Executive Briefings

Opportunity and Uncertainty: Key Trends in Aerospace and Defense

The aerospace and defense (A&D) industry is poised to benefit from a surge in global commercial demand, along with the advent of new technologies, government acquisition reform and the use of analytics to manage “big data.” At the same time, manufacturers and suppliers face a number of challenges, including stricter regulations and the uncertainties that characterize the defense sector.

Those were among the key themes to emerge during the Aerospace Industries Association’s (AIA’s) 2015 Fall Supplier Management Council (SMC) meeting, hosted by UPS. The event brought together SMC members, representatives of aerospace prime contractors and AIA staff, to focus on critical issues facing industry suppliers. Major topics of discussion included:

Reforms in Department of Defense acquisition practices. Speakers expressed hope that long-overdue measures will enhance the country’s defense capabilities, streamline the contracting process, level the playing field for commercial companies, and spur innovation.

New technologies and business models. Advances in unmanned aircraft, additive manufacturing and the management of big data have the potential to become major industry disruptors. At the same time, the federal government’s desire to access new sources of innovation will open the door to many smaller companies.

Uncertainty in the defense sector. While programs have not been cancelled, few new ones are on the horizon. The situation is clouding companies’ decisions about where to focus investment, and challenging their ability to achieve profitable growth.

The regulatory burden on suppliers. These essential partners in the A&D supply chain are handicapped by flow-down regulations that require them to incur significant expense, or agree to unrealistic terms and conditions. Primes can help by urging the DOD to streamline and standardize its procurement and contracting processes.

Growth in commercial aerospace. Strong prospects for the sector, especially internationally, offer abundant opportunities for primes and suppliers. To take full advantage of the trend, however, they will need to craft supply chains that are capable of delivering on current and future commitments. That means assembling networks of trusted and efficient partners, including skilled third-party logistics providers with deep industry and geographical expertise. In addition, all parties in the supply chain will experience a growing need for business and technical talent.

Those were among the key themes to emerge during the Aerospace Industries Association’s (AIA’s) 2015 Fall Supplier Management Council (SMC) meeting, hosted by UPS. The event brought together SMC members, representatives of aerospace prime contractors and AIA staff, to focus on critical issues facing industry suppliers. Major topics of discussion included:

Reforms in Department of Defense acquisition practices. Speakers expressed hope that long-overdue measures will enhance the country’s defense capabilities, streamline the contracting process, level the playing field for commercial companies, and spur innovation.

New technologies and business models. Advances in unmanned aircraft, additive manufacturing and the management of big data have the potential to become major industry disruptors. At the same time, the federal government’s desire to access new sources of innovation will open the door to many smaller companies.

Uncertainty in the defense sector. While programs have not been cancelled, few new ones are on the horizon. The situation is clouding companies’ decisions about where to focus investment, and challenging their ability to achieve profitable growth.

The regulatory burden on suppliers. These essential partners in the A&D supply chain are handicapped by flow-down regulations that require them to incur significant expense, or agree to unrealistic terms and conditions. Primes can help by urging the DOD to streamline and standardize its procurement and contracting processes.

Growth in commercial aerospace. Strong prospects for the sector, especially internationally, offer abundant opportunities for primes and suppliers. To take full advantage of the trend, however, they will need to craft supply chains that are capable of delivering on current and future commitments. That means assembling networks of trusted and efficient partners, including skilled third-party logistics providers with deep industry and geographical expertise. In addition, all parties in the supply chain will experience a growing need for business and technical talent.

Learn more about the key themes discussed at the AIA meeting, by downloading the full executive summary from UPS.