The Consolidation of Quebec’s Aerospace Supply Chain: Suppliers and the Path Towards Integration

Globally, aerospace supply chains are undergoing a period of considerable transition. In the past, prime contractors relied upon an extensive network of integrators and sub-tier suppliers to feed their final assembly lines. This relationship is changing, though, as OEMs are taking concerted efforts to consolidate their base of suppliers, displaying a heightened tendency to grant long-term contracts, almost exclusively, to large-scale suppliers with robust capabilities. As the direct channel between prime contractors and sub-tier suppliers weakens, integrators have emerged as the primary conduit linking these groups together.

Quebec’s aerospace cluster benefits from a suite of roughly 15 diversely specialized integrators. This class of supplier has expertise in complete systems installations in fields as varied as aerostructures, avionics, cabin interiors, engines, and landing gears. An array of sub-tier suppliers supports these activities by engaging in distinct niches of manufacturing and sub-assembly. Given the industry’s transition towards consolidation, it is becoming increasingly important for suppliers to demonstrate an integrated supply chain with comprehensive capabilities. Accordingly, suppliers within Quebec’s aerospace cluster are investing in process improvements and considering avenues of organic growth, acquisition, and partnership in an effort to bolster their capabilities as competitive suppliers within the local and global aerospace markets. 

With the emergence of low-cost manufacturing centers abroad, it is critical that suppliers refine their manufacturing processes while developing value-added capabilities. Supplier development programs, such as Aéro Montréal’s MACH initiative, encourage suppliers to adopt best practices while providing a framework in which they can monitor their continuous improvement. The MACH initiative also sparks collaboration and innovation within the local supply chain, lending to the further development of integrators and sub-tier suppliers that are better equipped to address the needs of the industry’s prime contractors. 

While suppliers are taking strides to refine their processes, it is equally important that they expand their capabilities. “Major players are looking to work with suppliers that are financially credible and able to share risk,” said Hugue Meloche, president and CEO of Meloche Group. 

This train of thought is pervasive amongst sub-tier suppliers and has triggered their goal of climbing the aerospace value-chain through vertical integration. The development of integrated capabilities is a key determinant of a supplier’s ability to provide value-added solutions. At the apex of vertical integration is design capabilities; a segment exclusive to the industry’s most robust suppliers. Chris O’Neill, president and chief operating officer of Mecaer America, said: “Everyone within the industry talks about design-integration, yet there are few companies in Quebec that have successfully moved from manufacturing into design.” 

Sub-tier suppliers that typify this call to action include Meloche Group and NSE Automatech. The former was initially a machine shop that entered the aerospace industry less than 10 years ago, and has since integrated its capabilities to include engineering, special processing, and sub assembly, NSE Automatech, meanwhile, undertook significant investment in the construction of a new facility and has expanded its offerings in machining, surface treatment, electrical integration, and sub-assembly.  “If you want to grow in the aerospace industry,” said Christian Delisle, president of Electro-Kut, ”you have to develop these capabilities.” Accordingly, Electro-Kut has integrated sub-assembly capabilities within its machining operations.

Quebec’s suppliers have also explored acquisition as an avenue of integration: Avior Integrated Products expanded its portfolio of value-added solutions by acquiring companies specialized in machining and mechanical assemblies; Alta Precision became a stakeholder of Tekalia Aeronautik, a special processing shop, to incorporate this process within the production of its landing gear components; and Héroux-Devtek has touted its interest in acquiring complementary manufacturers that have strong intellectual property rights in order to strengthen its profile of landing gear offerings.

Another way in which suppliers expand their capabilities is through partnership, in which they seek to leverage the unique capabilities of partners by consolidating their offerings to attract larger contracts. 

Commenting on the unique role of partnership within the local aerospace industry, Jacques Comtois, vice president and general manager of L-3 MAS, said: “Quebec’s aerospace cluster is uniquely positioned in the global aerospace community. It is highly integrated and its members embrace this approach. While we might compete against each other for a contract, we can easily become partners on another contract.”

Despite the dynamic composition of Quebec’s aerospace cluster, suppliers will need to continue to focus efforts on R&D in order to sustain their competitive edge in the global market. Commenting on this trend, Solange Fresneau, vice president of TechFab, said: “R&D will be what differentiates us from emerging low-cost markets.” 

Automation in particular will play a critical role as Quebec’s suppliers seek to distinguish themselves from low-cost competitors abroad. General Electric Bromont has led the vanguard for incorporating automation into its manufacturing processes, beginning in the late-1990s. Today, it has over 120 robots installed to undertake repetitive tasks and otherwise at-risk, non-ergonomic movements. “This has led to sustained productivity increases in excess of 7 percent annually,” said Alain Ouellette, director of robotization of General Electric Bromont. 

Zodiac Aerospace collaborated with Montreal-based AV&R and Excel Finishing Product to develop a robot for automatic sprayer finishing.

As the global aerospace industry is transitioning to favor consolidated supply chains, comprehensive suppliers, and advanced manufacturing practices, Quebec’s aerospace cluster has evolved in stride. The capacity of local suppliers to adapt to the expectations of prime contractors reaffirms Quebec’s position as one of the world’s leading hubs for aerospace activity.