Designing Resilience into the Defense Supply Chain

Supply chain resilience is critical in every sector. Within the defense industry, when security is at stake, it’s second-to-none. Yet supply chains face constant disruptions from numerous factors such as geopolitical conflicts, technological advancements, parts obsolescence and shortages, cyber security threats, global economic shifts, extreme weather events and pandemics. 

Navigating Obstacles in the Defense Supply Chain

Supply chain disruptions are not merely inconvenient. Delays in production and product releases can mean missing delivery dates – jeopardizing mission-critical objectives, damaging a company’s reputation and bottom line, while impacting security and readiness.

Successfully managing a defense OEM’s supply chain is essential, and can be fraught with challenges.

Risks to the Defense Supply Chain 

As the aerospace and defense sector’s leading provider of end-to-end product lifecycle and supply chain solutions, Celestica has a deep understanding  of the complex sourcing challenges OEMs face today. From our unique vantage point, five of the most prevalent risks are currently:

1. Geopolitical and global economic policies: Global tensions create uncertainty and vulnerability across the extended supply chain, affecting trade policies, access to resources, and disruptions to manufacturing, shipping routes, delivery schedules, profitability and cash flow, and long-term planning. 
2. Parts obsolescence and shortages: As many legacy defense systems rely on designs and/or parts from decades past, the risk of product obsolescence grows – highlighting the need for total lifecycle management. When critical components are in short supply, the ripple effect can be enormous – production halts, adjacent manufacturing lines are adversely affected, deadlines are missed, customers are let-down, costs rise, and readiness is impacted.
3. Cybersecurity threats:  As data breaches, ransomware, and malware attacks can disrupt supply chains and shut down operations for extended periods of time, the need to partner with suppliers that have mature cyber security controls in place – including NIST (National Institute of Standards and Technology) compliance and strict adherence to DFARS (Defense Federal Acquisition Regulation Supplement) regulations has never been more imperative. 
4. Regulatory compliance impacts flexibility: The defense and aerospace industries are highly regulated with extremely stringent requirements to guard against counterfeit and low-quality products. However, this limits how these sectors can react when it comes to product end-of-life, as they do not have the flexibility to use the readily available commercial parts leading to downstream effects on production efficiency, deliveries, and costs. 
5. Pressure to keep up: Technical advancements are complex. Next-generation innovations, such as the emergence of defense systems incorporating AI, encryption, and jamming technologies are having significant impact. Rapid product transformation puts defense manufacturing companies under enormous pressure to keep up with the latest developments and required computing power. This requires them to establish and qualify non-traditional supply chains as needed to support these innovations.

Building Supply Chain Resilience

Despite these seemingly herculean challenges, defense OEMs can take practical steps to shift their supply chain strategies from reactive to proactive – anticipating uncertainties and strengthening their readiness to cope with inevitable disruptions.

But what does supply chain resilience look like and how can defense OEMs adjust their approach? Our team of supply chain professionals cite six key areas of focus that can enable OEMs to mitigate risk, while optimizing agility, quality, and cost. 

Global scale and supply base: Strong, global supply chains are vital lifelines for every business, but particularly when producing advanced defense systems on a mass scale. Building a network of qualified global and local suppliers enables manufacturers to be flexible and proactive, seamlessly shift to new supply routes if necessary and enables them to scale-up to meet customers’ needs.

Component Level Sourcing Diversification: If we learned anything from the pandemic, it is that resilient supply chains are not anchored to sole-source solutions. Any disruption with a single supplier or trade route can prove catastrophic. It is imperative to continually strengthen your component-level supplier base by establishing multiple partnerships with high-quality, innovative, flexible vendors across the globe. World-class defense manufacturers employ component engineers to vet potential alternate suppliers – specifying the exact requirements needed. They ensure that only components designed, manufactured, and validated to meet exacting requirements are purchased, and identify suitable alternate components – enhancing supply chain agility while optimizing costs.

Proactive risk assessment & mitigation: Mitigating supply chain disruption starts at the design phase and extends across the product lifecycle. It involves proactively analyzing the lifecycle of each product’s raw materials, working with the supply base to ensure they understand your needs and you understand their component lifecycles, and then making decisions and evaluating next steps well in advance. 

Visibility and traceability: The use of robust tracking systems and data analytics enables real-time supply chain visibility. A global inventory management system is a critical pillar in building supply chain resilience. World-class systems provide trend analytics that offer visibility into cost, obsolescence, location, lead times, and more. The emergence of predictive analytics using AI and machine learning can map your entire supply chain into the future by forecasting demand changes, raw material shortages, and the potential impacts of geopolitical turmoil – enabling you to predict, plan and respond more effectively.

Security and Compliance: When it comes to the manufacturing of defense products, compliance extends beyond the factory floor, requiring manufacturers to exercise due diligence with their supply chains. This means carefully vetting suppliers to ensure they are compliant and capable of safeguarding controlled technical data (e.g. under programs such as CGP and ITAR). Compliance with controlled goods regulations and practices including: system/data integrity, access control, part qualification processes, employee training, quality standards and export licensing requirements -- are non-negotiable.  

Collaboration: Fostering close collaborative relationships with suppliers and keeping communication channels open is key. In times of crisis, critical decisions need to be made swiftly. It’s the suppliers who have prepared for that scenario who prevail -- delivering in times of need. Building trusted partnerships with suppliers who provide clear visibility to risks and take action to mitigate them is imperative. 

Celestica’s Design for Supply Chain (DfSC) approach mitigates risk and drives readiness

As the leading product lifecycle solutions partner to the aerospace and defense industries, Celestica knows that it is imperative to incorporate supply chain considerations early-on in a product’s design phase – essentially building risk mitigation and resiliency right into the product.

Our Design for Supply Chain (DfSC) offering is a systematic approach to designing products and processes that optimize the entire supply chain – from raw material sourcing to final product delivery. DfSC enhances product effectiveness by engaging early with customers and design engineering teams to establish a key understanding of their product requirements, schedule, unique material or technology, key component architectural choices, custom parts as well as standard component types.

Our three-stage DfSC approach spans: 

1. Requirements:  Working with customers to define product/project requirements for resources, timing, cost, specifications, geography, technology, regulatory requirements, and volumes.
2. Research: Conducting robust assessments of existing/new source availability across a number of criteria: capability, financials, relationship, quality systems, field performance, support offering, capacity, terms, flexibility, lifecycle support, and lead time.
3. Realization: Helping our customers focus on best total cost, risk mitigation, sourcing strategy, communication, application support, transactional engagement (i.e. ordering, warehousing, delivery), performance monitoring, and relationship growth.

In a dynamic and uncertain world, Celestica's Design for Supply Chain (DfSC) approach provides aerospace and defense companies with a proactive strategy to mitigate supply chain risks. By engaging early in the product design process, DfSC enhances product effectiveness, supports mission readiness, and contributes to national security. 

With Celestica's experienced supply chain experts, discover how your company can achieve a resilient supply chain that drives predictability, reliability, and responsiveness – the cornerstones of product excellence and readiness.