In the aerospace and defense (A&D) industry, service providers are key to helping enterprises achieve lower operational costs, improve productivity, and meet their goals. They assist with business operations, including product design, supply chain management, and manufacturing.
However, in an industry as competitive and regulated as A&D, service providers face many barriers to expanding within the industry. Compliance requirements, technological advancements, and a scaling supply chain introduce unique challenges that leave service providers needing a strategic approach to expansion.
Understanding Requirements is Crucial
Understanding compliance and regulatory requirements is crucial for service providers aiming to expand in the A&D industry. United States regulations control US sensitive information and the import/export of goods and services from A&D enterprises. Knowledge of compliance requirements such as CUI, ITAR, FedRamp, NIST, CMMC, etc. is essential to operating legally, protecting sensitive information, and avoiding penalties.
Further, it informs staffing approaches by ensuring that staff are verified US citizens and all OFCCP requirements are adhered to. This can be achieved by establishing compliance background checks, instituting a process for obtaining/verifying clearances, and launching compliance training. To guarantee all compliance and regulatory requirements are maintained for expansion, service providers are encouraged to partner with a compliance auditor and legal counsel.
Further, keeping pace with rapid technological changes and innovations is essential. Service providers must invest in and develop expertise in emerging technologies to remain competitive. One of the key technologies reshaping the A&D industry is Industry 4.0, which encompasses a new wave of smart manufacturing processes. This includes the integration of cyber-physical systems, the Internet of Things (IoT), cloud computing, and cognitive computing. Industry 4.0 is not just disrupting the way products are manufactured but also transforming the entire product lifecycle management, from design to maintenance, modernization, and repair.
By utilizing or adopting manufacturing differentiators such as digital transformation, Industry 4.0, and advanced technologies such as SAP S/4HANA, service providers will be well equipped to drive innovation and operational efficiency. Market entry strategies, therefore, should focus on leveraging digital transformation, Industry 4.0, S/4HANA, infrastructure, compliance, and cybersecurity to support A&D enterprises.
Additionally, the A&D sector’s cautious yet inevitable shift toward cloud-based solutions and digital transformation presents both challenges and opportunities. Previously, compliance and security constraints did not support cloud transformation. However, recent availability of ITAR compliant cloud platforms enables the opportunity for service providers to provide cloud migration, digitization, IoT, and SaaS platform services. Many A&D companies operate in several platforms due to mergers and acquisitions. As a result, they struggle to upgrade legacy systems, address hybrid cloud migration-based security and compliance concerns and integrate platforms. Since these challenges are all strong capabilities of the leading service providers, focusing on brand awareness and partnerships are key steps to taking advantage of this significant opportunity.
Another major challenge that service providers face is a significant increase in demand for A&D products and services as the supply chain recovers post-pandemic. This creates the opportunity for service providers to expand onshore and offshore. While the supply chain scales and production increases, a need for skilled workers and a resilient ecosystem arises for service providers to take advantage of this major expansion opportunity. To meet the rising demand, service providers can adopt a recruitment and upskilling talent strategy to ensure they have knowledgeable talent in an industry that currently faces a skills shortage and is struggling to keep up with the demand.
Moreover, providers can enact crisis strategies to ensure their supply chain remains resilient regardless of what challenges may arise. Crisis management strategies that focus on risk mitigation can empower companies to prepare for and avoid supply chain disruptions, making them a reliable provider of choice for clients. Furthermore, reliability can be furthered by implementing ERP systems. ERP systems create real-time communication through data exchange and data delivery, and they ensure seamless supply chain management through digital continuity.
Significant Benefits
Overall, overcoming the challenges to business expansion proves to be worthwhile. Service providers can significantly benefit from market recognition and revenue growth by utilizing their current capabilities to further expand within the A&D sector. The A&D sector’s adoption of next-gen technologies and digital transformation initiatives opens new revenue streams for service providers through the provision of specialized services and solutions.
Additionally, service providers that bring significant value to the market are recognized in industry assessments such as Avasant’s RadarView, which evaluates providers based on practice maturity, investments, innovation, and partner ecosystem. Implementing a growth strategy that prioritizes security and compliance requirements, technological advancements, and supply chain resilience is a good approach to capitalize on the opportunities available in this space. Avasant can aid with building a growth timeline where providers can start looking forward to expansion while taking short-term and long-term impacts into consideration.
by LeeAnna Knopes, Consultant