Aerospace execs seek to avoid marketplace collision

Sitting in front of a group of IT leaders from the world's largest aerospace companies, Inc. CEO Duncan Alexander warned that a glut of online exchanges is cannibalizing the industry's potential profits from the e-commerce revolution.

Chicago-based Aerospan is one of more than two dozen marketplaces formed by airlines, aircraft manufacturers, parts suppliers and software companies, all promising to automate supply chains more effectively than electronic data interchange has to date.

Attendees at this week's EyeForAerospace conference here said they agree that there isn't enough business to go around.

"The amount of fragmentation in the industry, in my view, is not healthy," Alexander said. "The people who are right now seeing the e-business dividend are the software vendors."

But many suppliers, such as Woodward Aircraft Engine Systems, have to respond to customers, including GE Aircraft Engines, Honeywell International Inc. and Raytheon Co., that have created competing exchanges, said Greg Crowley, a product manager at Woodward.

"We can't join them all," Crowley said. The company's goal is to join three or four, which should help increase its sales volume. Many conference attendees said that was a workable number, but no one knows which exchanges will survive.

Hedging its bets, The Boeing Co. helped form Exostar Inc. and plans to operate in other exchanges, according to T. Kyle Quinn, Boeing's director of e-business information systems. "We need to have all our bases covered," Quinn said.

Going It Alone

Complicating matters is the fact that Boeing's rival, Europe's Airbus Industrie, avoids exchanges and instead networks with its suppliers in private exchanges. "We want to go the way we are today; we stay alone," said James Rutledge, director of customer material services at Airbus.

Thomas Gulledge, a professor at George Mason University's Enterprise Engineering Laboratory, questioned the viability of online marketplaces because they present a low-margin environment for suppliers. "Suppliers are getting squeezed by the technology on one side and the dollars on the other," Gulledge said.

"We're spending multiple dollars to build the same functionality in all of these exchanges," said Exostar CEO Andy Pyler. "That's a sin."

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