our suppliers for operations and sourcing in growth regions. We ask: Do you know
                             “      the local supply chain in these countries, are you ready to source or invest there?
                                    VP Global Sourcing, OEM
                                                                                                                                   ”
                                    The criteria set focuses on the capabilities of suppliers to retain existing (national) cus-
                                    tomers and win new customers abroad. Customers expect suppliers to be well-informed
                                    about market trends, to be able to run tenders professionally, and to have aerospace
                                    audit experience. A supplier has to know its own country’s export regulations and the
                                                           Internationalization and Competitiveness of Aerospace Suppliers   11




    import regulations of target countries as well as the rules for uS export. A certain experi-
    ence in manufacturing operations abroad is also desired. Additionally, the supplier is
    expected to have a balanced customer portfolio with each customer not contributing
    more than one third of revenue.



    Product/Service Offer
    It is more important for a supplier to be specialized than big. In the future we will primar-
“   ily source from suppliers that help us to differentiate our own technology. If a supplier
    only offers commodities he has to be globally competitive from a price point of view.
                                                                                                    ”
    VP Strategic Procurement, OEM


    The criteria set focuses on the core products/services and value-added services of an
    aerospace supplier. Customers increasingly expect suppliers to contribute to their prod-
    uct differentiation. Technology co-development, flexibility in customer service, and quality
    management certifications (e.g. En 9100, EASA Part 21 G) are other important criteria.
    Increasingly, risk and revenue sharing partnerships, the management of sub-suppliers,
    and the ability to provide offshore content or take over the customer’s offset obligations
    are sought after. The price issue is gaining in importance.



    Enabler Processes & Skills

“   In our industry, it is not just about technology development anymore, it is about industri-
    alization. you can see from the professionalism of project and risk management whether
    a supplier is a good supplier.
                                                                                                    ”
    VP Procurement, Tier-1 supplier


    The criteria set focuses on internal management processes and skills relevant for inter-
    nationalization. Increasingly, customers expect suppliers to have a professional risk
    management (identification, monitoring, and mitigation of economic and technical risks),
    IP protection by contractual agreements, as well as an understanding of the contents of
    increasingly complex contracts, also of foreign customers. In addition to that, suppliers
    should be experienced in a range of financing instruments and dollar hedging. And quali-
    fied staff proficient in English is a requirement for processing international orders.
                                                            Internationalization and Competitiveness of Aerospace Suppliers   13




Where is the
aerospace
supplier industry
today?
To find out where the aerospace supplier industry stands today, we conducted an online sup-
plier survey. In total, 135 aerospace suppliers from Germany and Europe completed and sub-
mitted an online questionnaire. Based on the responses a profile of strengths and weakness-
es was created. This served as the basis for interviews with the “customer side”: CEOs, CPOs,
and other senior procurement managers of 12 OEMs and Tier-1 companies. From the inter-
views, an average customer expectation score was calculated per criterion. The average cus-
tomer expectation scores were taken as 100% (“red line”) and the supplier scores per criteri-
on were adjusted accordingly to see where suppliers are above or below customer
expectations. We split the sample in two parts: large suppliers exceeding €50 m in revenues
p.a. and SME1 suppliers.




1
    EU definition SME: small and medium-sized enterprises; ≤ €50 m of revenue p.a.,
    ≤ 250 employees, balance sheet total ≤ €43 m
14   Internationalization and Competitiveness of Aerospace Suppliers




                                 THE STrEnGTHS AnD WEAKnESSES PrOFILE OF LArGE SuPPLIErS

                                                              Competitor and Market
                                                                  Intelligence
                                                   Hr Capacities                Tender Experience
                                                                    100
                                                 English                                Aerospace Audit Experience

                         receivables Management                          75                        Export/Import Experience


                          Currency Hedging                               50                              Operations Experience Abroad
                                                                                                                                        CuSTOMEr
                                                                         25                                                             & MArKET
                     Financing Experience                                                                  Customer Portfolio
                                                                                                                                          ACCESS
                                                                          0
                                                                                                             Technology Advantage
                         Legal Experience
                                                                                                             (Product & Process)

                         Intellectual Property
          EnABLEr                   Protection                                                          Technology Co-development
          PrOCESSES
          & SKILLS             risk Management                                                     Flexibility

                                                  Pricing                                     Offshore/Offset Capabillity
                                                     risk Sharing                       Supply Chain Management                         PROduCT/
                                                                    QM Certifications                                               SErVICE OFFEr
                                     Large suppliers (n = 29)       Customer expectations = 100%




                                 Large suppliers roughly meet Customer & Market Access criteria, with the exception of set-
                                 ting up operations abroad. Regarding their Product/Service Offer they show strengths in tech-
                                 nology co-development and customer service, and some weaknesses in offshore/offset capa-
                                 bility as well as supply chain management. When it comes to Enabler Processes & Skills,
                                 large suppliers demonstrate strengths in legal experience and intellectual property protec-
                                 tion, and severe weaknesses in risk management and financing.
                                                             Internationalization and Competitiveness of Aerospace Suppliers              15




LArGE SuPPLIErS’ rESuLTS In DETAIL, n = 29

Customer &
Market Access                CuStOMER ExPECtAtIONS

Assessment criteria      0     50 100 150% % of % of                               Further description of sample
                                 < >       comp. comp.
                              below above  below above
Competitor and Market                         48%    52% Companies are regularly in touch with their customers’ technical (86%) and
Intelligence                                             procurement (76%) departments
Tender Experience                             69%    31% Companies have a clear understanding of formal (93%) and informal (83%)
                                                         criteria of customer tenders
Aerospace Audit                               24%    76% 65% of companies are audited by more than 3 OEMs
Experience
Export/Import                                 59%    41% Around 78% are experienced in national export processes/regulations, in uS
Experience                                               export regulations, and customers’ provisions / import processes in target
                                                         countries
Operations                                    86%    14% Only 56% have any experience in foreign direct investments, only 33% of par-
Experience Abroad                                        ticipants set up a production facility abroad, less than 20% in BrIC countries
Customer Portfolio                            45%    55% More than 60% of participants have a balanced customer portfolio, only 19%
                                                         are dependent on one customer
                                 85%
Product/
Service Offer                CuStOMER ExPECtAtIONS

