The state of Aerospace and Defense

As part of a critical infrastructure industry, aerospace and defense leaders must respond to the immediate crisis now while also planning for new ways of working which will emerge as COVID-19 infection cases begin to decline in the coming months.

Airlines are cutting immediate capacity in the range of 40 to 100 percent and asking for deferrals, model switches and cancellations on orders. Most major civil aircraft assembly plants are closed indefinitely or operating at a vastly reduced volume. These lower production rates are rippling down to the supplier network as production is paused and workforces furloughed.

While airlines still need to maintain parked aircraft, aftermarket revenues will be severely curtailed as overhauls are deferred to conserve cash and the maintenance mainstay hourly contracts track schedule and capacity downwards. As airlines make decisions on retiring models and reassess their fleet needs, aircraft production and aftermarket services will need to be fundamentally reassessed to account for long-term demand shifts.

Defense markets – and their dependent supply networks — remain strong from a demand perspective, with governments easing procurement processes and offering better payment terms. Even though deemed as a critical infrastructure industry status in many countries, defense contractors across the globe are facing lockdowns. However, the ability to maintain program schedules and production rates are hampered by the dual challenges of managing a highly skilled but now remote workforce while ensuring the safety of on-site workers. While most defense production sites are operational, local conditions are causing closures across the globe.

How to manage now

Aerospace and defense companies almost by definition solve large, audacious challenges. But now, business leaders must make rapid decisions and take immediate actions to protect the health and safety their people — including in their workplaces — while ensuring that critical business operations continue. They must also reassess fundamental shifts in medium term demand.

Response governance - containing the chaos

A critical action to successfully navigate the ongoing COVID-19 turbulence is to create a rapid response infrastructure with clear ownership of crisis monitoring and tracking. This infrastructure should communicate important and ever-changing information to senior decision makers and integrate tools to develop and execute response protocols, harnessing the power of artificial intelligence and data science.

Considerations

  • Risk management across complex multi-tier supplier networks is extremely complex and labor-intensive, often struggling to keep up with real-time changes.
  • Lack of visibility into sub-tier suppliers and their local conditions is a major supply chain planning obstacle.
  • Virtual working is a new concept for the Aerospace and Defense industry, requiring huge changes in infrastructure and culture.
  • Company facilities often span different regions, each with their unique infection trajectory.

View All

How to make it work

NOW - Triage and prioritize

  • Create a war room with responsive infrastructure and leadership
  • Build a cross-functional rapid response team to deal with emerging challenges

NEXT – Reconfigure

  • Coordinate marketing and communications with customers and stakeholders
  • Continuously assess the situation and take relevant actions

FUTURE - Scale and maintain

  • Factor in multiple waves of COVID-19 type outbreaks for business continuity planning
  • Implement sense capabilities that can quickly assess changes and their impact
  • Ensure ability to rapidly respond to further unforeseen disruptions
  • Assess permanent market shifts and re-optimize your organization to meet new market needs

View All

Supply chain and production - schedule and reschedule

Supply chains have always been critical for getting parts and assemblies delivered quickly, safely and securely to production facilities around the world – and their resilience is even more vital during the Covid-19 pandemic. It is vital that companies assess the availability of critical components and parts and whilst also exploring alternate in-region sourcing options, and those who can immediately mobilize their response and take swift actions to ensure parts supply now will be in a better position post-crisis.

Considerations

  • Aerospace and defense supply chains are highly orchestrated and complex.
  • Even though identified as critical infrastructure, aerospace and defense facilities across the globe are facing temporary shutdowns due to health and safety mitigations such as facility cleaning or dwindling OEM/airline orders.
  • OEMs, contractors and Tier 1 suppliers are directly or indirectly exposed to China supply sources.
  • As safety stocks are depleted, companies will start to feel the impacts of logistics issues and an inability to source many parts and/or make deliveries to their own customers.

View All

How to make it work

NOW - Triage and prioritize

  • Build response room infrastructure and leadership
  • Create a cross-functional rapid response team to deal with emerging challenges

NEXT – Reconfigure

  • Match workforce skills and certifications to new production schedules
  • Assess logistics and transportation for impact on parts availability
  • Consider retooling to manufacture medical equipment or personal protective material
  • Ensure business continuity by finding options for shortages and single source parts
  • Ensure production scheduling can rebalance production lines according to material availability and/or demand changes

FUTURE - Scale and maintain

  • Ensure business continuity and sense/respond for supply or demand shifts
  • Assess permanent market shifts and re-optimize the organization to meet market needs

View All

Workforces - adapting to the new normal

The COVID-19 crisis has both immediate and long-lasting implications for how people work and participate in society. Where possible, remote work mobilization at scale allows organizations to dynamically adapt to changing business needs based on global and local conditions while ensuring employee safety. For staff who cannot work remotely it is vital building safety and cleaning are fully in place.

Considerations

  • Production and assembly is often a very labor intensive activity which requires a large onsite workforce.
  • Local outbreaks, health and safety actions and lockdowns will significantly affect production and exacerbate the ability to schedule highly skilled workers who often need certifications to complete jobs.
  • Virtual working is a new concept to the Aerospace and Defense industry and tackling the cultural change when adopting this new approach cannot be underestimated.

