Defense demand is on the rise

Story

September 11, 2024

Rob Mather

IFS North America

There exist four operational trigger points where digital solutions can help solve defense-manufacturing issues and can extend a helping hand to production systems without increasing costs. Defense manufacturers can adopt several new technologies and tools to meet the pressing and ongoing demands for growth.

Over the last several years, diminishing demand and stock levels sparked a loss of as much as 40% of the U.S. defense sector’s value by some measures, causing manufacturers to scale back operations. Demand is increasing again, and the same manufacturers are struggling to keep up. Yes, the majority of issues faced by defense manufacturers are caused by external factors, but some internal factors are also causing challenges, such as disparate internal manufacturing systems or inconsistent information sources that restrict the ability to streamline operations.

A recent Deloitte report¹ pulled no punches when it argued that to unlock the necessary growth and efficiency to meet today’s growing defense market environments, aerospace and defense (A&D) organizations had to take digital transformation seriously: “Modernizing and integrating processes and enabling technologies are some significant steps for the A&D industry to improve production throughput and cost efficiency. Embracing digital transformation can reshape A&D production processes at all stages, significantly reducing industrialization cycle times, improving efficiencies, increasing production yield, and elevating quality standards.”

This type of transformation demands a company-wide approach to software and information that connects the shop floor to the top floor so that all departments and processes operate effectively to increase production, precision, and agility. Companies must start with moving away from siloed and inconsistent information sources to a single integrated management system that gathers data from the manufacturing execution system (MES) and enterprise asset management (EAM) system to inform the customer relationship management (CRM) and enterprise resource planning (ERP) system – that single integrated system takes in all the data and provides a single source of the operational truth.

Here are the four key operational trigger points where technology will enable defense organizations to achieve the high-performance manufacturing operations they need to take advantage of the boom years ahead.

1. AI-powered troubleshooting encourages streamlined operations

To help deal with surges in demand, defense manufacturers have reversed inventory strategies from lean and just-in-time principles to overstocking parts to ensure inventory buffer. Despite such a move reducing production risks, financial risks have been increased due to cost of purchase, storage, and tracking of materials and parts. To better balance risk, defense manufacturers can look to integrate operations and take advantage of demand-driven material requirements planning (DDMRP). This approach will ensure that inventory levels match demand levels and supply-chain variability. By looking at actual usage data, DDMRP can determine if the stock level for a part is sufficient to cover demand, making defense manufacturers more sensitive to supply-chain disruptions, variations in demand, and production downtime.

Additionally, the use of AI [artificial intelligence] within defense forces and manufacturers is on the rise. The U.S. Department of Defense (DoD) reports budgeting $1.8 billion during 2024 for AI applications². It also states that AI applications³ will be used going forward to help defense forces and organizations recognize patterns, learn from experience, make predictions, and generate recommendations, all of which can be applied to supply chain.

AI can help further de-risk production and financial issues. Manufacturers should look to combine anomaly detection and pattern recognition with real-time data correlation; the combination of AI anomaly detection and DDMRP can radically increase the speed and accuracy of problem detection throughout all aspects of the organization and can alert users to potential chokepoints before they escalate into complex and costly problems.

2. Project-management tools drive new efficiencies

Defense manufacturing projects by their very nature are complex, with multiple production lines needing to adhere to intricate assembly requirements. Project management, already a major challenge for defense manufacturers, is further exacerbated by the limitations of current types of ERP management software causing a disconnect throughout operations, alongside a lack of a skilled workforce readily available to defense manufacturers. Recent reports from Guidant Global⁴ highlight the workforce issues facing the U.K. [United Kingdom] defense sector, with key decision-makers stating they’re already facing a lack of skilled manufacturers and mechanics.

Implementing integrated project-management software will allow defense manufacturers to align their planning through their operations to optimize production and increase efficiency. The use of smart technologies such as integrated project-management software enables data to flow in real time so people, systems, and capabilities can be leveraged in every aspect of their operations.

The increased visibility brought by integrated project-management software enables manufacturing teams to react quickly to new priorities, thereby ensuring workers and machinery are coordinated to maximize efficiency and capacity and avoid wasting time, money, and resources.

