Honeywell Aerospace is working to fix a supply base that has failed to keep up with customer demand. The aviation systems and components company, which completed its separation from Honeywell on June 29, saw about 2% of its roughly 3,000 suppliers underperform in the first half, President and CEO James Currier said on an August 5 earnings call. While the percentage is small, these lagging suppliers have hindered the company from achieving 8% year-over-year order growth.

"Frankly, I underestimated the time required to implement and see the results of the corrective actions we have taken and are taking," Currier said.

Currier said the company is rapidly advancing process improvements to gradually increase capacity.

"While we urgently address near-term bottlenecks and work to resume strong output growth as quickly as possible, we believe the strategic actions underway will lay the foundation for higher visibility and performance in 2027 and beyond," Currier said.

Honeywell Aerospace is reshaping its supply chain by improving planning with suppliers and providing them clearer visibility into future demand, Currier said. The company is also more closely aligning inventory planning with delivery schedules.

To increase parts inflow, Honeywell Aerospace is strengthening control over its supply base, Currier said. In the first half, the company added supply sources for more than 50 constrained parts and plans to add another 50 in the second half of 2026. This will increase the number of multi-sourced parts by 15%.

Currier said the new supply sources will also support capacity expansion for certain critical minerals, thereby strengthening output growth in 2027.

Senior Vice President and Chief Financial Officer Joshua Jepsen told investors that Honeywell Aerospace is making significant capital expenditures on supplier tooling to improve capacity and yield and reduce rework. The company has also quadrupled investment in internal manufacturing and multi-sourcing.

Currier noted that a single underperforming supplier can have a significant impact. For example, one supplier's overdue deliveries amounted to approximately $15 million to $16 million, which is negligible relative to Honeywell Aerospace's $18 billion in revenue.

However, a single part from that supplier could unlock hundreds of millions of dollars in revenue, making the procurement cost disproportionate to its impact, Currier said.

"The entire industry is supply-constrained. All companies in our industry are working hard to increase output across the board," Currier said. "But this small group of suppliers has some very specific issues that are really limiting our output, revenue, and profitability, which clearly presents challenges but also opportunities to unlock."

Jepsen said supply constraints limited the company's year-over-year output growth to 3% in the first quarter and 4% in the second quarter—both below expectations. The current forecast for the rest of the year is output growth of about 4%.

At its June Investor Day, Honeywell Aerospace executives discussed plans to expand and strengthen the company's supply chain and manufacturing operations, targeting at least $6.5 billion in earnings and $4 billion in cash flow by 2030.