Assessment criteria      0     50 100 150% % of % of                               Further description of sample
                                 < >       comp. comp.
                              below above  below above
Technology Advantage                          83%    17% 17% have unique technical selling points, 66% have less than ten competitors
(Product & Process)                                      worldwide on the same technical level
Technology                                    59%    41% 55% of companies are involved in the conceptual and preliminary design phases
Co-development                                           of aircraft programs
Flexibility                                   69%    31% 30% regard their service offering as more comprehensive, 62% as comparable
                                                         to main international competitors
Offshore/Offset                               66%    34% 41% of companies can offer offshore content, about 30% have experience in
Capability                                               taking over offset obligations of their customers
Supply Chain                                  69%    31% 63% of companies control all their upstream suppliers, 41% have an interface
Management                                               with their customers’ IT systems
QM Certifications                             14%    86% 100% of companies have a QM certification, EN 9100 (90%), EASA Part 21 J
                                                         (10%), EASA Part 21 G (34%)
risk Sharing                                  66%    34% Only 34% of companies can assume complete risk sharing packages

Pricing                                       52%    48% 52% of companies have prices in line with international competition
                                 88%
Enabler Pro-
cesses & Skills              CuStOMER ExPECtAtIONS

Assessment criteria      0     50 100 150% % of % of                               Further description of sample
                                 < >       comp. comp.
                              below above  below above
risk Management                               97%     3% Only 38% of respondents consider their risk management to be systematic
Intellectual Property                         52%    48% 62% of companies protect their IP via contractual agreements, only 24% have a
Protection                                               systematic patent management
Legal Experience                              48%    52% 52% consider themselves experienced in contractual agreements of western
                                                         customers, 35% in agreements of non-western customers
Financing Experience                          100%    0% Top 5 financing instruments: companies’ current cash flow (69%), customer
                                                         prepayments (69%), bank financing (24%), cooperation with partners (24%)
Currency Hedging                              86%    14% 55% of companies issue invoices also in euro, about 45% do currency hedging,
                                                         45% define rates within customer contracts
receivables Management                        86%    14% 52% of companies do not insure their receivables, less than 15% sell their
                                                         receivables, 28% use documentary letters of credits
English                                       21%    79% Almost 100% of companies consider their employees
                                                         to be proficient or highly proficient in English
Hr Capacities                                  3%    97% Domestically, it does not seem to be problematic to find qualified technical
                                                         managers (10%) or engineers (14%), abroad there are some difficulties in find-
                                                         ing engineers (35%) and technicians (48%)
                                      87%
                                 ∼
   Answer range/spread   Score ( χ ) survey    Customer expectations = 100% (average interview responses)
16   Internationalization and Competitiveness of Aerospace Suppliers




                                 THE STrEnGTHS AnD WEAKnESSES PrOFILE OF SMES

                                                              Competitor and Market
                                                                  Intelligence
                                                   Hr Capacities                Tender Experience
                                                                   100
                                                 English                                Aerospace Audit Experience

                         receivables Management                         75                          Export/Import Experience


                           Currency Hedging                             50                               Operations Experience Abroad
                                                                                                                                        CuSTOMEr
                                                                        25                                                              & MArKET
                     Financing Experience                                                                   Customer Portfolio            ACCESS
                                                                          0
                                                                                                              Technology Advantage
                         Legal Experience
                                                                                                              (Product & Process)

                         Intellectual Property
                                    Protection                                                           Technology Co-development
          EnABLEr
          PrOCESSES
          & SKILLS             risk Management                                                      Flexibility

                                                  Pricing                                      Offshore/Offset Capability
                                                     risk Sharing                       Supply Chain Management                          PROduCT/
                                                                    QM Certifications                                                SErVICE OFFEr


                                     SME suppliers (n = 106)        Customer expectations = 100%




                                 In comparison to large suppliers, SMEs are considerably weaker with regard to Customer &
                                 Market Access criteria. The Product/Service Offer results are very similar, except that SMEs
                                 show a weaker risk sharing capability. The profile of the Enabler Processes & Skills criteria
                                 set is again similar to the large suppliers, but SMEs display additional weaknesses in legal
                                 experience and intellectual property protection.
                                                                  Internationalization and Competitiveness of Aerospace Suppliers                  17




SME SuPPLIErS’ rESuLTS In DETAIL, n = 106

Customer &
Market Access                    CuStOMER ExPECtAtIONS

Assessment criteria          0     50 100 150%     % of % of                             Further description of sample
                                     < >          comp. comp.
                                  below above     below above
Competitor and Market                              87%    13% Companies are regularly in touch with their customers’ technical (65%) and
Intelligence                                                  procurement (53%) departments
Tender Experience                                  91%     9% Companies have a clear understanding of formal and informal criteria of
                                                              customer tenders (60%)
Aerospace Audit                                    66%    34% 53% of companies are audited by 2–3 OEMs, 25% more than 3 OEMs
Experience
Export/Import                                      86%    14% 21% are experienced in national export processes/regulations, in uS export
Experience                                                    regulations, and customers’ provisions / import processes in target countries
Operations                                         98%     2% Only 15% have any experience in foreign direct investments, only 7% set up a
Experience Abroad                                             production facility abroad
Customer Portfolio                                 57%    43% Only 43% of participants have a balanced customer portfolio, 30% are depen-
                                                              dent on one customer
                                     48 %
Product/
Service Offer                    CuStOMER ExPECtAtIONS

