The Turkish aerospace industry and specifically the clustering approach are gaining global attention, providing ease of access to cost competitive capability. Defence Turkey magazine sat down for an in depth interview with Boeing Vice President of Aircraft Materials and Structures in Supplier Management, John Byrne at the recent ICDAA event (Industrial Cooperation Days in Defense and Aerospace) in Ankara on 13-15 October, to discuss the impact of the changing competitive landscape and the resulting supply chain opportunities in the Turkish market that are attracting the attention of Boeing and other companies the world.

A flattening Supply Chain, Less Tiers, More Visibility and Transparency 

Boeing has been a major OEM for decades, known all over the world, and has been adopting new strategies of product development and production organization since the late 1990s. They have redefined their supplier organizations and introduced new mechanisms of procurement and coordination to cut development costs, to focus on final integration of aircraft systems and to reduce production lead times. With this new trend that emerged between 1990 – 2010, aircraft manufacturers commenced to reduce the workload in their factories and assigned more outsourcing to the sub-industry. After the year 2010, the trend again has changed and the work is being assigned to a reduced number of reliable suppliers. (Boeing Commercial Airplanes has about 1,500 suppliers, so “reduced” is a relative term.) With this in mind, Mr. Byrne reflected on Boeing’s supply chain management model over the years, sharing that their supply chain is a balance of managing capability and capacity with risk. “We evaluate those things that we need to be able to do internally or have a capability internally that will help us advance our production system and/or create capability that will help us design or build our next airplane. When we consider the items that aren’t in that specific category then those are all the candidates that we would work with our supply chain on.”  Mr. Byrne said that they focus on structuring their supply chain such that it is the most efficient it can be in terms of how the entire supply chain works, saying “our goal is to flatten our supply chain, to not have so many tiers in it, to have more visibility and transparency throughout those tiers, and to source to those suppliers which can in fact deliver the highest level of performance and execution as well as the best value from a cost competitive standpoint.”  Mr. Byrne shared that they will continue to adjust and restructure their supply chain based on the lessons learned previously. Upon review, in some cases the Boeing Company may have more vertical integration than they had in the past, but at the same time he said that they will be engaging with a broader part of the supply chain than they have in the past.

Turkish Defense Industry Provides Access to a Broader Set of Lower Tier Suppliers

Commending TAI for its very broad set of capabilities, with the capability to do very complex structure as well as smaller assemblies and detailed parts, Mr. Byrne elaborated on Boeing’s strategy with TAI, “our strategy is to take the current work statement that we have there, collaborate with them to continue to get their production system as lean and efficient as possible so that it can be the most cost competitive, and then work with them on what types and pieces of business make the most sense for their capabilities and for our needs.” In order to auspiciously pursue this objective, Mr. Byrne indicated that it “requires that more time is to be spent engaging in the strategic discussions about ‘what and how’ so that they can structure their responses to some of our bids and things of that nature, that will have the best opportunity to plan and secure work going forward.  TAI also represents access for us to a broader set of lower tier suppliers, and so working with them on how to continue to develop more indigenous detail part manufacturing capability; we may either work with TAI on, for example, assembly that uses that, or we may end up going directly, as we end up sourcing a lot of detail parts ourselves.”

Capitalizing on Capability in Country

Mr. Byrne cited another recent update on an existing collaborative partnership saying “We just had a really nice award to Kale Aerospace that we announced last week, a significant work package on the 777x, I think that is really significant, it’s a new program for a company like Kale who has been a really good supplier with us, to secure that work and move forward.”   Boeing has other companies that have established capability inside Turkey, companies such as PFW, Fokker, for example.  Mr. Byrne stated that they are evaluating how they can work with them to capitalize on the capability that is in country, and lauded events such as ICDAA, saying that “ they are very important in helping us get exposed to and learn about additional suppliers that we did not know simply because we don’t operate in that area or because they haven’t thought of Boeing as a customer before. These events create a wealth of opportunity and information. We will examine and determine where we can spend some additional time, with which set of suppliers, because we have a need for that kind of capability or capacity or that they have a technology that is of interest to us.”   Boeing works with large companies like TAI and sometimes with very small companies, he shared an example “I can tell you I have numerous experiences where we started out with a small company in a foreign country that we just placed a few pieces of work in and the relationship grew, they grew, and ten years later they are a really large supplier.  That’s how we do business.  Part of it is just getting out and learning about who those smaller suppliers are and then figuring out which ones we want to engage with.”

