Measuring value‐leverage in aerospace supply chains

Abstract

Purpose

The traditional value chain has changed under the influence of globalisation, lean thinking and the value leverage towards suppliers in the supply chain. The leverage of value by the focal original equipment manufacturer (OEM)‐company to the supply chain has caused the focal OEM‐company to transform into a large‐scale system integrator (LSSI). The LSSI was defined according to the Petrick's definition. Indicators that measure the value‐leverage by these LSSI companies have not been found in literature. The purpose of this paper is to describe indicators that measure value‐leverage and illustrates that LSSI companies in the aerospace industry have a value‐leverage capability, using these indicators.

Design/methodology/approach

The authors' main research question is: “How to measure value‐leverage by LSSIs in the aerospace industry?”. As value‐leverage indicators have not been studied before, a literature study was carried out to develop a set of indicators which were tested in a quantitative analysis, using secondary data from 41 aerospace companies. Second, the value‐leverage indicators were applied to the aircraft LSSIs. The industry samples consisted of the global companies in the aircraft OEM industry and the relevant financial and company data were collected from the companies' public financial data, spanning a time frame of 14 years (1996 to 2009). A case study was performed on large‐scale aircraft system integrators, as a sample of the aerospace OEM industry, to demonstrate the effects of value‐leverage by aircraft LSSI companies.

Findings

With the new indicators, this research shows value leverage of aerospace OEMs and aircraft LSSIs as a sub group of the sample. The related indicators showed a change in leverage over time, indicating the leverage capability of aerospace OEMs. More in‐depth analysis on aircraft LSSI companies showed that aircraft LSSI with high correlation on the value‐leverage variables are more in value balance compared with aircraft LSSI companies scoring lower on the variables.

Research limitations/implications

This research has been limited to the aerospace OEMs. Data from secondary (public) sources were used, such as financial reports over a period of 14 years. Further research is necessary to develop indicators for other sectors of industries, such as automotive, medical instruments and construction, as well as to further improve the understanding of the outcomes of this study.

Practical implications

The new indicators measure value‐leverage of aerospace OEMs in general and aircraft LSSI companies. These companies could be compared on their capability of value‐leverage. Management of these firms can use the indicators to further improve their capability of value‐leverage on the supply chain regarding co‐development and co‐production of aircraft and related systems.

Social implications

It is useful for the executive management of aircraft LSSIs to balance the value leverage of their companies regarding R&D, customer demand and supply chain based production.

Originality/value

The paper identifies indicators that measure the capability of the aerospace OEMs to leverage value on supply chains. The found indicators form a preliminary model, which contributes to the usage of theories on lean manufacturing, supply chain management, value networks and open innovation.

Citation

Beelaerts van Blokland, W.W.A., Fiksiński, M.A., Amoa, S.O.B., Santema, S.C., van Silfhout, G.‐. and Maaskant, L. (2012), "Measuring value‐leverage in aerospace supply chains", International Journal of Operations & Production Management, Vol. 32 No. 8, pp. 982-1007. https://doi.org/10.1108/01443571211253155