Assessment criteria          0     50 100 150% % of % of                                 Further description of sample
                                     < >       comp. comp.
                                  below above  below above
Technology Advantage                               83%    17% 17% have unique technical selling points, 37% have less than ten competitors
(Product & Process)                                           worldwide on the same technical level
Technology                                         74%    26% About 52% of companies are involved in the conceptual design phases of
Co-development                                                aircraft programs, 58% in preliminary design phases
Flexibility                                        80%    20% 64% perceive their service offering as comparable to their main international
                                                              competitors
Offshore/Offset                                    81%    19% 43% of companies cannot offer offshore content, 21% have experience in taking
Capability                                                    over offset obligations of their customers
Supply Chain                                       82%    18% 41% of companies control all their upstream suppliers, 33% have an interface
Management                                                    with their customers’ IT systems
QM Certifications                                  39%    61% 85% of companies have a QM certification, EN 9100 (61%), EASA Part 21 J (8%),
                                                              EASA Part 21 G (20%), nadcap (9%)
risk Sharing                                       82%    18% 57% of companies are purely paid according to expenses, only 18% can assume
                                                              complete risk sharing packages
Pricing                                            54%    46% 45% perceive their prices in line with international competitors’
                                     72 %
Enabler Pro-
cesses & Skills                  CuStOMER ExPECtAtIONS

Assessment criteria      0       50 100 150%       % of % of                             Further description of sample
                                    < >           comp. comp.
                                 below above      below above
risk Management                                    99%     1% Only 24% have a systematic risk management
Intellectual Property                              76%    24% 48% are exclusively build-to-print suppliers, 42% protect their IP via contractual
Protection                                                    agreements, only 20% by patents
Legal Experience                                   94%     6% Experienced in contractual agreements with domestic customers (14%),
                                                              western customers (7%), non-western customers, e.g. russian, Chinese (4%)
Financing Experience                              100%     0% Top 5 financing instruments: companies’ current cash flow (53%), customer pre-
                                                              payments (45%), bank financing (32%), equity increases (18%), r&D grants (16%)
Currency Hedging                                   96%     4% 60% of companies issue invoices only in their national currency (e.g. euro),
                                                              only 24% do currency hedging, 22% define rates within customer contracts
receivables                                        92%     8% 76% of companies do not insure their receivables, less than 9% sell their
Management                                                    receivables, 8% use documentary letters of credits
English                                            31%    69% 96% consider their employees as proficient or highly proficient in English
Hr Capacities                                      15%    85% 37% of companies have problems in finding qualified technical managers,
                                                              engineers (41%); for operations abroad it is difficult to find engineers (59%) and
                                                              technicians (58%)
                                          66%
                                     ∼
   Answer range/spread       Score ( χ ) survey     Customer expectations (average interview responses)
Size does not always matter –
future competitiveness portfolio
                                                                                                   Internationalization and Competitiveness of Aerospace Suppliers            19




Why and how is the future competitiveness portfolio calculated?

As seen in the detailed descriptions of the sample, the scores per criterion are widespread.
They show that small suppliers can surpass customer expectations while some large compa-
nies do not even come close. To see how each individual supplier compares with other
suppliers and meets customer expectations at Enabler Processes & Skills and Product/
Service Offer criteria, we calculated a portfolio encompassing all 135 responding companies.

The position of each supplier is based on the suppliers’ average score achieved across the
Enabler Processes & Skills and Product/Service Offer criteria sets (16 criteria). Again supplier
scores where adjusted by the average customer expectation score set at 100 % to see which
companies are above or below customer expectations.


FuTurE COMPETITIVEnESS POrTFOLIO (n = 135)

Factor
                               1.3                                                                                                           DEFINItION OF zONES
 Enabler Processes & Skills




                                           Future exclusion                    Future         Future order                      13%
                               1.2         zone                                order          winning zone                             Future order winning zone: Suppli-
                               1.1                                             qualifying                                              ers roughly meet or exceed cus-
                                                                               zone                                                    tomer expectations. The zone starts
                               1.0
                                                                                                                                       at 90% of average customer expec-
                              0.9                                                                                                      tation for the Product/Service Offer
                                                                                                                                       criteria set and at 80% for Enabler
                              0.8
                                                                                                                                       Processes & Skills.
                              0.7
                                                                                                                                58%    Future order qualifying zone: Sup-
                                                                                                                                       pliers meet some customer expec-
                              0.6
                                                                                                                                       tations and show development
                              0.5                                                                                                      potential in other areas. The zone
                                                                                                                                       starts at 60% of average customer
                              0.4
                                                                                                                                       expectation for the Product/Service
                              0.3                                                                                               29%    Offer criteria set and at 50% for
                                                                                                                                       Enabler Processes & Skills.
                              0.2
                                                                                                                                       Future exclusion zone: Suppliers
                               0.1                                                                                                     are far from meeting customer
                                                                                                                          Factor
                              0.0                                                                                                      expectations, i.e. below 60% of cus-
                                     0.0   0.1   0.2   0.3   0.4   0.5   0.6    0.7   0.8   0.9   1.0   1.1   1.2   1.3   1.4    1.5   tomer expectations regarding the
                                                                                                              Product/Service Offer
                                                                                                                                       Product/Service Offer criteria set
                                                                                                                                       and 50% regarding Enabler Pro-
                              1.0 equals customer expectations            SME          Large company                                   cesses & Skills.




