How to identify and address supply chain disruptions in the A&D industry

What is market intelligence and how can it help companies streamline manufacturing processes?

Introduction

In recent years, the aerospace and defense (A&D) industry has faced unprecedented challenges in the form of supply chain disruptions that cause late deliveries, revenue losses and frustration among customers. These disruptions have become increasingly more intense by the aftermath of the COVID-19 pandemic, revealing that existing risk management approaches are no longer sufficient. Ongoing supply chain-related challenges are only getting worse with continued workforce shortages.

Additionally, a lack of collaboration between business functions has led to more disruptions and less streamlined processes. In this blog, we look into the data from a new Aviation Week supply chain study to understand the current state of the A&D supply chain and explore how integrating market intelligence can help mitigate these issues.

Understanding the problem

The first datapoint in the study touches on revenue loss. A staggering 53 percent of respondents reported that their companies had experienced revenue losses over the past two years due to the lack of essential parts or materials. In addition to revenue loss, 42 percent of respondents identified that raw materials are the leading cause of their supply chain issues. The reliance on these materials highlights a vulnerability since relying on raw materials alone isn’t enough to avoid certain supply chain issues. While 77 percent of respondents acknowledged some lead time when a supply chain issue is likely to occur, most of them have only a small warning window. This lack of proactiveness creates a reactive approach, rather than focusing on preventive solutions.

Late deliveries, revenue loss, stockpiling parts and more

Late deliveries and lost revenue were another trend throughout the study. Based on the results, 84 percent of respondents reported that supply chain issues caused late deliveries to their customers. Additionally, more than half (56 percent) experienced revenue or profit loss due to these issues.

In an attempt to safeguard their supply chains, many companies engage in stockpiling parts or purchasing safety stock. This practice is similar to the toilet paper shortage scenario during the COVID-19 pandemic. Early in 2020, many were worried there was going to be a toilet paper shortage, so everyone went to grocery stores and stocked up on toilet paper. People did this because they thought they were being preventative, but it created an artificial shortage of toilet paper. If people had continued to buy toilet paper at a regular rate, there may have never been a shortage in the first place. The same thing is happening to the supply chain when companies stockpile parts or raw materials.

When asked if they have adopted market intelligence, only 9 percent of respondents recorded that they are thinking about or have already adopted some form of market intelligence. This suggests that most companies are “attacking the symptoms but not the disease” when it comes to supply chain disruptions.

64 percent of respondents anticipate that workforce issues will adversely affect the A&D industry over the next three to five years. This brings to light the urgency of addressing supply chain challenges promptly. If companies wait another three to five years, they may fall even further behind and won’t be able to combat these supply chain issues as quickly.

Adopting market intelligence

Given the critical nature of the issues highlighted in the survey, it’s imperative that A&D companies take action to revamp supply chain strategies. The first way companies can do that is by adopting market intelligence. 9 percent of companies that have embraced market intelligence as a tool to combat supply chain issues are likely to see immediate change in their supply chain strategy. These organizations are at the forefront of addressing these issues to streamline manufacturing operations on a large scale. Adopting market intelligence will help companies provide valuable insights into market trends, supplier performance and potential risks, enabling companies to make proactive decisions faster.

Waiting for three to five years to address supply chain issues will only increase issues down the line. Companies must act swiftly to reevaluate their supply chain strategies, invest in smart technologies and prioritize market intelligence. It comes down to collaboration and awareness. A&D companies need to recognize that they are not alone in facing supply chain disruptions. This is a common issue across industry and collaborating and sharing knowledge among industry players can help identify innovative solutions and best practices to navigate these challenges.

Conclusion

The Aviation Week supply chain study highlights the prevalence of supply chain disruptions, revenue losses and late deliveries. While some survey respondents are taking reactive measures, there needs to be more awareness about the methods and solutions available to mitigate supply chain issues across industry.

Siemens is transforming the aerospace and defense industry by providing the most comprehensive solutions to safely and securely execute the programs that are revolutionizing air travel, space exploration and defense. Want to know more about Siemens Xcelerator solutions and how you can begin to adopt and leverage market intelligence to combat supply chain issues?  Visit this page for more information.

To learn more about how you can adopt market intelligence to anticipate and combat supply chain issues, you can watch the Aviation Week webinar titled ‘Unlock market intelligence to mature your supply chain strategy,’ on September 27, 2023, at 1pm Eastern Standard Time (EST).