Gartner Group recently published two reports summarizing the trends happening in the A&D supply chain markets – both the commercial and government sectors. Below are the highlights:
Commercial Supply Chain Challenges:
Strong demand for next-generation, fuel-efficient aircraft and a need to upgrade existing legacy systems are driving order backlogs and creating great demands for industry
partnerships between suppliers and original equipment manufacturers (OEMs).
In addition, global A&D deals and M&A increased in 2018 and are expected to remain strong as pressure on suppliers to reduce costs and increase production rates continues in 2019. Furthermore, M&A remains strong into the middle of 2019 with the recent announcement of a merger between Raytheon and United Technologies.
To meet this demand, supply chain leaders will need to adopt three key strategies:
- Ensure procurement functions are involved in any M&A activity as early as possible, for example, predeal stage, where 72% of all cost-saving M&A activity typically achieves between zero to 25% savings.
- Increasing demand for modernizing existing legacy systems, which will drive efforts to reduce total costs of SWaP-C upgrades.
- Digitization of the supply chain. According to Gartner research, digital initiative pilots are proving difficult to scale. In the 2019 Gartner CIO Survey, 41% of organizations are either designing or delivering on digital initiatives. However, only 33% have moved their digital business initiatives to scale or are harvesting results.
On the Government side, the challenges are similar to Commercial around procurement and modernizing legacy systems. Other things to note:
U.S. and global defense spending is on the rise. The 2019 U.S. Department of Defense (DoD)
budget request revolves around modernization of legacy systems and innovation through
■ Digital capabilities that support DoD’s digital business strategy (mission objectives):
■ Artificial intelligence (AI)
■ Autonomous systems
■ Directed energy weapons
Led by growing commercial aircraft production and strong defense spending, the aerospace and defense (A&D) industry, following many years of constrained spending and limited growth, is currently experiencing a major transformation.
In looking at where spending and priorities are taking place in Government Sourcing and Procurement:
We are seeing interest with our A&D customers on both sides move toward their digitalization efforts by adopting PLM systems to help manage the massive flow of data that needs to be tracked for any physical asset created. In essence, we are helping create a digital thread (VIDEO). The digital thread supports the creation of a digital twin and manages the entire change management process. Especially since physical assets last 30 years or more on the Government side, less so on Commercial but still a decade or more. Having traceability to manage all the variants in the development process is critical as organizations struggle to retain tribal knowledge. Technical data packages have also come up as a challenge, specifically how to share and distribute these super large file packages with their supply chain partners.
If you would like to learn more about how we are managing technical data packages and strategically using 3D PDF files to save time and money across DOD and Commercial aerospace and defense customers, please Contact Us. We’d love to share some of our recent successes.
Finally, if you’d like to receive a copy of either report, drop me a message here and I’ll email you out a copy.