                               Company size is a weak indicator for competitiveness – also small suppliers
                               exceed customer expectations across the 16 criteria.
20   Internationalization and Competitiveness of Aerospace Suppliers




                                Company profiles in the three zones

                                FuTurE OrDEr WInnInG zOnE

                                                                    Competitor and Market
                                                                        Intelligence
                                                       Hr Capacities       100              Tender Experience
                                                     English                                       Aerospace Audit Experience
                                                                            75
                             receivables Management                                                      Export/Import Experience

                                                                            50
                               Currency Hedging                                                                 Operations Experience Abroad
                                                                                                                                               CuSTOMEr
                                                                            25                                                                 & MArKET
                         Financing Experience                                                                     Customer Portfolio
                                                                                                                                                 ACCESS
                                                                              0
                                                                                                                   Technology Advantage
                             Legal Experience
                                                                                                                   (Product & Process)

                             Intellectual Property
                EnABLEr                 Protection                                                              Technology Co-development
                PrOCESSES
                & SKILLS           risk Management                                                       Flexibility

                                                      Pricing                                       Offshore/Offset Capability
                                                         risk Sharing                        Supply Chain Management                          PROduCT/
                                                                        QM Certifications                                                 SErVICE OFFEr
                                   Suppliers in future order winning zone (n = 17)          Customer expectations = 100%


                                Suppliers in this zone are primarily companies with a “Tier-1 profile” regarding technological
                                complexity of their products. 41% of the companies are SMEs. On average, they meet custom-
                                er expectations in terms of product-related services but also with enabler processes. They are
                                very likely to win attractive global tenders in future and have already proven their global com-
                                petitiveness. However, some weaknesses persist, primarily in risk management and financing
                                experience.

                                FuTuRE ORdER QuALIFyINg zONE

                                                                  Competitor and Market
                                                                      Intelligence
                                                       Hr Capacities   100          Tender Experience
                                                     English                                Aerospace Audit Experience
                                                                            75
                             receivables Management                                                      Export/Import Experience

                                                                            50
                               Currency Hedging                                                                 Operations Experience Abroad
                                                                                                                                               CuSTOMEr
                                                                            25                                                                 & MArKET
                         Financing Experience                                                                     Customer Portfolio
                                                                                                                                                 ACCESS
                                                                              0
                                                                                                                   Technology Advantage
                             Legal Experience
                                                                                                                   (Product & Process)

                             Intellectual Property
                EnABLEr                 Protection                                                              Technology Co-development
                PrOCESSES
                & SKILLS           risk Management                                                       Flexibility

                                                      Pricing                                       Offshore/Offset Capability
                                                         risk Sharing                        Supply Chain Management                          PROduCT/
                                                                        QM Certifications                                                 SErVICE OFFEr
                                   Suppliers in future order qualifying zone (n = 78)         Customer expectations = 100%
                                                                         Internationalization and Competitiveness of Aerospace Suppliers       21




This zone comprises the largest share of participating suppliers; 80% of them are SMEs. They
have the potential to be considered in future global tenders, and already collected some
export experience. On average, this group of companies offers attractive manufacturing and/
or engineering processes, some of them in highly specialized niches (e.g. CFCs, high-temper-
ature materials). Weaknesses in supply chain management, risk management, and financing
limit their further international growth.


FuTurE EXCLuSIOn zOnE

                                                         Competitor and Market
                                                             Intelligence
                                              Hr Capacities    100         Tender Experience
                                            English                                Aerospace Audit Experience
                                                                    75
                   receivables Management                                                      Export/Import Experience

                                                                    50
                     Currency Hedging                                                               Operations Experience Abroad
                                                                                                                                   CuSTOMEr
                                                                    25                                                             & MArKET
             Financing Experience                                                                      Customer Portfolio
                                                                                                                                     ACCESS
                                                                     0
                                                                                                         Technology Advantage (Product
                  Legal Experience
                                                                                                                  & Process

                   Intellectual Property
EnABLEr                       Protection                                                            Technology Co-development
PrOCESSES
& SKILLS                 risk Management                                                       Flexibility

                                             Pricing                                      Offshore/Offset Capability               PROduCT/
                                                risk Sharing                       Supply Chain Management                     SErVICE OFFEr
                                                               QM Certifications

   Suppliers in future exclusion zone (n = 40)      Customer expectations = 100%



92.5% of suppliers in this zone are SMEs. They reveal considerable weaknesses in almost all
criteria, except QM certifications, English skills, HR capacities, customer service, and pricing.
They tend to be commodity suppliers, e.g. milling and drilling companies, with many interna-
tional competitors, and thus they are prone to be replaced by low-cost suppliers from abroad.
OEMs will force them to further industrialize or threaten to phase them out. They might be
considered in less attractive, short-term contracts, primarily in the role of an extended work-
bench to give the OEM/Tier-1 “breathing space” when ramping up production.




    Nearly one third of aerospace suppliers are in the future exclusion zone.
    Although they currently have sufficient revenues and utilization rates they
    are likely to disappear from the aerospace market over the next 5–10 years.
                Role of
support organizations
                                                           Internationalization and Competitiveness of Aerospace Suppliers             23




Which organizations such as associations or government authorities currently
support aerospace suppliers in their internationalization?

A number of organizations support aerospace suppliers in their internationalization process.
The most typical organization types and some of their most common services are shown in
the illustration. In our survey the participants were asked to choose from a portfolio of 11 ser-
vices and indicate from which types of organizations they obtained which types of services.
Typically they indicated usage of more than one service and of more than one support organi-
zation.



TyPES OF SuPPOrT OrGAnIzATIOnS                                                        uSAGE OF SuPPOrT OrGAnIzATIOnS


                                                                                      national industry
                                       Government authorities, e.g.                   associations                               272
                                            embassies, consulates,
                                        representative offices abroad
                                                                                      regional aerospace
                                                                                      associations and                          250
                                      GA                                              clusters
trade support agencies                                          National industry
(national, regional),                                               associations,     Chambers of
                           A




                                                                                                                          189
                      TS




e.g. GTAI, Bayern                                               e.g. BDLI, GIFAS,     commerce
                                                  nA




                                    OEM
International                                                                ADS
                                    Tier-1                                            Trade support
                                                             Regional aerospace       agencies on a                       178
*universities,                      Tier-2
                    urI*




                                                           associations and clus-     national level
research insti-                                              ters, e.g. Aerospace
                                                     rA




tutes (not part                Tier-3 to Tier-n                                       representative offices
                                                                 Valley, Luftfahrt-
of the study)                                                  standort Hamburg       on a regional/state           114
                               SB            CC                                       level
State banks                                             Chambers of commerce,         Trade support
“Förderbanken”                                            e.g. WKÖ, IHKs, AHKs        agencies on a             98
(e.g. KfW, LfA)                                                                       regional/state level

                                                                                      Embassies,               59
                                                                                      consulates
        Aircraft supply chain

                                                                                      n = 135 companies




    Most frequently, aerospace suppliers turn to associations and clusters
    when they seek internationalization support.
24   Internationalization and Competitiveness of Aerospace Suppliers




                How do suppliers perceive services of support organizations? In which areas do they wish for
                more support?




