Aerospace and defense organizations increasingly recognize that exploiting new growth opportunities requires an agile and flexible supply chain that helps manage risk. The challenge can be identifying and working with new suppliers and creating new ecosystems to support the launch of new products and services, including often untested partners in emerging markets. 

Our survey demonstrates that supply chain failure continues to be viewed as a major risk for A&D organizations with 87 percent of respondents citing this as a major threat to achieving their growth agenda. Supply chain risk was ranked as the second greatest risk facing A&D manufacturers behind only concerns about the threat of another economic downturn.

“A&D organizations know there is great opportunity in new markets and by leveraging new capabilities but they worry about trusting their growth objectives with new partners and suppliers who may look good on paper but struggle to meet the OEM’s global standards and expectations,” notes Doug Gates, KPMG’s Global Head of Aerospace and Defense.

While A&D executives may voice clear concerns about supply chain risk, less than one-in-ten reports they have visibility down into their Tier 2 suppliers.  Only around half of our respondents are able to claim that they have ‘enhanced visibility’ into their Tier 1 suppliers and some Tier 2 suppliers.

While improved visibility will be key, A&D organizations are taking many steps to improve their supply chain’s flexibility and responsiveness. Almost two-thirds (64 percent) of A&D respondents say they have plans to invest into demand sensing to improve their supply chain operations. And 60 percent say they will invest into supply chain analytics.

The rapid adoption of sensors and Internet of Things (IoT) technology is capturing significant attention and investment from supply chain leaders. Almost a third (32 percent) of respondents said they would definitely be investing into IoT technologies for their supply chain. And an almost equal number said they would be prioritizing data and analytics capabilities in order to support improved visibility into their evolving supply chain.

A&D executives are worried about supply chain risk but lack visibility into their lower-tier supply network. Investments into new technologies and systems should help reduce the risk. Leading A&D manufacturers are responding by:

• looking across their product and service lifecycles to identify opportunities to improve collaboration with partners and suppliers to drive project certainty and investment returns
• streamlining and harmonizing processes across the supply chain network to improve agility, create flexibility and enhance visibility
• collaborating across the supply chain and IT to better manage the increasing number of connections with suppliers and enhance access security.