Managing supply chain risks in A&D

Airworthiness issues, trade wars, and supply chain disruptions have caused significant turbulence for the aerospace and defense (A&D) industry in recent years. The COVID-19 pandemic and resulting supply chain bottlenecks escalated these issues, especially ones related to procuring critical parts and components.

Unfortunately, some companies with outdated, legacy ERP and disparate systems found that risk-mitigation strategies were limited because of lack of visibility into end-to-end processes—including the supply chain.

A single company may participate in multiple roles and business models with its supply chain partners, requiring multiple points of interaction to maintain competitive cost and service levels. These complex relationships present some unique challenges that impact the efficiency and effectiveness of the A&D supply chain.

More than other manufacturing industries, A&D depends on a particularly high concentration of sole-source suppliers. Procurement managers must identify suppliers based on material specifications, costs, transportation modes, and delivery timelines—perhaps even planning out over the next 10 years. For trusted suppliers, this has the advantage of ensuring quality, minimizing production downtime, and optimizing costs. However, supply disruptions, such as delivery delays or quality issues, can lead to missed program milestones and cost overruns.

Available resources

The pandemic caused significant disruptions—perhaps most significantly because A&D suppliers were either directly or indirectly affected by facility shutdowns in China, a critical source of rare earth elements. With a dependence on sole-source suppliers—especially for the defense market—A&D companies have a vested interest in ensuring the viability of sole-source suppliers.

Single-source suppliers are similar to sole-source suppliers, with one critical distinction. A sole-source supplier is truly the only possible supplier available. With a single-source provider, multiple potential suppliers may exist, but only one meets the requirements of the commercial aviation industry or for government or military use.

These requirements include standards such as the AS9000, AS9120, and ISO 9000 series certifications for quality management; the new Cybersecurity Maturity Model Certification (CMMC) for US DoD contracts; and global trade compliance regulations for conflict materials and sanctioned countries. It takes time for manufacturers to obtain these certifications and to be qualified as “prime vendors.”

Weathering long lead times and large inventory demands

Long lead times is one of the biggest supply challenges for the A&D industry. It can impact performance metrics such as on-time delivery and can even lead companies to carry large levels of inventory to avoid potential supply shortages. An OEM or tier-1 supplier must consider the cascading effect of lead times throughout the entire supplier network to meet their delivery schedules.

Unanticipated disruption at any part of the supply chain can lead to order cancellations and performance penalties. When manufacturers can rely on the stability of a large order backlog for production planning, this improves the reliability of the entire supply chain through investments in advanced technology, more efficient processes, and workforce development.

A big part of supply chain risk management is building resilience. And that applies not just to the individual companies, but the entire global network of suppliers and service providers that support A&D across the world. Securely sharing data across this global network is critical.

Care must be taken about dual-use technologies—environments that manage both commercial and defense work. A greater focus on cybersecurity as part of supply chain risk management and resilience is emerging. The CMMC helps define requirements and where and how sensitive data is stored. Leading companies are turning to the cloud as a way for them to become more secure.

Infor supply chain solutions

The key to end-to-end supply chain visibility is to have all trading partners connected with each other via a multi-enterprise supply chain business network (MESCBN). An MESCBN is much more than just a data transmission network for EDI messages, an ERP system, or a stand-alone supply chain tower. An MESCBN connects with many other networks, provides a centralized source of shared information across enterprises, enables network-wide collaboration, and more.

Infor Nexus™ is a leading business network for multi-enterprise supply chain orchestration and optimization—connecting businesses to the entire supply chain for enhanced supply chain visibility, collaboration, and predictive intelligence. With advanced planning, execution, and finance capabilities, businesses can intelligently sense and respond to supply chain activities in real time.

Infor supply chain solutions enable A&D organizations to:

• Identify key suppliers and build collaborative risk-sharing relationships

• Map out the supply chain at multiple levels to identify key risk points and relationships for proactive management
• Monitor and manage multiple supply chain tiers and dimensions using analytics to quickly identify and address problems
• Support unique EDI requirements of trading partners
• Incorporate global trade compliance requirements in a secure, end-to-end supply chain

Actionable advice

The best way for A&D companies to increase supply chain resilience is through a digital ecosystem that creates value for all stakeholders by sharing data, collaborating on business processes, and broadcasting clear and stable demand signals across the supplier network. Increased visibility and transparency will improve supplier relationships and enable more efficient production planning.

Learn more about Infor solutions for A&D.

About the author:
Edward Talerico is Infor's Sr. Director, Product Management for the Aerospace and Defense industry