Aerospace Organisations Face Ongoing Supply Chain Issues

Aerospace and defence companies face a production challenge that originates in their supply chains. Order books have reached historic highs, but backlogs continue to grow faster than manufacturers can deliver.

The competitive advantage now belongs to firms that can resolve supply chain bottlenecks and scale production ahead of rivals.

Backlogs grow across defence

The defence industry is experiencing high demand, but backlogs have reached an all-time high. This situation no longer represents a positive indicator of market position but rather points to a broader industry challenge.

According to Bain, Boeing's backlogs stand at US$695bn. Airbus is working towards increased production of its A320 family, but faces engine supply constraints.

Lockheed Martin's missile and fire control division delivered production at record high rates yet saw backlog growth of 20% over a single year. The widespread nature of these backlogs suggests an industry-wide issue rather than isolated organisational delays.

Supply chain constraints could show themselves as the core reason behind the industry's inability to meet demand on time.

Supply chain constraints outweigh other factors

Bain explored 15 defence programmes and found that 87% of companies stated supply chain issues were more impactful than labour, engineering or capital equipment issues. According to Bain, much of this challenge comes from multiple organisations relying on the same sub-tier supplier base.

When demand across the industry increases, these suppliers face a more intense surge in demand that customer forecasts do not always represent.

"In nearly 90% of the aerospace and defence programmes Bain analysed, supply chain constraints were cited as a key obstacle to ramping production," explains Jim Harris, Partner at Bain & Company and co-writer of the report.

"The companies pulling ahead are treating supplier capacity as a strategic asset — not a procurement problem."

Production growth targets across the US and Europe are between 20% and 500% higher than levels between 2024 and early 2026. Supply chain issues have resulted in allied nations having lowered munitions stock, airlines being unable to expand their fleets and suppliers losing customers.

Supplier investment becomes a strategic priority

Honeywell Aerospace has a backlog of US$19bn, an increase of 20% from the year prior. To close this gap and mitigate risk of future bottlenecks, Honeywell is planning to invest in its supply chain.

"If I need to buy equipment for suppliers, smaller suppliers that are providing critical components for us, we will go ahead and do that as well, where necessary and where required," Jim Currier, CEO of Honeywell Aerospace tells Reuters.

"So, when I think of capital deployment, it's not just within our own four walls."

By acknowledging the need to invest in its supplier base, Honeywell is exploring the issues behind production delays. In doing this, it is protecting its assets and working to support its suppliers.

Businesses are seeing the issues behind sole sourcing and long supplier qualification cycles. Demand for core materials used in aerospace has increased in recent years, putting strain on critical material supply chains.

Rare earth minerals are difficult to process, but their use in aerospace and defence has seen production and demand grow.

Strategies to resolve constraints

Bain points to four main strategies to close the backlog:

• Find new capacity within operations by undergoing an inventory redesign and removing any scrap that does not add value to the organisation. This helps introduce buffers that can protect production continuity and prevent routine stoppages.
• Build a strong relationship by deploying people on site at critical suppliers in order to engage with the company. This means issues can be resolved in a hands-on manner and shows a commitment to collaborating with the supplier.
• Commit to a supply base by committing set volumes, which allows firms to avoid the risk from just-in-time manufacturing. Producing stock ahead of orders means organisations can have a stockpile of materials, which allows businesses to respond to heightened demand rather than working to meet demand.
• Make use of digital tools, as predictive analytics helps flag constraint risks in advance and digital twins can identify bottlenecks and help find solutions. Through implementing these tools into planning, organisations can prepare for supply disruptions.

The production gap is an industry-wide issue driven by heightened demand and supply chain delays. The companies that can respond to these issues and invest in supplier capacity will position themselves better among competitors.