3. Workflow engines combined with manufacturing execution systems enable efficiencies

One of the biggest challenges defense manufacturers are struggling to overcome due to rising demand levels is that of reducing lead times – in August 2023 the delivery time for production materials reached 87 days, according to numbers from Deloitte. Despite being reduced by 13 days compared to 2022, the average lead time has yet to recover to pre-pandemic levels. Integrated workflow tools can help defense manufacturers reduce lead time, with their ability to provide all relevant parties with data so that people, machines, and asset’s time and skills are all optimized.

A key part of digital transformation within the defense manufacturing industry is to move away from siloed data and toward real-time data that flows from the shop floor to the top floor of defense manufacturers. Powerful MESs with integrated workflow engines enable data to flow from end to end, so every worker has operational visibility of what’s happening and what needs prioritizing.

Utilizing powerful MES with integrated workflow engines brings far more benefits to defense manufacturers compared to typical ERP systems with data aggregators or business-intelligence reports. Integrated workflow systems are accessible for all relevant parties – providing vital insights into ongoing work everywhere. (Figure 1.)

[Figure 1 ǀ Manufacturing execution systems with integrated workflow engines enable real-time flow of data from the shop floor to the top floor.]

4. Regulatory compliance – that last hurdle

Defense manufacturers operate in an industry defined by regulatory requirements, whether it’s supply chain, cybersecurity, sustainability, or employment – they all have their own regulations to comply with. This reality requires defense manufacturers to have fully traceable operations and processes that generate information readily available for regulatory reporting.

As regulations get stricter, current disjointed systems make it harder for defense manufacturers to meet requirements, with slow data compilation and increased risk of information being inaccurate or out of date. A real-time, single source of the truth is needed.

To this end, manufacturing-management platforms should include integrated and automated templates for mandatory government reports that are ready to use when called upon. Combining MES and ERP in one place will also help them comply with the ISA-95 standard⁵ from the International Society of Automation (ISA). Doing so ensures use of standardized data models and communications to enable consistent and accurate data exchanges throughout all business systems.

Realizing efficient and compliant manufacturing

Choosing a strategic technology partner is common for defense manufacturers to realize operational and financial goals. Turning away from siloed and disparate data and instead adopting an integrated system such as MES and EAM systems being passed straight to the CRM and ERP system means that defense companies can boost productivity levels, empower their current workforce, and increase regulatory compliance.

Once in place, digital transformation can unlock a host of benefits for defense manufacturers and enable them to control in-house hurdles while managing the current and any future rise in demand.

Notes

¹ Deloitte Consulting, “2024 aerospace and defense industry outlook” https://www2.deloitte.com/us/en/insights/industry/aerospace-defense/aerospace-and-defense-industry-outlook.html

² U.S. Department of Defense, “Department of Defense Releases the President’s Fiscal Year 2024 Defense Budget” https://www.defense.gov/News/Releases/Release/Article/3326875/department-of-defense-releases-the-presidents-fiscal-year-2024-defense-budget/#:~:text=The%20FY%202024%20DoD%20budget,allies%2C%20and%20partners%20for%20success.

³ U.S. Department of Defense, “U.S. Endorses Responsible AI Measures for Global Militaries” https://www.defense.gov/News/News-Stories/Article/Article/3597093/us-endorses-responsible-ai-measures-for-global-militaries/

⁴ Guidant Global, “UK’s defence sector at risk of falling behind other countries as the STEM skills shortages rage on”https://www.guidantglobal.com/news/uk-s-defence-sector-at-risk-of-falling-behind-other-countries-as-the-stem-skills-shortages-rage-on-

⁵ International Society of Automation, “ISA95, Enterprise-Control System Integration”https://www.isa.org/standards-and-publications/isa-standards/isa-standards-committees/isa95

Rob Mather is IFS Vice President, Aerospace and Defense Industries, responsible for leading the IFS global A&D industry marketing strategy, while also supporting product development, sales, and partner ecosystem growth. Rob has more than 15 years of experience in the A&D sector, having held a number of strategic R&D, presales and consulting positions at IFS, Mxi Technologies, and Fugro Aviation. Prior to his current position, Rob built and led the global A&D Presales Solution Architecture team at IFS. He holds a degree in aerospace engineering from Carleton University (Ottawa, Canada).

IFS • https://www.ifs.com/