Honeywell Aerospace is trying to fix a supply base that has failed to keep pace with customer demand.
The aerospace systems and components company, which finalized its spinoff from Honeywell on June 29, found roughly 2% of its 3,000 suppliers underperformed in the first half of the year, President and CEO James Currier said on an Aug. 5 earnings call. Though few, the laggards prevented the company from matching an 8% year-over-year increase in orders.
"Frankly, I underestimated how long it would take to implement and see traction from the corrective measures we had taken and are taking," Currier said.
The company is quickly making process improvements to incrementally increase production capacity, Currier said.
"As we work urgently to address near-term bottlenecks and return to robust output growth as quickly as possible, we believe the strategic actions underway will create a foundation for greater visibility and performance in 2027 and beyond," Currier said.
Honeywell Aerospace is revamping its supply chain by improving planning with suppliers and giving them better visibility into future demand, Currier said. The company is also aligning inventory planning more closely with delivery schedules.
To increase component inflow, Honeywell Aerospace is tightening control over its supply base, Currier said. It added sources for more than 50 constrained parts in the first half, with plans to add another 50 in the second half of 2026. That would increase multi-sourced components by 15%.
The additional sources will also support capacity expansion for specific critical minerals, strengthening output growth in 2027, Currier said.
SVP and CFO Joshua Jepsen told investors Honeywell Aerospace is making significant capital expenditures on supplier tooling to raise capacity and yields and reduce rework. The company is also quadrupling its investment in insourcing and multisourcing.
A single underperforming supplier can have a significant impact, Currier said. One supplier, for example, was roughly $15 million or $16 million past due in deliveries, a small amount relative to Honeywell Aerospace's $18 billion in revenue.
Still, one component from that supplier can unlock hundreds of millions of dollars in revenue, making the purchase cost disproportionate to its impact, Currier said.
"The industry overall is supply constrained. And we within the industry are all working to increase output across the board," Currier said. "But these are some very specific issues with this handful that are truly limiting our output, revenue and profitability, which creates challenges, obviously, but also opportunities to unlock."
Supply constraints limited the company's year-over-year output growth to 3% in the first quarter and 4% in the second — both below expectations, Jepsen said. The current forecast for the rest of the year is roughly 4% output growth.
At its investor day in June, Honeywell Aerospace executives discussed plans to scale and strengthen the company's supply chain and manufacturing operations to generate at least $6.5 billion in earnings and $4 billion in cash flow by 2030.
