If you take a step back and look at the aerospace and defense industry as a whole, it is easy to say that manufacturers have weathered the storm of the Great Recession. A deep dive, however, reveals much more complexity and several industry trends you may not know about. To clear the air, this blog post covers the top five issues facing the aerospace and defense industry.
AS 9100 on the horizon
As you already know, the latest version of ISO 9001 has been published. What you may not know is that AS 9100 will soon follow suit. As of this writing, the timeline for AS 9100 revisions is on schedule, according to the International Aerospace Quality Group and the Society of Automotive Engineers. As scheduled, balloting for revisions to the standard began in December 2015. Once balloting is concluded, the final version of AS 9100 will be released in April 2016, which is only a few months away. The question is: How will you adjust your company’s quality management system to satisfy the new AS 9100, which will reflect structural changes to ISO 9001?
Divergence of commercial aerospace from defense continues
If you look at aerospace and defense from a broad perspective, the raw numbers show that the industry has never been as profitable. In fact, profitability data based on earnings before interest and taxes (EBIT) show that “average profitability of the top 100 companies in the industry reached a record 10.2 percent EBIT margin, up by almost 1 percent over 2013.” The caveat is that a sizable proportion of this profitability is coming from the commercial sector, not defense. If you follow politics in the U.S., you probably have read of how budget sequestration will affect defense spending for many years to come. Revenue decline for the defense sector “accelerated in 2014 to a 1.6 percent drop, driven by budget cuts,” according to a fresh report by AlixPartners.
Emerging technologies as competitive differentiation
The previous two issues represent the most critical challenges for aerospace and defense. Drilling down a step, you have to wonder how the industry will alleviate these competitive pressures. One way is to implement emerging technologies in creative ways. For example, you may not know about the potential of additive manufacturing for aerospace and defense. Flexibility of product design is arguably the biggest benefit of 3-D printing technologies, which may prove to be a huge opportunity for defense manufacturers struggling to raise revenue.
The power of the supplier
Surely, your supplier management processes are business-critical assets. Another top trend in aerospace and defense revolves around bolstering this mutually beneficial relationship with suppliers. A phenomenal article by Strategy& makes the point that “even seemingly small changes can lead to significantly improved outcomes.” Furthermore, the article draws attention to the fact that “when defense contractors reassess and improve their interface with customers and suppliers, focus on eliminating inefficiencies and begin to alter what and how they procure, it’s not unusual to see cost reductions of as much as 30 percent.”
Addressing the problem of an aging workforce
Looking several years down the road, you also have to wonder how aerospace and defense will accommodate an aging workforce. If you work in aerospace and defense, you already know how challenging it is to recruit young, talented personnel with the right qualifications. You may not know that 18 percent of the workforce in aerospace and defense will be retirement eligible in the next two years. Surely, if you delve deeply into these five issues, more concerns will reveal themselves. The question moving forward is: What can your company do about it?