The aerospace and defense industry is enjoying unprecedented growth. But original equipment manufacturers (OEMs) and their suppliers can’t afford to be complacent. They will need to ensure that their global supply chains are fast, flexible and dynamic, in order to take full advantage of a growing economy and strong customer demand. 

The top trends and challenges facing the sector were addressed in depth at the 2015 UPS Aerospace and Defense Summit. Experts and industry thought leaders tackled many of the major issues on the executive agenda, including globalization, energy policy, risk mitigation, compliance, best practices in operational excellence, and the promise of emerging markets.

“Outstanding” growth on the horizon
Aerospace and other businesses will someday look back on 2015 as “the good old days,” said Jonathan Berger, Vice President of Aerospace & MRO with ICF International. He noted a first-quarter increase in demand of nearly 12%, with capacity up by just over 7%. The period has been “outstanding” for operators, OEMs and Tier 1 and 2 suppliers alike, he said.

Jim Barber, President of UPS International, identified huge opportunities for continued growth in aerospace worldwide. Some 37,000 new aircraft will enter the global market over the next 20 years, he said. In addition, existing fleets will require maintenance and repair as they age. The global aerospace sector will have to embrace “radical change” in order to accommodate that level of growth, speakers said. Supply chains will become simpler, faster, more flexible and more widely distributed. Suppliers will be called upon to boost product quality and service reliability, while manufacturers will increase their reliance on in-country vendors.

The value of supply chain optimization
Even today, a company’s ability to navigate supply-chain complexity is what distinguishes it from the average performer, said Charlie Covert, Vice President of Customer Solutions with UPS. Manufacturers employing best-in-class supply-chain techniques have costs that are 7.8% lower than the rest. Expect that gap to widen, as companies wrestle with the challenge of collecting and analyzing “big data.” Dr. Ed Frazelle, President and CEO of Logistics Resources International, stressed the importance of demystifying terms such as “complexity,” “capability” and “performance,” with an eye toward shedding non-value-added practices. In the end, he said, an aerospace company’s performance boils down to its total supply-chain cost per “perfect order.”

Learn more about the insights presented at the 2015 UPS Aerospace and Defense Summit by downloading this executive summary.