7 barriers to aerospace and defense supply chain success
As air travel demand soars, aircraft equipment manufacturers continue to innovate in areas like jet engine fuel efficiency, navigation technology and materials science. These improvements, especially around fuel efficiency, are driving demand for newer aircraft models, and speeding up the replacement of previous generations as a result.
For supply chains in the aerospace and defense industry, keeping pace with original equipment manufacturers (OEMs) who are dramatically increasing production rates for components, systems and services, is a major challenge. As the flying public continues to demand lower airfares, a ripple effect is running through the entire supply chain, from OEMs to tier one suppliers and lower, as everyone struggles with the ongoing challenge of competitive pricing.
The global defense industry is also facing new challenges, including how to grow profitably in the face of a potential market decline and how to cut costs to maintain acceptable financial performance. These organizations are cutting costs to maintain their margins in this declining revenue environment. Successful defense companies have anticipated defense budget cuts, already reducing staff, cutting overhead costs and getting leaner. They’re accelerating process automation instead of hiring more staff, resulting in higher operating earnings per employee.
Digital product development and computer-aided design have changed the game further by creating significant efficiencies in the product development process. Lean manufacturing and six sigma initiatives have significantly cut waste and inefficiency in the production process. It’s expected these initiatives and programs will take off further as companies continue to work on managing margins and profitability.
Aerospace and defense supply chain pain points
Various point-based solutions, multiple enterprise resource planning systems (ERPs) and legacy systems located around the globe mean disparate, disconnected data. That results in poor end-to-end supply chain visibility, latency in critical decision-making and overall inefficiency in supply chain operations.
Solution: Incorporate all supply and demand data through a closed-loop process that writes back to execution systems based on decisions made throughout the planning cycle. Integrating data into a single system of record builds confidence in the accuracy of data and the global capacity management system. One data set means one version of the truth and one location where anyone involved can see updates to those numbers.
Large-scale data requirements
The computing power required to model global, multi-tier supply chains and explode demand and supply across integrated supply chains is enormous. But the ability to scale is a critical capability to supply chain success.
Solution: Make sure you’re using the best technologies available to support scalability and performance requirements for this data-intensive industry.
Supply chain complexity
Limited visibility due to increased supply chain complexity makes it difficult to see the true reality of the extended value network when it comes to capacity, material availability and the likelihood of supporting schedule shifts.
Solution: Connect your end-to-end supply chain by harmonizing data in a single source, which will drive improved visibility and offer insight into planned and current demand, inventory, capacity, constraints and supply at any desired level of the product hierarchy.
Products typically have a large number of models, options and configurations available, and engineering change orders are usually ongoing as products are customized to meet each consumer’s individual demands. This results in deep and varied bills of material (BOMs) that need to account for a large number of planning attributes including model/unit BOM effectivity, prioritization, inventory pooling, interchangeable parts and BOM substitution.
Solution: Complex analytic support. A solution that supports all aerospace and defense specific planning parameters into demand, supply, inventory and capacity balancing. BOMs should hold the product structure for manufactured products and include draw quantities (quantity per assembly), start and stop effectivity dates, production yields and mix factors, etc. that drive the explosion of top level demand through to the lowest level of the product structure requirements. Separate models or units of common parts and net them independently of one another. This ensures supply for a given unit is allocated to demand for that same unit. Effectively manage different pools of inventory for a part and ensure proper segregation during netting by preventing intermingling of inventories for a given part associated with different customers, contracts or projects. Group together parts considered equivalent in form, fit and function to satisfy demand for any part in the interchangeable group. Be sure to set different levels of priority and assign them to specific demands. This ensures higher priority orders receive supply first.
Inadequate tools for rate simulations
Existing tools to support schedule change simulations require extensive expertise to run, and fail to fully represent limitations within the extended supply chain. Adjusting rates can be extremely time consuming, spanning weeks in some cases.
Solution: Deploy a tool that allows you to test rate changes in seconds. You’ll be immediately able to see impact across the supply chain and project delivery dates, identify the impact on gating material and capacities, and quickly invite users to participate in resolving any issues. What-if analysis and scenario creation capabilities also allow for faster facilitation and broad collaboration to ensure schedule alignment and feasibility. You also need support for the definition of rate-based constraints for virtually any unit of measure. View constraints for load-only comparisons, constraint availability or limit the timing and availability of supply and demand. This allows for a simple way of producing a constrained demand and supply plan that respects key limitations and identifies the impact on demand and supply commitments. Don’t forget to evaluate material availability before identifying when work will be loaded.
Line of balance analysis
With a high degree of individual unit configurability, there’s a strong need for visibility into supply chain alignment and the delivery of each unit to ensure delivery and revenue attainment predictability. Unfortunately, that visibility isn’t always available.
Solution: Connect your data, processes and people into a single, harmonious environment so you can easily see the entire set of items, including the source of the supply (on-hand, on-order or planned) of an aircraft in production. That allows you to determine whether any items needed are missing, and whether the timing will support the customer delivery window.
Engineering changes are commonplace, and since these changes are often managed in multiple systems, it’s difficult to assess the impact on the supply chain.
Solution: Test and identify the operational impact of selecting particular dates for selected engineering changes. This lets you determine effectivity timing that maximizes alignment with performance objectives and avoid excess or shortage conditions.
These are just a few of the specific aerospace and defense supply chain pain points. Are there other challenges you’re facing in your supply chain? Let us know in the comments section below.
Don’t forget to check out the other industries featured in this blog series: