- 3 May 2017
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Aerospace, Defense, and ERP Working Together
What changes are in store for the aerospace and defense (A&D) industry in 2017? After years of diminished growth, A&D is ready to bounce back firmly this year — and for the immediate future, based on almost all indicators. Industry leaders, such as Deloitte, are particularly optimistic that trend lines will continue to rise. Read on to learn why experts are buoyed by the data, and in particular how cloud-based Enterprise Resource Planning (ERP) will factor into A&D’s resurgence over the next 4 years.
Defense Spending on the Rise
One of the most prominent factors encouraging growth is driven by higher defense spending and defense contractor expectations. Furthermore, the defense subsector should grow at a rate of roughly 3% in 2017 after years of declining growth.
According to the Washington Post, contractors expected to benefit most from the new administration include BAE Systems, Boeing, General Dynamics, Huntington Ingalls, Lockheed Martin, and Northrop Grumman. Nearly $55 billion could be added to the defense coffers.
New Administration, New Focus
The newly elected United States administration is increasing its focus on defense spending, with promises to increase the number of land and sea fleets, seen as a boon to missile manufacturers and ammunition companies. However, proposals to revise trade policies, particularly with China, could disrupt the aerospace supply chain on a global level.
This concern notwithstanding, Fitch Ratings boosted its overall 2017 outlook for A&D to “positive,” up from “stable” in 2016.
Taking Flight with Commercial Airline Production
CTND projects market-wide increases based on findings similar to those of Deloitte and Fitch, emphasizing that the backlog for new airplanes to replace outmoded crafts is at a historical high. Boeing and Airbus are expected to increase the number of aircraft produced by 8%. An increase in the capabilities of these new planes will drive digital manufacturing over the next 3 to 4 years.
Reconfiguring of manufacturers to a tiered system will organize output better, boosting both growth and demand. Further adoption of smarter software-as-a-service (SaaS) will only benefit A&D.
ERP Adoption: Cloud-Based Efficiency
Many A&D companies continue to seek cloud-based ERP to provide smoother functioning of its data and IT at large. With a supreme need for real-time information and data transparency, the aerospace and defense industry is expected to adopt ERP software at more aggressive rates than other industries.
This growth can be tied in part to cloud ERP services finally catching up to governmental security and compliance requirements. By efficiently managing maintenance and support costs, both commercial airlines and military contractors are poised to increase profit.
Emerging Market Sectors: Commercial Drones and Space Travel
New markets to consider over the next 4 years include commercial drones and commercial space travel. By 2020, the commercial drone market could increase by $125 billion as the FAA estimates a 1650% increase in the nation’s fleet. Identified Technologies, as an example of one company that makes drone software and sensors, announced that their revenues grew nine-fold in 2016.
SpaceX continues to open the doors to new business opportunities as the successful Falcon 9 launch and landing in January demonstrated the possibility for successful rocket reuse. Telecommunications, global positioning, and other industries will benefit from further development by SpaceX.
A&D, ERP, and You
Overall, the current projections peg growth at anywhere from a conservative 2% to a robust 5%, with unequivocal agreement that defense spending will pace the overall A&D industry. Other beneficial factors include new wealth in the Middle East and Asia, relatively lower commodity prices (including crude oil), and strong passenger demand for commercial flights.
Being prepared for compliance protocols, understanding global supply and distribution chains, and innovating continuously are the keys for any company handling ERP software for A&D. How do you see ERP benefitting the industry?