​AEROSPACE STATES ASSOCIATION

NOTAM- Notice to ASA Members

ASA NOTAM - JUNE 2018

Location Trends in the Aerospace Industry [1]

NEWS:  
A natural geographical shift, lean supply chain management, and a new approach to incentives offerings are influencing aerospace companies’ locations decisions.  This is interesting to understand where significant geographical changes are being made in the aerospace industry.

ANALYSIS:
The Airbus Global Market Forecast for 2014-2033 forecasts that air traffic will grow at 4.7 percent annually—primarily attributed to lower oil prices, increased passenger travel demand, strong equipment replacement cycle and continued technological advancement. [2]  Increased demand for American workers is predicated upon 2 key factors—safety of operations in the USA versus off shore locations and security risks and violent activity in today’s geopolitical climate.

Supply chain management and performance predictability are important in the aerospace industry.  The “lean” supply chain, taken from the automotive industry ensures that the supplier network is streamlined, with integrated procurement and logistics to ensure a true partner relationship.  Just in Time (JIT) delivery principles as well as “Kanban” system for inventory management translate a “reactive” supply chain to a proactive” supply system!  The synergy of suppliers, from the Original Equipment Manufacturer (OEM) through tier 4 and tier 5 suppliers cannot be overemphasized!

Site location incentive offerings have rapidly transitioned from tax abatements, exemptions and rebates for property, utility, sales and usage taxes and performance based cash grants to customized incentives that are specifically based on the particular needs of the aerospace company and the community it may call “home.”

Examples of customized incentives include site development costs, utility relocation challenges, access roads, etc.  Alabama recognized that workforce education needs were significant when Airbus elected to locate in Mobile.  The Alabama Industrial Development and Training organization developed the Alabama Aviation Training Center to prepare workers for the high technology aerospace sector.

IMPLICATIONS FOR ACTION:
Changes in tort law, willingness to cut “red tape” and reduce bureaucracy are key components in attracting an aerospace company to your state.  Remember, this has all been done before, someplace! There is no reason to “reinvent the wheel.”  However, each state and Economic Development Officer (EDO), and each aerospace company has unique and special ideas, talents and needs that when addressed from a collaborative viewpoint, can achieve the goals of all participant stakeholders.

Actions by Lieutenant Governors (LTG) and Economic Development Officers (EDO) could include the following:

Establish a state-wide study group to analyze rules, regulations, and jurisdictional requirements that are difficult or onerous to comply with.
See what rules, regulations or jurisdictional requirements can be changed, adapted, waived, adjusted, relaxed, or implemented in order to make this a true win/win situation.
Coordinate with manufacturing groups, the state chamber of commerce and local chambers of commerce to have a full stake holder input into how rules can be developed which are complimentary to new business development.

 
Aerospace Growth Gets Turbocharged [3]

NEWS:
This article addresses the growth in the aerospace and defense sectors expected in 2017.  Although a 1 year old, the analysis is both salient and germane to our industry.  Read more here: Aerospace growth gets Turbocharged.

ANALYSIS:
 Deloitte produced the following forecast for 2017.




















The key takeaways from a turbocharged growth environment include the following:  

  • Revenue growth is up, operating profits are double digit
  • Earning for commercial aerospace sub sector expected to grow by 20 percent
  • Defense spending increases after years of defense budget decreases


Factors that make a particular state more attractive to an aerospace company than another  appear to be the following:

  • Education—a system of systemic integration from the K-12 to the community college and 4-year levels.

                    Seamless integration, workforce development, ease of college credit transfer between institutions, high school

                    dual credit programs and “workforce” ready training for high school and community college students are all

                    elements in states that possess high aerospace sector company presence.

  • Collaboration between state agencies—Work force development, Economic development officers, State boards of higher education, the K-12 education, a “can do” attitude contrasted to “we don’t do it that way here” approach are significant in successful states that have attracted and continue to attract aerospace companies.
  • A tax structure which is “friendly,” whatever that word means seems to be important.  We don’t specifically define “friendly” because it has different connotations to different entities—however, taxes are certainly important to site locations.
  • Open spaces with good air, rail and ground transportation infrastructure being totally integrated remains important.
  • Rich, robust wireless infrastructure, “wired” broadband environments throughout either the state or certain parts thereto are deemed important to many companies.

                       Much communication today is performed through smart phones, tablets and other hand-held devices.

                       Connectivity is a given by today’s work force.