                PErCEPTIOn OF nOn-FInAnCInG SErVICES OF SuPPOrT OrGAnIzATIOnS (n = 135)
                                                              In %

                Collective stands at foreign fairs                   61                      38   1   33%        More support
                B2B events with potential foreign                    60                      39   1   36%
                                                                                                                 wished by % of
                customers
                                                                                                                 respondents
                Individual mediation of contacts to pot.             59                      40   1   44%
                foreign customers
                responding to initial questions on legal             52                      47   1   27%
                issues abroad
                responding to initial questions on                   50                      49   1   17%
                export/import/customs regulations
                Country and sector analyses                          48                      49   3   46%

                Delegation visits of pot. foreign customers          46                      50   4   30%
                to home country
                Delegation trips abroad                              47                      51   2   27%

                Mediation of suitable service providers              40                      55   5   19%
                abroad
                Training cooperations between domestic               34                      62   4   10%           Helpful
                and foreign universities
                                                                                                                    Not utilized
                Training cooperations between domestic               22                      73   5   9%
                and foreign vocational colleges                                                                     Unhelpful




                PErCEPTIOn OF FInAnCInG SErVICES OF SuPPOrT OrGAnIzATIOnS (n = 135)

                                                              In %
                Government r&D grants                                     49        7 0 19   25

                Government low interest rate loans               21        16 0     33       30

                Conditionally repayable loans at the
                                                                14 14 0 27                   44       61% of respondents wish for
                national level
                                                                                                      more support in project financing
                Conditionally repayable loans at the           6 13 0          26            56
                regional/provincial/state level
                Mezzanine capital (government venture         2 17 0           25            56
                capital) at the national level                                                                      Offer reviewed and utilized
                Mezzanine capital (government venture         2 15 0 19                      64                     Offer reviewed, found to be
                capital) at the regional/provincial/state                                                           suitable, but not utilized
                level                                                                                               Offer reviewed and found
                                                                                                                    to be unsuitable
                                                                                                                    Offer basics known
                                                                                                                    Offer unknown
                                                      Internationalization and Competitiveness of Aerospace Suppliers   25




The individual organizations’ internationalization support services portfolios vary in breadth
and depth. The services valued most by suppliers, in terms of usage and future support
whishes, can be subsumed in three groups:

Project financing offers: Almost two thirds of suppliers (61%) wish for more support in
financing, more than for any other service. While 3/4 of participants are familiar with govern-
ment r&D grants, other types of financial support are barely known. As support organizations
have standard financing programs and tend to communicate them openly, the answers indi-
cate that state-backed financing offers may not be perceived as commercially attractive, e.g.
when it comes to interest rates or administrative burden. They may also indicate that offers
are not suitable for aerospace companies because they do not cater for their specific require-
ments and conditions (e.g. very low production volumes, high investments, product life cycles
> 30 years, dependence on a single customer for a program).

“Door opener contacts”: This sort of internationalization services belongs to the most
popular among suppliers. Joint stands at trade fairs and B2B events are part of the standard
range of services of many support organizations. In some cases they even mediate individual
contacts to potential customer companies. At trade fairs and B2B events, suppliers can get in
touch with relevant technology and procurement decision-makers. Interestingly, only half of
the respondents considered international delegation trips as helpful, although these trips are
frequently offered by support organizations. The other half has not even made use of this offer
so far. A reason for that could be that typical delegation programs consist mainly of meetings
with politicians or representatives of government authorities and associations. They are not
geared towards getting in touch with decision-makers in potential customer companies.

Providing market information: The provision of advice on legal issues, export and import,
customs regulations, as well as country and sector analysis are also highly valued by suppliers.
From time to time these services may be offered for a specific project, but they are not part of
support organizations’ standard programs, at least not for the special needs of the aerospace
industry.




    Some of the support services most valued by suppliers, such as project
    financing offers, are not geared towards the specific needs of aerospace
    suppliers.
26   Internationalization and Competitiveness of Aerospace Suppliers




                     At first glance services of support organizations cover major aspects of an
                     aerospace suppliers’ internationalization process.




                                       InTErnATIOnALIzATIOn BuSInESS PLAnnInG OF AErOSPACE SuPPLIErS



                  MARkEt AND CuStOMER
                                                                     BuSINESS MODEl                                         OPERAtIONAlIzAtION
                  ANAlySIS


           tSA   – Analysis of overall country/market            – Product/Service Offer:                              – Setup of operations
                   accessibility and attractiveness                Technology,                                 GA      – Supply chain management
                                                                   Customer Service, Offshore/Offset,                  – Export and import regulations
                 – Target customers’ accessibility and             QM Certificates, Risk Sharing, Pricing                and processes
                   attractiveness
                                                                                                               CC                                          SB
                                                                 – Enabler Processes & Skills: risk                    – Project risk management
      GA   NA
                 – Identification and getting in touch             Management, IP Protection, Legal,
      tSA RA
                                                                   receivables Management, Language            SB      – receivables management
                 – Customer needs and key purchasing               Skills, Hr Capacities, Financing,                   – Legal and contractual issues
                   criteria                                        Currency Hedging                            tSA
                 – Tender processes and decision-                                                                      – Human resources capacities
                   making                                        – Market entry options: Export, sales
                                                                   offices, locating value creation abroad
                                                                   (manufacturing and/or engineering)



