Global shortages are hitting virtually every part of the composite supply chain. Prices are rising, and emerging industries are pushing the limits of available materials. With the supply chain causing concern well before the global COVID-19 pandemic wreaked havoc by shutting down borders, manufacturers have begun to recognize that the traditional approach to supply chain management must change.
A lack of logistics transparency has proven particularly problematic in the complex composites supply chain. “I think the COVID-19 pandemic was eye-opening for everybody,” points out Thorsten Wuest, assistant professor for smart manufacturing at West Virginia University. “It unveiled the underlying issues that have been building for quite a while.” One of the primary issues is limited visibility into the supply network.
Greater supply chain visibility allows companies to track raw materials, components, sub-assemblies and final products as they move from supplier to manufacturer to consumer – from production to end use. Having access to the inner workings of their supply chain helps companies make informed decisions about their operations and reveals possible risks in the existing chain. It can also open doors to new business partners, as members of the Utah Advanced Materials & Manufacturing Initiative (UAMMI) have learned. UAMMI is driving a nationwide effort to connect composite manufacturers with customers and strengthen localized supply chains to help companies respond more quickly to changes in demand.
Despite the current challenges, including raw material shortages, there are ways for companies to build new levels of supply chain resiliency by assessing their manufacturing ecosystems, digitizing information and evaluating and growing their pool of suppliers. Ultimately, they can gain greater control over their supply chain, remain competitive and ensure that customers have the right products at the right locations and the right time.
Weathering Supply Shortages
As is the case for many industries right now, composites fabricators and their clients are witnessing a range of raw material shortages and resulting price hikes. For example, prices for styrene and petroleum-based composite materials began climbing even before winter storm Uri hit the Gulf Coast in February 2021, shutting down U.S.-based refineries and petrochemical plants key to resin supply.
Babu Vineeth, vice president of the Composites Association of New Zealand, reports limited availability of resin options due in part to supplier monopolies among Asian material suppliers. While the U.S. trade war with China drove delays and price increases around some Asia-sourced materials, China’s increasing consumption of the materials it once largely exported is adding to supply bottlenecks. Supply delays from China have led to an extreme shortage of fiberglass rovings, Vineeth adds.
“It is something that composites players are absolutely keeping an eye on,” says Brandon Fitzgerald, director of client engagement for Lucintel, a global management consulting and market research firm specializing in the composites industry. “There’s less supply coming out of the Asia-Pacific region that was once a hub of low-cost raw material for the rest of the world. Now they’re consuming much more internally, and that’s leading to certain price increases globally.”
This shift in consumption also impacts carbon fiber availability, as short-tow fibers are largely sourced from Asia. “It’s very hard to source materials for specialist applications, including aerospace-grade carbon fiber,” Vineeth says. “Local suppliers never stock it and, in most cases, there is significant lead time from overseas.”
Material availability isn’t the only impediment manufacturers face. Fitzgerald notes that local and regional freight bottlenecks – particularly in the U.S., where the trucking industry has been hit hard by labor shortages – have made it increasingly difficult to procure certain raw materials cost-effectively. Today’s global shipping container shortage, driven by COVID-induced border shutdowns and trade imbalances, is only adding to the existing problem.
Keeping all this in mind, Wuest notes that composites fabricators have the added difficulty of managing some raw materials’ comparatively short shelf life. “They do not last forever,” he says. “That might cause issues with demand in the downturn, especially in industries where they use prepregs.”
Vineeth says local manufacturers are adapting to these risks by increasing their raw material stock levels. “Most local suppliers have placed advanced orders with overseas providers to avoid supply delays,” he says.
Fitzgerald echoes this sentiment. “A lot of people are putting in orders right now because they want to try to get ahead of the price increases they see coming as a result of shortages in the market,” he says. “People have backup suppliers, they have tertiary suppliers, they have emergency plans – but now they’re having to resort to them and it’s creating additional costs.” At present, suppliers seem to be passing most costs on to customers, but in some industries those customers are struggling with their own challenges in meeting demand.
Evaluating the Ecosystem
OEMs face tremendous disruption today, and that should give manufacturers reason to pause. Management consulting firm Oliver Wyman is projecting that the COVID-19 pandemic will impact the aviation industry’s growth for the next decade. Boeing has already reduced its 10-year market outlook for new aircraft by 11%. In automotive manufacturing, plant closures due to COVID followed by critical semiconductor shortages are causing production delays to mount. In the midst of these delays, virtually all major automotive OEMs are beginning their transition to electric vehicles. This move is driving component manufacturers to reevaluate their offerings to remain competitive.
Given these changes, Wuest suggests now is the time for composites companies to evaluate their manufacturing ecosystems. Typically, industries with only a few suppliers or consumers have a vested interest in keeping the entire ecosystem healthy, he notes. It’s not uncommon for OEMs or Tier 1 suppliers in some industries to actively talk to their competitors about sharing components. “They try to find a solution together because they all know if that supplier goes bankrupt, they are all left without anyone that can produce the quality product needed,” Wuest says.
There is already a great deal of collaboration along the composites value chain, Fitzgerald adds. “It’s not easy to work with composites, and there are knowledge reservoirs in different places, so there’s a lot of collaboration that happens throughout the value chain.” As manufacturers touch base with suppliers in the year ahead, Fitzgerald advises asking about the health of these companies and determining how to support them during these disruptions.
“Provide your supplier with your material forecasts well ahead,” Vineeth advises. For suppliers, he suggests, “Work along with customers and plan production and supply arrangements based on their forecasts. Inform customers well ahead if the expected delivery dates are not achievable.”
In today’s challenging supply environment, information is valuable. “Sharing data is sharing power,” Wuest says. “Everybody proclaims that data is the new gold, yet most have not figured out how to use that gold.”
Growing Digital Connectivity
Parimal Kopardekar, director of the NASA Aeronautics Research Institute, offers a suggestion for better deploying data. “Lack of digital network connectivity to lower tiers have challenged demand aggregation and forecasting-related considerations,” he says. “If lower tier suppliers could understand the forecast better, they can aggregate the raw material sourcing much more efficiently. Sharing the demand forecasting with lower tiers is critical to overall efficiency and throughput.”
He suggests that a lack of credible forecasting and forecast sharing is partly to blame for the limited supply of carbon fiber materials and resins available to meet automotive and aerospace demand in particular. “Lack of high-volume production with high-quality materials continues to be a bottleneck,” he adds.