View All

How to make it work

NOW - Triage and prioritize

  • Employee safety ensured
  • Health and safety, building safety and cleaning fully in place
  • Determine which programs and roles can be executed remotely

NEXT – Reconfigure

  • Support employee needs for physical, mental and relational needs
  • Provide ongoing, effective internal communications
  • Plan for business continuity by assessing risks, skills and capacity

FUTURE - Scale and maintain

  • Factor in multiple waves of COVID-19 type outbreaks for business continuity planning
  • Implement sense capabilities that can quickly assess changes and their impact
  • Ensure ability to rapidly respond to further unforeseen disruptions

View All

Systems resiliency and security - adapting to the new normal

While many aerospace and defense companies have some form of remote working environment, most have never conducted a remote worker deployment at scale, creating a surge of digital activity which can overwhelm older IT platforms. Systems resiliency and remote security are vital – but embracing Cloud technologies, machine learning, augmented/virtual reality and analytics can drive resiliency, innovation, and lead to greater efficiencies and spur new collaboration for the long term.

Considerations

  • Remote workforce deployment in Aerospace and Defense often necessitates unique security requirements that must be considered in full.
  • Security requirements will vary enormously from country to country for global organizations.
  • Technology adoption will be crucial to mitigate workforce or key skills shortages along with addressing production scheduling and rescheduling.
  • Only 38 percent of aerospace and defense companies have mature cloud practices and tools in place, while just over half have a cloud strategy execution roadmap in place.

View All

How to make it work

NOW - Triage and prioritize

  • Determine which part of your workforce can be quickly aligned to be remote
  • Fully enable employees with PCs, secure network connectivity
  • Assess if network and infrastructure can scale

NEXT – Reconfigure

  • Remote worker identity and access management at scale
  • Ensure VPN operates at scale
  • Resolve national security/ITAR/GDPR implications
  • Remote access and security measures scaling and functioning

FUTURE - Scale and maintain

  • Factor in multiple waves of COVID 19 type outbreaks for business continuity planning
  • Implement sense capabilities that can quickly assess changes and their impact
  • Ensure ability to rapidly respond to further unforeseen disruptions

View All

Business development - assessing the shifts

Changes within the industry are rapid. Airlines are cutting immediate capacity cancelling orders and deferring overhauls. Hourly maintenance contracts will track capacity reductions downward. Defense facilities and workforces face the same challenges as their commercial counterparts with local outbreaks and lockdowns significantly affect production. Feeding these daily dynamics back into your organization will be crucial to proactively manage cash and reduce internal operational and planning volatility.

Considerations

  • Airlines are cutting immediate capacity in the range of 40 to 100 percent and beginning to ask for order deferrals, model switches and cancellations.
  • Commercial Aerospace aftermarket revenue is being negatively impacted as airlines defer overhauls to conserve cash while hourly contracts track schedule and capacity reductions.
  • Commercial Aerospace faces enormous headwinds, but Defense and Space appear to offer a relative safe haven in terms of sustained demand with governments stepping up to offer more favorable terms and maintaining budgetary spending.

View All

How to make it work

NOW - Triage and prioritize

  • Establish communications with customers
  • Assess immediate customer posture on orders, deferrals and cancellations

NEXT – Reconfigure

  • Detailed assessment of opportunity and sales pipeline
  • Load revised order and delivery forecasts into production
  • Continuously feed order and sales changes back to production and delivery

FUTURE - Scale and maintain

  • Assess permanent market shifts and re optimize the organization to meet market needs
  • Implement sense capabilities that can quickly assess changes and their impact
  • Ensure ability to rapidly respond to further unforeseen disruptions
  • Consider how retirements/deferrals will impact used/new parts, overhauls and service

View All

What to reconfigure

In the short to medium term, aerospace and defense companies need to be ready to reconfigure parts of the organization due to the ever-changing challenges of COVID-19.

Communicate, listen, act

  • Coordinated marketing and communications with customers and stakeholders is essential, coupled with continuous assessment of the situation, and relevant and effective action taken decisively when required.
  • Internal communications must also be effective and there needs to be business continuity planning for skills and capacity to address risks.

Revise, retool, rebalance

  • Workforce skills and certifications need to be matched to new production schedules.
  • Logistics and transportation should be assessed for any impact on parts availability.
  • Business continuity options need to be considered when facing shortages and single source parts - could the company, for example, retool to manufacture medical or personal protection equipment?
  • Production scheduling will be vital to rebalance production lines according to demand changes.

Safe, secure access

  • All staff remote access and security measures must to be foolproof.
  • Quickly enable remote worker identity and scale access management and VPN capacity across the company.
  • Ensure that any data security/ITAR/GDPR implications have been fully considered and resolved.

Forecast, update, repeat

  • Make detailed assessments of the opportunity and sales pipeline regularly and load the revised order and delivery forecast into production.
  • Feed any order and sales changes back to production and delivery immediately.

View All

What's on the horizon

Re-balancing operating models will be a priority, as aerospace and defense companies address what’s needed now, and position for what’s next.

The Aerospace and Defense industry will pivot more towards digital transformation and leverage smart technologies with the adoption of intelligent solutions powered by Artificial Intelligence to gain insight into complex and every evolving situation and the local and global level. The enablement of talent and cloud infrastructure will help bring strategies together quickly.

In the short term, commercial aerospace markets will be on pause while defense markets sustain the industry. As commercial aerospace markets recover, there is a distinct possibility that defense markets may become challenged as government budgets react to lower revenues and grim fiscal realities.

Aerospace and defense companies with a resilient workforce, strong ecosystem and adaptable operations will be best positioned to ride out the immediate challenges and build stronger, more resilient businesses that can overcome future public health, economic and financial shocks.



Contact us

Subscription Center
Stay in the Know with Our Newsletter Stay in the Know with Our Newsletter