                                       Support services covered by support organizations
                                       GA   Government authorities      SB   State-backed banks        RA    Regional associations and clusters
                                       NA   National associations       CC   Chambers of commerce      tSA   Trade support agencies (national, regional)

                                              Regular aerospace-specific support            Non-industry-specific support
                                                       Internationalization and Competitiveness of Aerospace Suppliers   27




The illustration shows the generic steps of international business planning of an aerospace
supplier from market analysis via business modeling to operationalization. Those issues for
which support organizations offer assistance are highlighted. At first glance the organizations
cover many relevant aspects of supporting international business. As we have learned from
the interviews with support organizations, most of them solely focus on assisting companies
in getting “door opener contacts” (e.g. joint stands at trade fairs, delegations, B2B events), the
initial steps of international business. Subsequent steps which are even more important are
not covered to the same extent. In these fields chambers of commerce and banks provide
certain coverage. However, they tend to lack specific knowledge of the aerospace industry,
making their support limitedly usable for aerospace suppliers. There also seem to exist –
apart from some notable exceptions on the regional level – only very few joint efforts of sup-
port organizations, which increases the likelihood of parallel efforts and one-off initiatives.
    Recommendations to
stakeholder groups
                                                    Internationalization and Competitiveness of Aerospace Suppliers   29




Which efforts by the stakeholder groups have the biggest impact on the im-
provement of international competitiveness?

Our analysis showed: most of the large suppliers already come close to customer expecta-
tions whereas the majority of the SME suppliers have to close a substantial competence gap.
SMEs make up more than 80% of aerospace suppliers and are indispensable for the success
of future programs. They stand for a large fraction of key know-how needed to successfully
design and build aircraft parts and components.

But customers do not only seek for technological niche know-how. They expect commercial
management skills, also of their SME suppliers. Shifting responsibility for technology devel-
opment, manufacturing, and financing to SMEs bears certain risks for the aerospace industry
base. SMEs tend to be lacking management capacity and the financial backbone to fulfill
these tasks. The low production volumes they can accomplish in technical niches do not allow
for a real industrialization of processes which is needed to cut costs. SMEs usually perform
their value creation in-house in Europe, but more and more (even domestic) customers pay
in uS dollars. In many cases it is not possible for the SMEs to contract sub-suppliers in uS
dollars or to outsource manufacturing operations abroad.




    To make the system integration model in global supply chains work addi-
    tional skills and joint efforts by all levels of the supply chain are required.
    It will take OEMs, Tier-1 and lower-tier suppliers up to one decade and
    substantial investments to accomplish this. The process has to be acceler-
    ated and balanced to ensure that German and European suppliers keep
    attractive work shares in future programs.
30   Internationalization and Competitiveness of Aerospace Suppliers




                               rECOMMEnDATIOnS




                                1

                                AEROSPACE OEM/TIER-1
                                • Strategic connection to the best
                                • Focused supplier development
                                • Increased transparency


                                2

                                AErOSPACE SuPPLIErS
                                • Strengthen risk and claim management    Improving international
                                • Strengthen technology differentiation      competitiveness
                                  and sub-supplier management


                                3

                                SuPPOrT OrGAnIzATIOnS
                                • Market access network
                                • Accessible R&d schemes
                                • Access to project financing
                                                         Internationalization and Competitiveness of Aerospace Suppliers   31




Recommendations to
OEMs / tier-1 suppliers
Strategic connections to the best: The companies of the future order winning group
will become the rising stars within the aerospace supplier market due to a very competitive
mixture of products/services and mature support processes. Especially the SME suppliers in
this area have to manage tremendous growth challenges as they are already identified as best
in class by OEMs / Tier-1 suppliers. To ensure their future performance OEMs / Tier-1 com-
panies should establish strong and strategic relationships with them to become “preferred
customers”.

Focused supplier development: Most of the current supplier development activities are
focusing on short-term performance improvement measures to keep delivery schedules. Many
of the tackled suppliers are in the future exclusion zone. In addition to these firefighting actions
(which are needed and useful), OEMs / Tier-1 companies should establish supplier develop-
ment programs with a choice of suppliers from the future order qualifying zone. The perfor-
mance of these suppliers is currently sufficient but they display weaknesses in some enabler
processes, especially in risk and supply chain management. Joint projects will help to improve
the supplier performance in these areas and will lift the suppliers into the future order winning
zone.

Increased transparency: Many OEMs / Tier-1 companies share only a limited amount of
program and technology knowledge with their suppliers. The information they provide is mainly
focused on a subsystem level. Additionally, it tends to be too optimistic, so that suppliers’ business
cases are bound to fail if they rely on it. Having made these experiences over the years,
suppliers become very careful when using OEM/Tier-1 information as a valid planning base.
This leads to a lack of consistent planning and transparency throughout the whole supply chain.
Increased transparency will not eliminate this problem, but it has to be the starting point for
future planning reliability and consistency.
32   Internationalization and Competitiveness of Aerospace Suppliers




                               Recommendations to suppliers
                               In the survey most of the suppliers indicated that their day-to-day business hardly leaves any
                               time to pro-actively approach potential international customers. To make sure that the limited
                               amounts of time and money for international sales efforts are invested effectively, suppliers
                               should first work on strengthening those criteria which are relevant from a customer and bot-
                               tom-line perspective:

                               Strengthen risk and claim management: All suppliers have to integrate risk and claim
                               management into their project management to reduce negative impacts on their bottom line
                               (e.g. of program delays). All-time transparency on a project’s status is vital. Proven methods
                               are needed to identify, analyze, and sustainably avoid failures and poor quality. Those methods
                               can be provided by OEMs and Tier-1 suppliers. Suppliers may also consider joint activities and
                               best-practice sharing within their peer groups. To learn about financing opportunities suppli-
                               ers may turn to associations and clusters to be directed to suitable banks and other financial
                               service providers.

