BIZ 365 reply 4 Reply to student

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The work below has been written by another student. Please reply to it by providing at least 1160 words, APA format, and citation. Please be advised that your response should be related to the student’s work. Thanks. (reply to mark’s post)

According to globaledge.msu.ed “the aerospace and defense industry is composed of companies that manufacture defense products, such as aircraft, watercraft, weaponry, and information systems, and companies manufacturing spacecraft. Most of these products are purchased by federal governments for military purposes or by federal space programs”. The Aerospace and Defense industry is Highly Concentrated. The production in this industry is dominated by a small amount of large firms that are able to shape the industry’s direction and price levels.

One important thing to consider in the aerospace industry is forecasting. From the procurement stand point, accurate forecasts would help on better service and operation. Reading an article from The Journal of Business Forecasting called “FORECASTING DEMAND IN THE AEROSPACE AND DEFENSE INDUSTRY” it pretty much describes, in a very clear way, how the demand and the suppliers are established. For instance, the suppliers are categorized into two tiers: Tier 1 and Tier 2. Tier1 are the big companies. The big OEMs like Boeing, Lockheed Martin and also Airbus. These companies, besides manufacturing planes, they” manufacture and provide spare parts and MRO service” (Safavi, A. 2005). An MRO is a maintenance, repair and overhaul station. Tiers 2 are companies that would provide the hardware, like bolts, washers, etc. Tier 2 also includes “major component suppliers such as General Electric which provides engines for an array of aircraft” (Safavi, A. 2005).

Since there are a small number of customers that could buy multi-million dollar aircrafts, customers tend to look for an MRO to do their repairs on the airplanes. The customer may agree with the MRO to do a repair in 30 days or maybe 5 days. Usually short checks are landing gear replacements and it does not involve any structure or interior repairs. Here is when a forecast is needed. “Prior to making major research and development investment to develop a commercial aerospace and defense, or weapon system, a long-range forecast is required. Although A&D systems are made-to-order, long manufacturing and procurement lead-times drive suppliers to generate accurate demand forecast. In order to accurately forecast demand for new systems, one needs to know the size of the market, market share and drivers of the demand” (Safavi, A. 2005). Many times, instead of buying a valve control or a tube assembly, the MRO will do an overhaul of the part, but if the part fails the repair, then the part needs to be replaced. “If a failed major component is beyond repair, it needs to be replaced (with a new system). Forecasting the number of deployed systems that fail and a portion of them that would be beyond repair over time is a challenging problem” (Safavi, A. 2005). One issue that is encountered is the corrosion of the parts. This needs to be taken in consideration. Many times the part is corroded and there is no way to be repaired. Therefore corrosion of parts needs to be considered as an irregular event for forecasting.

What I have experienced is that unfortunately it is difficult to establish a good forecast in parts. One factor is that the airline does not want to pay for a very expensive part so the airline will defer for the next check. There are two types of MRO demand: “parts that are replaced during maintenance. Demand for parts that are routinely replaced during maintenance are usually tied to the maintenance schedule and parts that fail randomly during usage” (Safavi, A. 2005).

A conclusion on this subject would be that forecasting in the Aerospace industry is very challenging

REFRENCECS:

http://globaledge.msu.edu/industries/aerospace-and-defense

http://search.proquest.com/docview/226922265?accountid=12085Safavi, A. (2005). FORECASTING DEMAND IN THE AEROSPACE AND DEFENSE INDUSTRY. The Journal of Business Forecasting, 24(1), 2-7. Retrieved from