Challenging times for A&D supply chains

These are challenging times for A&D supply chains for a whole host of reasons, not least because of the rapid growth in demand brought on by heightened geopolitical instability and the ongoing conflict in Ukraine.

From a Defence perspective, responding to the reality of high intensity warfare in continental Europe after such a prolonged period of peace has brought many challenges for governments globally. The aftereffects of the Covid-19 pandemic have also encouraged governments to focus on onshoring capability where possible to improve resilience and ensure sufficient availability of assets to deal with crises in the future.

Here in the UK, the conflict in Ukraine has shaken up thinking about Defence supply chain strategy. Previously, the UK’s Defence industry was built on long-term investments in large, sophisticated systems designed to boost national security during peacetime. Now, there is much greater focus on speed of innovation and the development of ‘attritable’ assets, such as low-cost drones or Uncrewed Aerial Vehicles (UAVs), which are suitable for rapid deployment on a fire-and-forget basis. There is also much greater focus on disaster relief and humanitarian tasking; making sure the right assets are available and can be deployed quickly at times of crisis.

Demand for large, complicated defence systems hasn’t disappeared entirely however, and several major programmes are continuing to run in the background. Pace of innovation is important here too, which is why digital transformation has such a critical role to play. By developing a ‘digital backbone’ that others can key into, OEMs and Tier One manufacturers can give themselves a competitive edge in collaborative programmes, where end-to-end supply chain integration is required.

Much of this digital backbone can exist in the cloud, where it can be accessed easily and securely by supply chain partners, bringing opportunities for enhanced efficiency and agility. Digitalisation is also speeding up innovation processes through the use of digital twins and other advanced simulation technologies, supporting the development of prototypes that are more efficient and effective by design.

Key to improving defence supply chain resilience in the future is balancing the need for cost efficiency with the requirement for greater agility and localisation to ensure availability of supply in times of need. To achieve this, governments must lead the way by forging global partnerships and be prepared to collaborate at an industry level to strengthen their own capability and that of their allies. As well as delivering the volumes needed to protect supplies of mission-critical materials or components, these strategic partnerships can also be mobilised quickly in response to urgent demand.

Another lesson that has been learned since the onset of the conflict in Ukraine is the importance of inventory management, which essentially means having the right assets in the right locations. When the conflict began, it was clear that the assets that many countries had been stockpiling were not the right ones. Governments found that they had to scramble to reinstate programmes for weaponry they had thought would no longer be needed. To ensure availability of supply in the future, governments are now looking to onshore capability linked to the production of vital supplies of munitions, but can this scaling challenge be done efficiently? Data has a role to play here too by supporting the development of accurate demand forecasting models, whilst ensuring that inventory is rightsized intelligently.

These are undoubtedly challenging times for manufacturers across the Defence sector, however, exciting opportunities lie ahead to work together to build an industry which is more resilient and efficient, and better equipped to respond to crises. The common thread is digitalisation and investing in ways that will support industrial integration in the future.