AEROSPACE AND DEFENSE

Three critical areasof improvement for
the future of A&D
supply chains

Introduction
In stark contrast to the slowdown
during the pandemic, a new challenge
plagues the aerospace and defense
industry. Fueled by a rise in global travel,
geopolitical escalations, and a newspace race, demand for A&D products
has skyrocketed over the last few
years. Keeping up with this demand isessential for business success, but theindustry must solve for a supply chain
that’s become increasingly complex andfragmented.
End-to-end supply chain orchestration isempowering today’s supply chain leaders
to synchronize their data, people, andprocesses all in one place so they canabsorb disruption and adapt to changes
without missing a beat.
Kinaxis sponsored a survey with IDC tounderstand what is driving change acrossthe supply chain (SC), if orchestration
can help, and what’s supporting or
hindering the adoption of orchestration
tools to manage complexity, risk, anddisruption. The research comprises aquantitative survey conducted in late2023 of over 1,800 SC decision makers
from multiple geographies, industries,and functions.

02

1. A&D companies
need to focus onresilience
What do we mean by resilience?
Resilience, defined as best-in-classadaptability to disruptions both big andsmall, is especially difficult for the A&D
industry due to a heavy reliance on
outsourced processes and suppliers with
their own complex supply chains.

The A&D industry
is less resilient
than others

27%

Only 27 percent of
A&D companies rate
their supply chains as
resilient, the lowest
amongst sevenindustries surveyed. 1

Why can’t A&D supply chains
respond to disruptions?
Inherently, the A&D industry has
elements that make it difficult tobe resilient:Complex Products
Aircraft production involves
intricate processes andthousands of criticalcomponents. The resulting
supply chain is distributedand intricate. When adisruption occurs, thenetwork is slow to adapt tochanges.

Single-Source Risk
It’s common in theA&D industry to havesingle‑source suppliers forspecialized components.
A single point of failure
can disrupt the entire
supply chain.

Reactive Approaches
Historically, many A&D
firms react after-the-fact todisruptions because they
don’t have visibility into allparts of the supply chain.

03How can A&D organizations
become more resilient?
Despite fundamental challenges,
there are still many opportunities forimprovement.
Top priorities of A&D leaders include
focusing on reducing lead times withsuppliers, efficiently managing resources,
mitigating risks to supply disruptions,and complying to ever-changing
regulations across various regions.
It is important for all companies –regardless of their current stage oftransformation – to align their supply
chain goals with the overall company
vision to maximize benefits. Solutions
can include diversifying the supplierbase and shifting to a proactive stancewhen it comes to risk.

A&D companies reported
that top goals for their
supply chain as: 1
1

Supply chain resilience –improve the ability to respondto market changes either
upstream with suppliers or
downstream with customers

2

Improving supply chain visibility/traceability

3

Improving integration
between supply chain planning,execution/fulfillment, andoverall supply chain governance4

Modernizing/updating IT related
supply chain infrastructure04

2. A&D companies
need to break
down data silos
Data silos are rampant in A&D
A&D companies go through frequent mergers
and acquisitions, which adds to the proliferationof data systems. Kinaxis has seen companies
with more than 10 ERP systems. Additionally,
A&D companies often use siloed point solutions
created for highly specialized processes, which
also contribute to the data fragmentation
problem.

A&D suffers from silos more thanother industries
Technology fragmentation in A&D is apparent
in the research findings. Compared to the sevenother industries surveyed, A&D leaders reported
the highest amount of disparate systems.
Nearly 25% of A&D companies characterize thetechnological foundation of their supply chain tobe standalone applications. 1

The consequences of disparate systems
Fragmented technologies not only hamper
agility, they impede the industry’s ability
to balance the technical, regulatory, andsafety nature of products. They also create
vulnerability to disruption through lack ofvisibility. End-to-end oversight and management
across siloed systems is critical for success.

05

Top supply chain technology capabilities sought after by A&D leaders
Modern supply chain systems have theability to merge data across multiplefragmented systems to create one sourceof truth. A&D leaders identified thefollowing as top technology priorities: 1
1Composability (i.e. components/modules connected via API onproduct level)

2Flexibility

3Ecosystem integration

4

Configurable (i.e. flexible options
to adjust capabilities/reporting)5

AI/GENAI capability

Ideal solutions for A&D bring together
these capabilities to handle theindustry’s biggest challenges. The latest
supply chain orchestration platforms
provide the ability to connect deep
bills of materials from finished goods
to raw materials, handle the specialized
processes of an engineer-to-ordermanufacturing environment, and analyze
large volumes of data to detect supplierrisk and lead time deviations. Capabilities
like GenAI can prescribe risk mitigation
options and upskill talent on new tech.

06

3. A&D companies need to collaborate
better with external stakeholders
Poor collaboration risks the supply
chain on every front

Collaboration priorities among
A&D leadersWith suppliers, a lack of two-way
communication about demand shifts or
supply constraints can stall the entire
supply chain. On the transportation side,
poorly coordinated shipments of supply
can hinder production. Finally, a lack ofcommunication with customers about
delays puts revenue and reputation at risk.

Managing complex supply chains withmultiple layers requires active collaboration.
Top three priorities for A&D companies in
the next one-to-three years are: logistics& global trade (59%), collaboration withsuppliers (55%), and collaboration withcustomers (40%).

Orchestration is essential for better collaboration
External collaboration with multi-tier suppliers, logistics, and transportation providers
continues to be critical as demand grows.
To achieve multi-party collaboration, management of the entire supply chain holistically isimperative. IDC’s research notes nearly all (94%) of A&D companies said that end-to-end
supply chain orchestration would have a modest to significant impact on performance. 1

Supply chain opportunities achievablewith orchestration: 1
1

Exceeding customer expectations with better
processing, delivery, and communication

2

Resilience to any disruptions

3

Gaining a competitive edge by delivering better
products, services, and customer expectations

4

Confident decision-making, through real-timedata and analytics

5

Stronger collaboration with all supply chain
stakeholders
07

Learn from the leadersThis leading aerospace and defense manufacturer builds complex products that require
utmost coordination. Planners are tasked with building forecasts while accounting
for deep bill of ladings, tiered suppliers and multiple other factors. Lockheed Martin
implemented the Kinaxis® Maestro™ platform to connect the dots and data across its
supply chain, bringing together teams and increasing the visibility. As a result, forecasts
were more robust, planners had more information at their fingertips, and Lockheed
Martin had the confidence it needed to handle anything that comes its way.
To learn more about how Kinaxis can help A&D companies increase collaboration andsupply chain visibility, visit kinaxis.com/en/industries/aerospace-defense.
1Source: IDC Resource Map Deck, sponsored by Kinaxis, Leveraging End-to-End Supply Chain Orchestration:
Deliver Next-Generation Supply Chain Management, Intelligence, and Responsiveness, IDC DOC ID#: CA52482924_RMD, May 2024.

This industry spotlight is accurate as of the date published and may be updated by Kinaxis from time to time atits discretion. Copyright © 2024 Kinaxis Inc. All rights reserved. Kinaxis, the Kinaxis logo and RapidResponse arewww.kinaxis.com

registered trademarks of Kinaxis Inc. All other brands and product names are trademarks or registered trademarks of
their respective holders, and use of them does not imply any affiliation with or endorsement by them