- 28 February 2018
The aerospace and defense (A&D) industry is enjoying slow yet steady growth. The industry grew by 2.4% in 2016 to $674.4 billion, which slightly outpaced the United States’ GDP growth of 2.3%. This was driven by continued growth in the European A&D industry, increased global defense spending in the US, as well as increased revenue in sectors such as original equipment manufacturers (OEMs) and electronics.
Nevertheless, this incremental growth shouldn’t be taken for granted. A&D manufacturers, in particular, face challenges across their operations from raw materials procurement to new technologies that will impact production. Below, we examine some of the major challenges facing A&D companies, along with some strategies to overcome them.
1. Supply Chain Risk Management
A&D companies always need to be aware of the risks inherent in their supply chains. Unpredicted, sudden shifts in demand can affect production levels with little time to adjust supply. Last-minute design changes may force companies to re-evaluate production processes on the fly. Political shifts can also affect the supply and sourcing of parts and raw materials.
Manufacturers should always be aware of the state of other players in their supply chain — including primary and secondary suppliers. Their circumstances can indicate key factors that may affect your own company’s operations.
Tip: Many companies find success in incorporating a two-pronged approach to risk management. The first should focus on managing spot buys (annual, quarterly, and monthly purchases), while the second should focus on managing long-term contracts with primary and secondary suppliers. An integrated ERP solution can give you better visibility into your supply chain, allowing you to monitor — and respond to — changes in supply throughout the production cycle.
2. Supply Chain Complexity Creep
Today’s supply chains work across two layers: physical equipment and digital information. Of course, the greatest benefit of digital information is that it allows for data analysis to improve operations. Streamlined supply chains can lead to lower costs and improve project completion times, giving companies a huge competitive advantage.
Yet there’s a dangerous drawback to layering digital technology over equipment: complexity creep. Digital technology can sometimes lead to a slowing down of processes as workers learn the new workflow and how it fits into the entire supply chain. In some cases, this slowdown can outweigh the supposed benefits of using the technology.
Tip: Incorporate an ERP system into your manufacturing process that can monitor and analyze data at every step of production. This will allow you to make faster decisions guided by accurate, real-time information about your operations. With an easy-to-use system that collects and stores data all in one place, leveraging ERP can help your organization avoid complexity creep even as you add new technologies and devices to your operations.
3. Shortage of Skilled Labor
Despite its steady growth, the A&D industry faces a labor shortage. Today’s training programs don’t move fast enough to supply the industry with new workers and manufacturers are challenged with finding ample candidates to replace the aging workforce. Furthermore, A&D companies need workers with highly specialized skillsets in order to manage complex projects. Even when companies do find good candidates, they must take the time to get new hires up to speed on the existing processes in the organization.
Manufacturers also need to train new and existing workers in the technology that will drive the future of A&D — such as additive manufacturing, the blockchain, and the Internet of Things (IoT). This is especially important in aviation and aerospace, where digital transformation is happening swiftly and those who don’t adapt are in danger of being left behind.
Tip: Work with schools and programs to ensure students are receiving the necessary training (and encouragement) to work in the A&D industry — this could include offering insights on what skills should be taught, and speaking at school events. Leverage your ERP system to help fill the knowledge gaps between your experienced workforce and your new hires. An ERP solution acts as a company-wide repository of data and knowledge, easily accessible to all staff members.
4. AS9100 and ITAR Compliance
For an A&D manufacturer, being AS9100 compliant can make the difference between winning a new customer and losing them to a competitor. This standard allows a company to show their ability to provide products and services that consistently meet customer and applicable statutory and regulatory requirements. In order to achieve AS9100 compliance, manufacturers must be diligent in documenting and storing information, standardizing company best practices, and maintaining a strong quality assurance process.
International Traffic in Arms Regulations (ITAR) apply primarily to manufacturers that export defense articles or services outside of the US. To remain compliant with ITAR, companies must keep extremely thorough records of the sale and distribution of products and services, and show that they can reliably restrict access to data to only the necessary or intended parties. Being out of compliance (or out of date) with either AS9100 or ITAR can result in lost business deals, limited opportunities, and customer turnover; yet, it’s both costly and time-consuming for A&D manufacturers to stay on top of the current requirements for these industry regulations.
Tip: Use the monitoring capabilities of your ERP system to help manage compliance requirements for various regulatory bodies. ERP enables you to chart your supply chain from material sourcing all the way to product delivery, keeping accurate records available for your next AS9100 audit. Utilize approved supplier lists, quality clauses, and supplier surveys to manage risks and improve quality assurance. Your ERP solution can also help you manage ITAR compliance, through license identification management and denied party screening.
5. Embracing Additive Manufacturing
3D printing may still be in its infancy, but manufacturers are already looking to incorporate additive manufacturing (3D printing for manufacturers) into their workflows. Rather than create each part of a product separately, additive manufacturing allows for the creation of a complete, integrated product at once — ultimately saving on time and costs. The challenge for most companies comes in the time and costs associated with implementing additive manufacturing in the first place, as a brand new process.
Rather than view additive manufacturing as a threat to traditional manufacturing, companies should view it as another resource to add to their skillset. Embracing an entirely new method of production requires investment in new equipment, materials, and employee training — all of which is overwhelming for many manufacturers.
Tip: In order to embrace additive manufacturing, companies need the capability for real-time data collection and management, in order to track project predictions, costs, scheduling, supply chains, and more. Before you invest in new equipment and training, implement an advanced ERP solution (or update your existing system) in order to get the data you need at your fingertips. An integrated ERP solution allows manufacturers to closely monitor safety, quality, and costs across the production lifecycle — all of which is imperative when introducing a new process such as additive manufacturing.
Overcoming Challenges in A&D Requires Digital Transformation
Today’s A&D companies face the challenge of mixing the latest technology with traditional equipment and workflows; they face uncertainties in an unpredictable political climate that spans nations; they face a future of an undertrained (or short-staffed) workforce. Approaching these challenges head-on will give your company a competitive advantage for the coming years. This means looking to ERP systems and taking advantage of all they offer, working closely with suppliers, and educating your workers about emerging technologies. A&D is at a crossroads. It’s up to the players — the manufacturers, in particular — to push it down the right path.