                               Strengthen technology differentiation and sub-supplier management: OEMs in-
                               creasingly look for suppliers to help them improve their own technology differentiation, and
                               they expect them to manage their sub-suppliers professionally. Pronounced technologi-
                               cal strengths of a supplier may offset some weaknesses in enabler processes and market
                               access. Therefore suppliers should consider state-funded r&D programs to co-finance tech-
                               nology development. In case a supplier provides manufacturing services (e.g. milling and
                               drilling) the development of additional competencies in manufacturing engineering should
                               be taken into consideration. To be regarded as an attractive supplier companies have to in-
                               clude special process suppliers in their sub-supply chains and they have to be able to manage
                               them professionally. A joint initiative of peer companies to reach transparency and solutions on
                               special processes should be started.
                                                      Internationalization and Competitiveness of Aerospace Suppliers   33




Recommendations to support
organizations
Market access network: So far none of the support organizations provides end-to-end
support. Cooperation between organizations is limited as well. What is needed is an expert net-
work that informally links all available internationalization services and makes them transpar-
ent to suppliers. It should cover all process steps aerospace suppliers normally have to follow
to do business abroad (see example provided in this study). Such a network can most prag-
matically be set up “bottom up”. Aerospace clusters could take the lead and provide links to
regional aerospace companies. “neutral” state-backed organizations, chambers, and associa-
tions should join the network, as well as economic development agencies (some of them have
European offices) and commercial service departments of embassies/consulates of countries
with aerospace OEMs (primarily uSA, Canada, Brazil, russia, China). These organizations have
a commercial interest to help and they tend to have extensive networks providing local as-
sistance. To avoid parallel efforts and to learn from each other, the regional networks should
allow some coordination by the national aerospace association. Although most of the sup-
port organizations don’t focus on aerospace, they will provide industry-specific support when a
“critical mass” of interested companies can be reached (e.g. 50–80 companies).

Accessible R&D schemes: Partially state-funded r&D projects have a considerable im-
pact on competitiveness, especially of smaller aerospace suppliers. But although schemes
are broadly known, SME suppliers’ access to r&D funding is still limited in practice. Associa-
tions and clusters should actively support suppliers’ efforts in cooperation with OEMs / Tier-1
suppliers as well as ministries and project management agencies to let SMEs participate in
aerospace project consortia not only as paid subcontractors, but as genuine project partners.
This would help SMEs to generate their own intellectual property resulting in products they can
offer to international customers.

Access to project financing: Existing state-backed programs for long-term project financ-
ing to enable risk sharing partnerships are still only limitedly known to many aerospace sup-
pliers. Some of the suppliers who already know these programs often perceive them as more
expensive than commercial offers, even for solvent companies of a certain size. Therefore,
the national aerospace association supported by regional clusters should start a regular dia-
logue with banks and other financial service providers to advance bankers’ knowledge of the
aerospace industry’s specifics to facilitate financing decisions and to jointly think about “new”
financing models. (State-backed) banks tend to be prepared to do so, when a “critical mass” of
potential customer companies can be reached (e.g. 30–50 companies).
34   Internationalization and Competitiveness of Aerospace Suppliers




                                   CONCLUSIONS
                                    Today, the tasks of aerospace suppliers are much more diversified
                                    than they used to be, which forces the companies to develop a broader
                                    skills portfolio.

                                    OEMs increasingly look at the total value of a supplier; in addition to
                                    the traditional strengths of European suppliers, namely their product
                                    and process know-how, service aspects of their value proposition
                                    come into focus. Supporting processes and skills play an ever more
                                    important role in supplier evaluations and ratings. Due to the global
                                    price competition, even on OEM level, customers expect their suppli-
                                    ers to do business internationally, and to take over topics like quality
                                    management and improvement, sub-supplier management, internal
                                    steering, and risk management. We have seen that a fraction of Euro-
                                    pean aerospace suppliers – including SMEs – already provide this
                                    broad skills portfolio needed to secure attractive work shares in future
                                    global aircraft programs. But the majority of the aerospace suppliers
                                    surveyed have not yet reached this point: only 70% of them seem to be
                                    capable to remain players in this challenging industry.

                                    Individual efforts have to be complemented by joint actions along the
                                    whole aerospace supply chain, including the OEM level, to maintain a
                                    competitive industrial base in Germany and Europe. Support organi-
                                    zations should utilize their leading role to initiate and steer coopera-
                                    tive efforts of suppliers and facilitate the discussion and exchange
                                    between all market participants.

                                    Suppliers not willing to invest into their future capabilities need to
                                    rethink their business model. They might still get some orders, but
                                    their aerospace business will become extremely volatile as future
                                    contract awarding will depend on capacity constraints in other parts
                                    of the supply chain. In the end, these companies will have to invest
                                    just to remain in the business – they will have to increase flexibility
                                    and speed in their order-to-delivery process. However, the aerospace
                                    investment would be well spent, as it might turn out to be useful and
                                    profitable in other industry segments as well.
                                                                 Internationalization and Competitiveness of Aerospace Suppliers   35




Methodology, online
survey participants, interview partners
METHODOLOGy

 1                            2                           3                                   4
 ONlINE                        StRENGtHS &                     CuStOMER                           DISCuSSIONS
 SuRvEy                        WEAkNESSES PROFIlE              INtERvIEWS                         WItH SuPPORt
 OF SuPPlIERS                  OF SuPPlIERS                    (OEM, tIER-1)                      ORGANIzAtIONS

