Low Cost Country Sourcing : Canadian Aerospace Perspective

Executive Summary

Business Drivers and Linkages

Canadian aerospace supply chain managers are now faced with the challenges of efficiently combining low cost, global sourcing and supply chain agility at the same time. Low Cost Country Sourcing (LCCS) is strategically important for 87 percent of Canadian aerospace manufacturers. ¹

A key driver of LCCS implementation is customer pressure. Assemblers are requesting suppliers to have production capability in LCC while there continues to be increasing demand from emerging markets consisting mainly of smaller price-conscious airlines with increased bargaining power.

There is a high percentage of foreign direct investment (26 percent) and joint ventures (32 percent) in this sector as there is an industry trend to build a low cost manufacturing base in emerging countries.  ¹³

Origin and Type of Products Sourced

China and Mexico are the main locations of LCCS of goods with most Canadian aerospace manufacturers sourcing from the countries. They are mainly sourcing LCC products that qualify as intermediate goods (86 percent) because different components are often manufactured from different places and then transferred for assembly. ¹

Key Performance Indicators (KPI)

More than 84 percent of aerospace manufacturers achieve on-time shipments of North American products more than 90 percent of the time. However, very few achieved on-time shipments of LCCS products.  ¹

Since initiating LCCS, a majority of aerospace manufacturers increased their lead time, inventory level, logistics cost and Total Landed Cost (TLC), while decreasing the quality of the goods.

Best in Class Analysis

Best practices of aerospace manufacturers who decreased their TLC include establishing secondary source(s) in less risky regions/countries, using air transportation mode and having dedicated resources/team on global sourcing.

Of aerospace manufacturers who are able to achieve LCC on-time shipments more than 75 percent of the time, 100 percent of them have in place a supply visibility program compared to 17 percent who achieve less LCC on-time shipments less than 75 percent of the time. ¹

---

To access the Portable Document Format (PDF) version you must have a PDF reader installed. If you do not already have such a reader, there are numerous PDF readers available for free download or for purchase on the Internet:

• Adobe Reader
• Foxit Reader
• Xpdf
• eXPert PDF Reader