Airbus urges suppliers to carry extra stocks amid output snags

Airbus (AIR.PA) laid down the law to its stretched supply chain on Wednesday, with a senior US executive reminding contractors to meet timing and quality targets and recommending that suppliers shore up “buffer stocks” of critical materials.

Like its rival Boeing (BA.N), the European planemaker is aiming to ramp up airplane production. Airbus currently has an ultimate goal of producing 75 of its best-selling family of A320neo single-aisle jets a month by the middle of the decade.

During a presentation at the Pacific Northwest Aerospace Alliance’s annual conference, Elise Charbonneau, Airbus Americas’ head of procurement strategy and transformation, laid out the steps needed to allow Airbus to increase production.

“We need our suppliers to deliver [to] their contract,” Charbonneau said. “That means delivering on time, on quality, on specification, on quantity, at the right site. … We also need you to control your own suppliers.”

Charbonneau also suggested that suppliers would bear the burden of carrying extra inventory to smooth any disruption, saying it was “very important” that suppliers create “buffer stocks” of critical items.

Kevin Michaels, managing director of consultancy AeroDynamic Advisory, said that while many suppliers are likely already carrying additional inventory, many do not have the working capital necessary to buy additional stock.

“Ultimately, working capital in sub-tier suppliers could actually determine how many airplanes are going to get built,” he said.

The comments came as Airbus is expected to announce a flatter build-up in production with its earnings on Feb. 16, after abandoning its 2022 delivery goals and encountering what it has described as widespread delays in its supply chain.

Industry sources have said earlier plans for a sharp increase in output rattled suppliers worried about being left with surplus inventory and reluctant to carry surplus stock.

The United States is Airbus’ single largest supplier, with more than 2,000 US companies located in about 40 states.

Last year, Airbus announced plans to build a second A320neo-family assembly line in Mobile, Alabama.

Analysts at Bernstein on Wednesday lowered financial and delivery forecasts for Airbus, but placed the main focus on Europe, citing “new supplier challenges, particularly with smaller European suppliers facing significant increases in energy costs

It is not the first time Airbus has urged global suppliers to carry an extra cushion of stocks.

In May 2021, Reuters reported that the company’s procurement chief had written to suppliers urging them to ensure parts were ordered from sub-contractors on time and to implement “proper buffers” of inventory to anticipate future output increases.