Aerospace Industry Lures Suppliers Online

SAN FRANCISCO (03/03/2000) - Just as ford and general motors are attempting to lure their suppliers into their electronic playgrounds, aerospace companies are also getting into the act.

Like the automotive industry, several players, big and small, are creating various types of Web sites aimed at partially automating some part of the manufacturing supply chain. And like automotive, there are two fundamental issues that lie beneath these efforts - who owns them and how they will relate to each other.

AviationX has clear answers to both of those questions. The early-stage startup has raised $1.6 million from individuals including Nick and Tim Stojka, the brothers who cofounded PlasticsNet, one of a handful of sites among the first generation of Internet exchanges. The Stojkas recently sold a chunk of their company to industry heavyweights, including Eastman Chemical. Other Internet exchanges in industries ranging from oil to chemicals have made similar moves, betting that teaming with industry giants will help drive business to their fledgling marketplaces. Without that help getting a critical mass of transactions, the thinking goes, these exchanges will never be able to establish themselves as efficient ways to match buyers and sellers.

But AviationX leaders say the company will not take that route. "There could be compromises being aligned with a certain manufacturer," says VP Jeff Saunders.

He says that airlines buy parts and supplies from thousands of vendors, so it doesn't make sense to buy aftermarket parts and supplies through a site controlled by one or two giants.

Other companies trying to become central trading hubs for the aerospace industry are taking different approaches to the ownership issue., for example, is backed by United Technologies and Honeywell, which claim to account together for about 40 percent of commercial aircraft parts, and have combined aerospace sales greater than $20 billion. The site, which is expected to begin operating in the second quarter, hopes to provide a forum for airlines to trade spare parts among themselves, as well as a place for Honeywell and United Technologies to flog their wares.

The two companies each own 40 percent of the venture while the remaining 20 percent is owned by i2 Technologies, which provides the software. United Technologies spokesman Peter Dalpe says the partners are sensitive to the need to be operationally unbiased and are willing to take on new equity owners. He also says he'd be happy to take on a partner like GE.

But GE, which makes engines that compete with those made by United Technologies subsidiary Pratt & Whitney, is creating its own site for exclusive use by about a dozen airlines that use its aircraft engines.

One obvious question for all these aerospace sites - and for b-to-b Web sites in other industries - is if and when they will allow direct connections among themselves so that their customers can move among sites.

And there is an even more fundamental question: Will airlines use these sites at all? Airlines are extremely careful about the way they buy and handle spare parts because one bad bolt can lead to catastrophe. John Sterling, VP of e-commerce at iProcure, a software company that does a protion of its business with airports, says safety concerns are why airlines will probably not alter their procedures for buying parts and won't gather around one central exchange.

"Everyone does their own thing," says Sterling. "Changing to a new way is just too scary."

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