Thriving Aerospace Market and Supplier Expectations – Turkey is of Great Interest for the Cost Benefit Side of the Equation

As of 2015, it has been estimated that there are 20 thousand civil aircrafts.  The lifetime of these aircrafts will be expiring in 2034 and it is said that this figure would be reduced to 5 thousand.  It is recognized that these aircrafts will need to be replaced and 15 thousand aircrafts would be renewed.  In addition, the aerospace markets of the Far East and China are growing.  Demand for 20 thousand aircrafts has been identified in that region and if this demand is included as well, a requirement for 40 thousand aircrafts emerges.  35 thousand new aircrafts will be manufactured and the value of this is in the world economy is estimated at $ 5 trillion by 2034, according to Boeing’s 2016 market forecast.   Within this context, Mr. Byrne detailed how he approaches the thriving aerospace market and his expectations of suppliers.  The OEM focus on competitive and reasonable prices, high-quality delivery performance and sufficient capacity from the Suppliers is key.  

“Each of the markets is different. China is an example of where we have a tremendous growth in the market and demand for our airplanes, it is also a market that while it does not do prescriptive offset, doing business in China is necessary to help access that market, so we work to develop an industrial policy and strategy that is commensurate with what the dynamics and requirements of that market area.  We consider similar issues for large markets like Turkey, which also have a growing aerospace industry.  We consider what the opportunities are, we review what the requirements are going to be and the expectations, it is much better for us to be on the ground in a country where we sell and have to support our airplanes because we get to know the local capabilities and it just makes us better in terms of being able to sell and support our products.”  He said that one of the ways that they achieve this is by finding good suppliers on their production side, which he described as something that helps them tremendously.  Mr. Byrne continued, “Also, we are looking for good quality, low cost suppliers.  A region like Turkey, with an aerospace industry that has been around and is maturing, yet still has access to incentives from the government and other things that help manage the cost side of the equation, that is of great interest to us.   We are having to constantly adjust our supply chain strategy, our supply chain make up from a global standpoint that balances the cost competitive needs, capability and capacity needs with the realities of the market access and the business needs.”

Connecting Turkish Sub-Industry and SMEs to the realities of the market place, a key element in Competitiveness 

Mr. Byrne stated that one of the challenges for the Turkish suppliers, and a lot of other suppliers all around the world, is to truly understand what the competitive landscape is.   He commented “It’s even difficult for long established suppliers, for example in the US, because our competitive landscape has changed significantly in the last 2 - 3 – 4 years.  Consequently, what suppliers thought was sufficient in terms of performance, was sufficient in terms of cost, just a couple of years ago, isn’t good enough today.   Therefore, I think that is one of the challenges that the Turkish suppliers have, getting very well connected to the realities of the market place and we are trying to help that conversation take place and there are various ways that can be done.”

Clusters are attractive – Turkish Industry is ‘Right On’ 

With accolades for the approach that Turkish Industry has taken with Clusters, Mr. Byrne said “I like what I saw here in this symposium and event, it is the development of clusters where you have multiple companies coming together with entities that are providing assistance, government help, things of that nature, that then take multiple companies’ capabilities and offer a better solution, that’s very attractive for us.   For example, when I come in and I can find a machine shop that does really good machining, I know there’s a surface treatment facility that’s close by that can do that, and I know there’s thermal processing and then somebody else can do the assembly, and I can go to one place and get all those contacts, that’s very helpful and I think what Turkish industry is doing along those lines I think is right on.”

Future investments in Turkey?  

As Turkey can be a lucrative hub to reach other markets, with many large companies already making investments, of course there is much inquiry and anticipation about future investment strategies for Boeing in Turkey.   Mr. Byrne explained that when they plan to do investments it’s more from the strategic end, but did disclose that they do consider the idea.  “We’ve made investments in other places, so it’s all about the environment.”  With the industry poised for success in Turkey, Boeing held an event on Friday following the ICDAA event, which Mr. Byrne described as having a two-fold objective.  “One is just getting the Boeing needs and what our requirements are to a broader base of suppliers and vice versa having an additional opportunity for us to meet and engage more directly face to face with a whole new set of suppliers that we traditionally haven’t dealt with.” In closing, Mr. Byrne reflected that “Boeing really appreciates its engagement and long history in Turkey.  I think the success and the growth that we’ve seen is important for us in our industry.  We hope to continue to partner and create those opportunities for success going forward in the future.”