Three critical traits to help carry an A&D manufacturer through a crisis
The warning about the vulnerability of the aerospace and defense industry’s supply chain came buried in the pages of a report issued by the consulting firm EY two years before the COVID-19 outbreak became a full-blown global crisis. In the February 2018 report, EY cautioned that “disruption at any part of the supply chain might lead to a cascading effect on the entire supply chain. Supply disruptions and subsequent delivery failures can lead to severe consequences.”
The consequences of disruption that EY envisioned have materialized in the A&D industry during the pandemic. Closures of factories in Mexico, where A&D firms have been deemed non-essential, were reportedly wreaking havoc on the supply chains of U.S. defense firms. Major cutbacks by airlines were idling or curbing activity at many civil aircraft assembly plants, curtailments that were reverberating down to lower-tier suppliers.
Among aerospace and defense manufacturers, the pandemic exposed supply chain vulnerabilities that even the most diligently modeled and tested contingency plans had not uncovered, and risks many companies never imagined they would need to address. It also highlighted three of the capabilities that can help to protect a supply chain by neutralizing or at least reducing those vulnerabilities, including:
- An intelligent, Industry 4.0 digital backbone. What’s happening inside the factory? What’s the status of our parts suppliers? Where do things stand with the transport companies on which we rely, and the individual shipments we’re expecting? Are there constraints on raw materials? If I can’t get materials from one supplier, what’s my most cost-efficient alternative? These are among the pressing supply chain questions to which manufacturers need clear, real-time answers.
During the pandemic, a connected, end-to-end digital infrastructure could be the virtual supply chain “control tower” that enables manufacturers to find the answers they seek.
With Internet of Things sensors feeding operational data on core business processes into an enterprise-wide system, manufacturers could gain insight into what’s happening on their own shop floor. With AI- and machine learning-powered analytics tools, they could simulate and predict operational performance and identify potential issues with production assets before they become disruptive. When applied to data from across the supply chain, some of the same tools could help to predict supply chain behavior, and enable manufacturers and their supply chain partners to quickly identify potential vulnerabilities and disruption points, and react accordingly.
During a crisis like the coronavirus pandemic, a strong, connected digital backbone also can help manufacturers to reinforce guidelines designed to keep their employees healthy and working.
Data-informed digital capabilities could enable a manufacturer to devise, implement and track compliance with new procedures, workflows and worker precautions across facilities in multiple geographic regions, tailoring them to the pandemic-related circumstances and restrictions in each facility and region.
Boeing was doing just that with its plan to return 27,000 employees to work and resume commercial airplane production in Washington State in late April.
- Agility. Effectively navigating the unprecedented level of uncertainty that A&D businesses face as a result of the COVID-19 crisis requires a great deal of agility. And agility is about making well-calculated strategic decisions, fast.
To inform those decisions, companies need data and the digital tools to rapidly gain insight from it.
Here’s where the aforementioned supply chain “control tower” again proves its value. Manufacturers can use the data flowing into its systems from supply chain partners and its own operations to rapidly pivot to a new part or raw material supplier, for example, or to a new transport company, in order to avoid a potential disruption.
When ERP and HR tools are attached to the control tower, a manufacturer also can be more agile in how it deploys its workforce during a crisis to maximize productivity — without compromising worker safety. For manufacturers involved in both the defense and commercial sides of the A&D business, the ability to quickly and effectively shift employees who may not be needed on the commercial side to the defense side of the operation can prove vitally important to maintaining the stability of the business.
- Collaboration. Among the supply chain vulnerabilities laid bare by the global health crisis was the general lack of visibility many companies have into their sub-tier suppliers and the local conditions impacting those suppliers. Collaboration across the supply chain—built around a “We’re all in this together” business mindset—was key not only to maintaining that visibility but also to mobilizing to support suppliers that were at risk of folding under the economic weight of the crisis.
As reliant as many A&D companies are on sole-source suppliers for certain parts and subassemblies, the crisis put those relationships—and the sole-source suppliers themselves—at risk.
Establishing a digital network in which the various players in the supply chain can share data, communicate, gain insight from a single source of truth, and use that insight to mobilize on a coordinated basis, can be immensely valuable in keeping a supply chain intact.
With this digital supply network, the members of a supply chain can cooperatively adapt to ensure parts and materials get where they need to be, and that critical suppliers don’t succumb to the crisis.
A connected, collaborative supply chain also can empower companies to support the public interest during a pandemic, enabling them to pivot to manufacture new in-demand products, as many companies across the manufacturing landscape have done.
A&D companies in Europe were relying on these types of collaborations during the COVID-19 crisis. Members of the European Aerospace Cluster Partnership, for example, were sharing information, data and best practices to protect their supply chains and their fellow members. The group’s goal: to “try to help the aviation industry as a whole to survive this particular difficult moment.”
As important as capabilities like these are during the “normal” course of business, they can be a lifeline to survival during a crisis like the one aerospace and defense manufacturers face here in 2020.