Advanced manufacturing firms have been advised to check the stability of their suppliers in the wake of the US government’s proposed trade sanctions on Bombardier.
Speaking exclusively to SM, Richard Wilding, professor of supply chain strategy at Cranfield School of Management, said: “If I was in an industry buying high tech components I’d be asking the question, 'Are my first tier suppliers exposed to this, and what do I need to do to support those suppliers?'”
Wilding said today’s trade sanctions on Bombardier were a classic example of environmental supply chain risk.
The US Department of Commerce proposed a 220% tariff on Bombardier’s C-Series planes sold in the US after it found in favour of rival Boeing in an anti-dumping case brought by the plane maker.
As well as obvious implications for the Bombardier plant in Northern Ireland, the effect on Bombardier’s business could ripple though the sector's supply chain network as a whole, Wilding said.
“The key thing really for the supply chain as a whole is – you’ve got to understand it’s a network and competition is not between individual companies, it’s between the supply chains they’re part of.
“So if suppliers are now put at risk this can start sending ripples out across the supply chain network and impact on the sector as a whole,” he said.
Firms need to start engaging with suppliers to find out if they are likely to be affected by a potential fall in business from Bombardier, and if so buyers should offering support such as reducing payment times to improve their cash flow.
This might also mean asking more stable suppliers to extend their credit dates. “Of course this is unpalatable but the reason you are doing this is to focus on recognising we’re part of a network and if one of these suppliers goes under it could compromise the whole supply chain network.”
Paul Adams, head of aerospace and defence at supply chain consultancy Vendigital, echoed Wilding’s advice and said supply chain visibility was key to protecting against future shocks caused by trade disputes.
“I wouldn’t want [a supplier] to be heavily dependent on one of my competitors and for me to be a marginal customer,” Adams told SM.
“You’re looking for suppliers that have a diverse range of customers, and you’re looking for suppliers that have a really robust load and capacity plan, so they understand their capability.”
It’s important to understand who your suppliers are and where they are based. “If you understand your supply chain right the way down to raw material level, you’ve got a much better chance of mitigating the potential impact of any tariffs before they have a negative impact on your business,” he said.
While most businesses still overwhelmingly see the benefits of free trade, Adams said there was speculation that Boeing timed its moment to “test [president] Trump’s metal” and his America First trade policy, adding that while the ruling itself wasn’t a massive shock, the size of the tariff imposed was.
A trade dispute isn’t something a company enters into lightly, Adams said. “However the political climate is as such that it make taking these decisions more, rather than less, likely.”
Boeing welcomed the decision to sanction Bombardier and said global trade “works only if everyone plays by the rules”.
In a statement Bombardier said it strongly disagreed with the ruling and described the proposed sanction as “absurd and divorced from the reality” of the industry.
A final decision on the anti-dumping case and any sanctions against Bombardier is expected in December.
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