, NEW YORK: New information from Deloitte Consulting LLP's Aerospace and Defense industry group indicates that the risk of failure for A&D companies is “real and significant” if companies don't implement changes now to help ensure the longevity and success of their supply chains.
“The risks are imminent,” said Jim Schwendinger, vice chairman, global aerospace & defense, Deloitte Consulting. “Costs and inventories are growing, service levels are lagging and products are not making it to customers on time or on budget. Significantly optimizing your supply chain for high-speed performance is an effective way to deliver what customers and the market expect.”
Achieving supply chain success, Deloitte says, will likely involve enterprise-wide changes. As programs become larger and more global, the complexity of managing the supply chain grows tremendously. Aligning supply chain capabilities with the company's corporate strategy and growth objectives is key to building a sustainable, integrated model.
“Over the past year the A&D industry has suffered numerous service issues, many as a direct result of inefficient supply chains,” said John Coykendall, principal, Deloitte Consulting. “These difficulties have resulted in enormous cost overruns, delayed new product rollouts, missed delivery dates, and have forced companies to make serious adjustments in production which, in turn, has affected their entire supplier network.”
These major setbacks, Coykendall says, are many times the result of supply chain breakdowns. While companies frequently attempt to improve supply chain performance, too often the approach to solving one challenge creates disruption elsewhere in the supply chain. By taking an integrated supply chain view, companies can drive improvements in performance while also reducing costs.
“Supply chains have traditionally been depicted as linear streams, and this narrow view can lead to missed opportunities for improved integration of supply chain capabilities,” said Schwendinger.
Five techniques A&D companies should use to boost supply chain performance include:
1. Aligning supply chain and business strategy: Critical product decisions are made early in the life cycle. Careful thinking about aligning supply chain network strategy with business strategy early can drive performance down the road.
2. Integrating multiple supply networks: Knowing when and where to integrate supply chain networks is critical. Single supply chains that serve all businesses will typically under-perform on both cost and service objectives.
3. Aligning and integrating supply chain planning: Poorly integrated planning activities can be detrimental. Companies need tight coordination and integration of demand plans, inventory plans and production schedules.
4. Strategically managing the supply network: Aligning the supply chain organization to facilitate better decision-making is imperative. Businesses must manage multiple linkages and dependencies within the network to gain flexibility and competitive advantage.
5. Mitigating tiering risks: Companies must provide a consolidated view of demand through multiple supply chain levels. As visibility has shifted away from OEMs to tier one, supply chain managers must increase their focus on tier two and tier three players that have dropped below the radar.
Companies who are ready to initiate the process now, Deloitte says, should begin by considering:
– How many supply chains do you have?
– Where do you need to build capabilities to meet expected cost and performance objectives?
– What are the three to five areas within your supply chain which, if significantly improved, would dramatically enhance your cost and performance?
As used in this document, “Deloitte” means Deloitte & Touche USA LLP.
Deloitte Consulting LLP