135 suppliers completed       22 internationalization     12 customer interviews            5 discussions with
an online questionnaire.      criteria were defined,      were conducted, each              support organizations:
Participants were asked       based on 36 questions /     lasting on average 1.5            3 associations,
60 questions in 3 areas:      245 answer options of       hours. The interviews             1 cluster, 2 trade
company profile, interna-     the online questionnaire.   were based on the inter-          support agencies.
tionalization capability,     For each selected answer    mediate results of the
and usage/perceptions         option, 0–20 points were    supplier survey (n = 95).
of support measures           given. The average cus-     Customers were asked
from customers, state,        tomer expectation score     to interpret the results
associations. The ques-       (“red line”), based upon    from their viewpoint, and
tionnaire was distributed     the interviews, was taken   to state their expecta-
by supporting associa-        as 100%. The supplier       tions towards suppliers.
tions and clusters. The       scores were adjusted
answers required no           with the customer expec-
exposure of critical infor-   tation score to see where
mation. Suppliers could       customers are below and
take part anonymously.        above customer expecta-
                              tions.



German and other European suppliers took part in the online survey; the sample reflects the
typical SME structure of the aerospace industry.


GEOGrAPHICAL SPrEAD, COMPAnIES PEr rEVEnuE CLASS (n = 135)

               GEOGRAPHICAl SPREAD OF COMPANIES                                COMPANIES PER REvENuE ClASS

                                                     37                           83
                                                                                                           Total sales
          97                                                                                               Aerospace sales
                                                                               66


                                                                 6
                                            HB, HH, nS, SH
                                           5               B, BB,                             24
                                                 7                                              20
                                                           MVP, S                      1618
        Germany                                                                                        9 7 10 10
      38                                 nrW rP, H                                                           4   3
                                                21        21                    <€     € 10 – > € 20 – > € 51– > € 100   >€
                                                                                10 m   20 m 50 m       100 m –250 m      250 m

                                                                                       SMEs
     Europe
      other                                                                    Approx. 80% of companies have total sales
                                                BW        By                   of up to € 50 m
                                                                               Approx. 50% have aerospace sales
                                                                               less than €10 m

Definition SME: small and medium-sized enterprises; EU definition ≤ €50 m of revenue p.a., ≤ 250 em-
ployees, balance sheet total not asked for. 10% of SMEs in this sample are part of larger enterprises.
36   Internationalization and Competitiveness of Aerospace Suppliers




                                   The sample is spread quite evenly across all levels of the supply chain, across technical seg-
                                   ments, as well as manufacturing and technical services companies.


                                   SAMPLE STruCTurE (n = 135)

                     tECHNICAl SERvICES                                                                                        MANuFACtuRING

                                                     92                                                                                               81
                                                                         AIrCrAFT SuPPLy CHAIn                                                             74
                                   74                                                                                               67                23
                                                               70                                                                                          20
                                                                                                                          Systems 16
                    Engineering 40                   49 39
                       Services                                                                                                                       22 16
                                                                                 OEM                                      Modules 18
                                            31                                                                                       24
                          MrO
                                   15 14 28 20                                  Tier-1           e.g. ~compressor,        Compo-      4
                       Special                                                 systems           cargo-loading sys-       nents & 33 4 36 38
                               19             8                                                                             parts
                     Machinery                                                                   tem, fuselage system                16
                                              9 15 11
                                                                                Tier-2           e.g. ~blisk/ramp
                                                                               modules
                                  Aero-
                             structures
                                          Engines
                                                    Systems
                                                               Cabin/
                                                              Interior




                                                                                                                                    Aero-
                                                                                                                               structures
                                                                                                                                            Engines
                                                                                                                                                      Systems
                                                                                                                                                       Aircraft
                                                                                                                                                         cabin/
                                                                                                                                                       interior
                                                                                                 system / fuselage
                                                                                                 subassembly
                                                                            Tier-3 to Tier-n     e.g. ~blade, actuator,
                                                                          components & parts     stringer
                     • Companies could choose                                                                              • Companies could choose
                       from 0–12 technical                                                                                   from 0–12 manufacturing
                       services segments                                                                                     segments
                     • Average: 2                                                                                          • Average: 1.8 (max. = 12,
                       (max. = 7, min. = 0)                                                                                  min. = 0)
                                                                                                            Internationalization and Competitiveness of Aerospace Suppliers   37




Interview partners

The interview partners from “the customer side” cover airframe and aero-engine OEMs as
well as global Tier-1 suppliers of aerostructures and electro-mechanical systems.

In addition, discussions were held with support organizations.
                                                             “CUSTOMER SIDE” INTERVIEWS WITH OEM / TIER-1
  DISCUSSIONS WITH SUPPORT ORGANIZATIONS




                                                                                                                                               [undisclosed]


                                                                                                              [undisclosed]
                                           [2 undisclosed]
38   Internationalization and Competitiveness of Aerospace Suppliers




                               Authors
                               The study was conducted by Michael Santo and Jochen Schmid who provide experience in
                               industry, consulting, and support organizations.




                                                                 Michael Santo, Managing Partner of h&z, is a
                                                                 seasoned expert of the aerospace and
                                                                 defense industry. Before joining h&z, he held
                                                                 senior management positions in the aero-
                                                                 space industry. He was a German Air Force
                                                                 officer and holds a master’s degree in
                                                                 engineering and business administration.




                                                                 Jochen Schmid is working as a consultant
                                                                 for h&z. He is a member of the Aerospace
                                                                 & Defense practice. Prior to joining h&z he
                                                                 was a manager in an aerospace cluster for
                                                                 5 years. He started his career as apprentice in
                                                                 a large European aerospace and defense
                                                                 company. He holds a bachelor’s and master’s
                                                                 degree in business administration.
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                                       Heart rate of our employees when they are
                                       passionately engaged
                                       * Beats per minute. Not to be confused with the pulse! The heart rate of a healthy person at
                                       rest is between 50 and 100 beats per minute. A shrew has 800–1,200 bpm and an elephant
                                       15–30 beats per minute.




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