IMPLICATIONS FOR ACTION:

  1. LTG’s and EDO’s could develop an inventory of what each state possesses—every state and locale is unique—capitalize on that uniqueness—make it a benefit instead of an handicap
  2. Identify state uniqueness and ascertain how that is beneficial to any aerospace company
  3. Review state integrated collaboration between state government agencies, manufacturing associations, educational institutions to develop a pathway forward employing the uniqueness that is only in your states.  Be creative, use “out of box” thinking—you are unique for a reason—exploit and develop that uniqueness!


 

USDOT Announces BUILD Program to Replace TIGER [4]

NEWS:
The US Department of Transportation (DOT) announced on April 20, 2018 a Notice of Funding Opportunity (NOFO) to apply for $1.5 Billion in discretionary grant funding through the Better Utilizing Investments in Leverage Development (BUILD) Transportation Discretionary Grants program.  $15 Million of the $1.5 Billion is allowed as awards for planning, preparation or design of eligible projects.

The BUILD program replaces the pre-existing Transportation Investment Generating Economic Recovery (TIGER) grant program. The program is designed to fund surface transportation infrastructure that has a significant local or regional impact.  BUILD funding can be used to support roads, bridges, transit, rail, ports or intermodal transportation.

The funding for this program is available through September 30,2020.  The maximum grant award is $25 Million and no more than $150 Million can be awarded to a single State, as specified in the FY 2018 Appropriations Act.  At least 20 percent of the funds must be awarded to projects located in rural areas.  Rural areas are defined in paragraph C3ii of the NOFO, Rural definition for this program.

ANALYSIS:
To provide technical assistance to a broad array of stakeholders, DOT is hosting a series of webinars during the FY 2018 BUILD grant application process.  Details and registration information regarding these webinars will be made available at https://www.transportation.gov/BUILDgrants

The deadline to submit an application for the FY 2018 BUILD Transportation Discretionary Grants program is 8P.M, EDT,  July 18, 2018.

This program is obviously a step forward in providing funding to states who have sites in rural areas which with some infrastructure improvements, could be easily viable in attracting new aerospace manufacturers.  The timing is tough, just 60 days between now and the proposal submittal date, however, identifying 2-3 staff members to review existing infrastructure opportunities in surface transportation and seeing how those opportunities can fit into this program may be very worthwhile.

IMPLICATIONS FOR ACTION:

State DOT directors, in conjunction with LTG’s and EDO’s, could identify surface transportation projects which this funding may be applicable to.  If project is applicable to funding, then develop a proposal submission addressing the state need and benefit.  Additional information is contained in the BUILD Fact sheet and the BUILD NOFO.  


[1]http://www.areadevelopment.com/Aerospace/q3-2016-auto-aero-site-guide/location-trends-aerospace-industry-670022.shtml
[2] Ibid 
[3] Source:  https://businessfacilities.com/2017/04/aerospace-growth-gets-turbocharged/
[4] https://www.transportation.gov/BUILDgrants​




ABOUT THE AUTHOR - JOE MICHELS, Ph.D., P.E., C.P.L.


Joe Michels, Ph.D., P.E., C.P.L. is the principal at Solomon Bruce Consulting LLC.  Solomon Bruce Consulting, based in Fort Worth, TX, is a management advisory services practice which focuses in business process improvement, business strategy, supply chain management and government procurement.  Dr. Michels is a retired USAF senior officer.  He served in the Air Force Chief of Staff’s office as a logistics policy analyst, commanded an award winning F-16 Maintenance squadron at Moody AFB, Georgia, a Logistics Group at Bolling AFB, DC in addition to serving as the Deputy Commander at Thule AB, Greenland.  He served as the Dean of the School of Systems and Logistics at the Air Force Institute of Technology, Dayton, Ohio.  He was the Dean of the College of Business at Montana State University-Billings prior to joining Solomon Bruce Consulting LLC.   He is the Chair of the national examination committee for the design and development of the Industrial and Systems engineering professional licensure examination.   Dr. Michels holds graduate adjunct faculty appointments in the Colleges of Business at both the University of North Texas, Denton, Texas and the University of Texas, Arlington.  He holds earned degrees from Weber State University (B.S.), University of Southern California (M.S.), Texas A&M University (Ph.D.), University of Oklahoma (M.P.A.) and the Naval War College (M.A.)  He was selected as a Forrestal Scholar at the Naval War College.  He is actively involved in public schools in Fort Worth Texas. Dr. Michels is a member of the Fort Worth Rotary (12thlargest in the US), serving as the chair of the Program Committee and is a Paul Harris Fellow.  He is a member of the Board of Directors of the Lone Star Chapter of the NDIA.  He has been a national keynote speaker in a wide variety of fora regarding aerospace, aviation, and business.