AEA Pilot's Guide 2022-2023 - 34

PATIENT TOLERANCE
Continued from page 33
Reuters reported that Apple cut its iPad production in half
to allocate more chips for its iPhone 13.
reached this point before because we've always been able
to shield people from them. "
Avionics OEMs do not employ just-in-time inventory
because they must use chips and other electronic
components from suppliers with a documented quality
assurance process, according to Alpiser. Those parts must
meet the provided specifications and tolerances, " and we
test for the spec and its ability to serve our product. "
Substantial inventories buffered the supply chain
fluctuations. " When we started tapping our safety
reserves, there was some optimism that we would be able
to solve some of the issues, " Alpiser said. " At that point,
no one knew how deep it was going to be. This has lasted
incredibly longer than anyone ever imagined. "
" Direct purchases from several big distributors and
numerous component suppliers anchor Avidyne's supply
chain, " said Dan Schwinn, president and chief executive
officer. " We started hearing about supply issues from our
distributors more than a year ago, " and shortly thereafter,
" we started to see component cost increases and
shortages. "
Having long-term relationships with suppliers, avionics
OEMs provide regular forecasts of what they will need
in the coming year or so. Before the pandemic, " Our
costs typically stayed the same or went down, and our
distributors are usually really good about getting us the
parts they committed to, " Schwinn said. Then supply chain
deliveries " gradually got worse, and then they suddenly
turned much worse. " Orders arrived late, with a note
saying the next order might be delivered in a year or two.
" The most recent blow has been suppliers who have
decommitted on orders we've had in place for months and
years, " Alpiser said. An allocation rather than the full order
is the most OEMs can hope for. " It's hard to see where
we fit in the line, " Alpiser added. " It does help that aviation
serves essential public and military services. That helps us
get some priority. "
But not that much. Like any business, the chip makers
first support their biggest customers. For perspective,
a December 2021 New York Times article reported that
the automotive industry annually spends $49 billion on
chips, wireless device manufacturers spend about $170
billion, and neither got all they needed. In November 2021,
No one can say how much the avionics industry spent
on chips, but it's surely a single-digit percentage of the
$2.3 billion forward-fit and retrofit equipment sold in 2021
according to the Aircraft Electronics Association's Avionics
Market Report.
When suppliers can't provide the needed parts, " We
have to try and find it on the open market, through
brokers, or other manufacturers who have an excess, "
Schwinn said. " This is where the cost can increase 10 to
100 times. By the middle of 2021, something like 10% of
our components were coming from alternative sources,
and we had another 10% increase in our overall cost of
components in 2021. "
If the needed part is unobtainable, manufacturers need
to find an alternative part that functions as close to the
original part as possible, Alpiser added. " Engineers make
whatever changes the product needs so that it delivers
all of its original functions and capabilities, and you go
through all of the testing and certification requirements
to prove to the FAA that the new part delivers. That takes
time. "
From six months to a year, Schwinn noted. " And say
you redesign that product for a new part, and the lead time
on that part is already 40 weeks anyway. "
The pandemic hit not long after the ADS-B deadline,
Alpiser said. " We expected a drop-off in aircraft upgrades,
certainly for transponders. The reality is that the pandemic
probably helped offset some of the (expected decreased
business) because demand has not shown any sign of
subsiding during the pandemic. "
Backlogged shop schedules have been a small saving
grace, a buffer on the OEM inventory drawdown. Then,
later in 2021, the supply chain took a harder hit, especially
for some products, like navigators, causing increased lead
times. OEMs are dealing with these issues through regular
and proactive dealer communications.
" When the pandemic hit, our schedule remained full,
and it gave us a little extra time to complete projects
because people didn't need their airplanes as much, " said
Rachel Rustin of Crown Aviation in Everett, Washington.
" Lead time updates from our equipment providers were
our first indication of supply chain issues. "
Continued on page 36...
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