Selecting the Right ERP for the Aerospace & Defense Industry
It’s been a tumultuous year for Aerospace & Defense manufacturers. Commercial airlines have seen a sharp drop-off in passenger volume, and many have deferred overhauls until customer demand returns to more predictable levels. This is especially true of the wide-body jets used for intercontinental travel, but the overall effect has been industrywide. While some fleet owners have taken this is an opportunity to perform upgrades, overall business driven by the commercial aviation sector has fluctuated between 30% and 50% below pre-COVID peaks.
The drop-off has affected both production and aftermarket activity, leading to a cascading effect that has impacted smaller manufacturers and MRO service providers. Even in cases where demand has been relatively healthy, supply chains have frequently experienced disruptions that make it difficult for manufacturers to meet existing demand. Logistics and transportation networks have been slowed and shortages have arisen in a number of sectors (such as electronics), making it difficult to predict delivery dates for much-needed parts.
As if that were not enough, manufacturing firms are faced with the challenges of supporting a larger remote workforce than ever before, and managing workplace safety for those who remain on site. Furloughs have been common, especially in the area of aircraft maintenance, yet A&D companies have been reluctant to risk losing skilled workers by extending those absences for too long. Some manufacturers initially shifted some capacity to the production of PPE, retooling production lines and keeping their people employed; but the rush to fill that need has subsided, leaving companies to seek other paths to diversification.
Defense, in contrast, remains healthy, – as the United States and other friendly governments around the world strive to maintain operational readiness. The US Department of Defense has stepped up its efforts to ensure the industry remains healthy, – increasing the frequency of progress payments, for example, and ensuring that smaller contractors upstream read the benefits of such programs.
Consequently, your firm’s ability to measure progress using Earned Value Analysis (EVA) can be immensely important. An ERP system with Earned Value Management (EVM) capabilities can mean the difference between poor liquidity and a strong cash position. Managing flow down requirements to upstream suppliers and subcontractors, likewise, will be a critical requirement for defense contractors going forward.
The DOD and other federal agencies are rolling out tighter cybersecurity standards that will affect every company in the value chain, including even the smallest manufacturers. As we will discuss later, this could have profound implications for companies who are not already running CMMC-certified ERP systems.
Investing in Business Agility and Efficiency
Supply-chain resiliency is of particular interest to most manufacturers right now, as managers struggle to gain better visibility to incoming shipments, and to coordinate production schedules to keep on-time deliveries on track. This is particularly critical at a time when delivery times can often be the most important deciding factor in a customer’s purchasing decisions.
Manufacturers who struggle with inefficiencies in materials handling, scheduling, and supply-chain planning stand to gain substantially by implementing newer systems and technology that the cater to the specific requirements of the A&D industry.
While many ERP vendors will claim to address A&D requirements, most will require extensive customization to address industry-specific needs such as FAA specification management for MRO, tail-number effectivity, digital thread management, DFARS compliance, and export control. Many ERP systems lack important elements required for tracking lots/batches and serial numbers in the A&D industry. EDI and secure electronic exchange are frequently afterthoughts. As industry requirements continue to evolve, “plain vanilla” ERP systems will require even further customization to remain current with DOD, FAA, and other federal requirements.
Dedicated A&D solutions, in contrast, address the comprehensive needs of companies in this industry, and will evolve to meet those requirements as they change. Industry 4.0 technology like additive manufacturing, smart machine integration, and IoT capabilities to enable servitization will play an even more important role in A&D going forward. It makes little sense to roll out ERP systems that will not keep up with the regulations and innovations that are critically important to A&D companies.
Coming Soon: CMMC
An especially hot topic right now is the implementation of new cybersecurity requirements that will flow down to virtually every defense contractor, regardless of size. Cyber Security Maturity Model (CMMC) certification will soon become a limiting factor in your company’s ability to participate in DOD contracts at any level. It’s likely that other countries will standardize their own defense industry requirements based on CMMC, so the impact could potentially extend to virtually every contract and every customer with whom you do business.
For defense contractors in particular, the CMMC requirement alone is reason enough to transition to a new cloud-based ERP system. Infor’s CloudSuite for Aerospace & Defense is already certified at CMMC Level 3, which supports the handling of ITAR controlled data. Hosted on GOVCloud with AWS, Infor CloudSuite for Aerospace & Defense meets the highest standards for cybersecurity in the industry.
Positioning Your Business for Growth
After serving a relatively small group of large customers for years, many companies in the A&D industry have been feeling the pain of limited diversification. Leaders at many firms are aggressively seeking new ways to apply their core competencies to business opportunities outside of their traditional markets. Organizations that previously operated with little or no need for lead generation or field sales activity are now turning to digital marketing and CRM technology to help them seek out new business, and to ensure that their current customers are well served.
Downturns are often characterized by increases in M&A and private equity activity, as investors seek attractive target companies with strong long-term potential. Looking ahead to the recovery that inevitably follows a period of relative stagnation, investors identify strong business opportunities, and the smart money follows. Companies that plan proactively for the recovery phase will be in the best position capitalize on early growth opportunities in the coming year.
At Synergy Resources, we understand the needs of A&D companies. Our industry experts can help you meet or exceed strict new federal requirements, deploy highly secure systems, increase efficiencies, and win more business. Just as importantly, we can help you position your company for growth and continued success, rising above your competitors and building long-term advantage.
To learn more, visit Synergy’s website to find out how CloudSuite for Aerospace & Defense can help your business.