
COVID-19: Address disruption and build resilience in Aerospace and Defense
April 15, 2020
April 15, 2020
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.
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.
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.
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.
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.
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.
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.
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.
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.