Trends Shifting the Operational and Technology Needs of Aerospace & Defense Leaders

Rising capital costs, shifts in global trade, and a constant increase in cyber-attacks from adversarial entities are reshaping operational needs of business leaders aiming to grow value in the highly regulated Aerospace & Defense (A&D) industry. Business leaders are using operational strategy and technology innovation as levers to navigate through these evolving challenges while meeting the regulatory requirements to operate in the A&D industry.

Cost-Effective

Opportunity cost has not been this high in years, with federal funds rate quickly rising between 2022 and 2023 above 5% to control inflation, as shown in the graph below.

Source: BDO, Forbes, “Federal Funds Rate History 1990 to 2024.”, May 20, 2024.

Higher interest rates have led A&D business leaders to focus on cost optimization efforts to increase the available capital needed to expand sales and grow value. 

From a people and process perspective, the need to right-skill talent while integrating processes have been operational imperatives to increase efficiency while controlling cost.

Meanwhile, generative artificial intelligence has given us a quantum leap in data analytics. Defining specific use cases, especially in back-office operations, is key to the successful use of this innovative technology. Further, choosing an enterprise resource planning platform that was purposely built for A&D avoids costly customization.

Robust Supply Chain

Hyper-globalization trade was focused on the economics of efficiency with just-in-time inventory systems. Tariffs, supply chain shortages, and security threats have shifted global trade to an era of friend-shoring and just-in-case inventory systems to improve resilience. The heavily regulated A&D industry has also created high barriers to entry, which limits supplier availability and shifts purchasing power away from buyers. A&D business leaders are optimizing their processes and leveraging technology to help their organizations overcome shifting supply chain needs by:

• Bundling the demands from multiple projects to scale up sourcing, increasing purchasing power, and reducing inventory levels.
• Focusing on innovation with technologies such as digital twins to shorten development time.
• Building dashboards and reporting tools with specific A&D Key Performance Indicators (KPIs) to enhance visibility and allow business leaders to make informed strategic decisions.

FedRamp-Certified Cloud-Based Solutions

The Cybersecurity Maturity Model Certification (CMMC) is a critical mandate from the U.S. Department of Defense (DoD) to enhance the protection of sensitive data and safeguard our nation from adversarial entities. A&D companies that handle controlled unclassified information (CUI) must comply with CMMC requirements to be able to bid, win, and execute contracts with the U.S. Department of Defense (DoD). 

Selecting a Cloud Service Offering (CSO) that has a FedRAMP Moderate Equivalency or FedRAMP Authority to Operate (ATO) is a DoD minimum mandate for all DoD Contractors who process, store or transmit CUI or Covered Defense Information (CDI) within the CSO solution. This includes ERP solutions that may hold CUI and potentially data subject to International Traffic in Arms Regulations (ITAR), which requires, at a minimum, U.S. Data Sovereignty for both servers sitting on US soil and US persons monitoring those servers. In the case of ITAR data being stored on ERP solutions, those solutions must be hosted on Impact Level 4 Government cloud solutions.

When computing needs exponentially increase every few years, the ability to have a FedRamp-certified cloud-based solution not only future-proofs your business, but also helps achieve the CMMC qualifications needed to win DoD contracts with CUI.

Takeaway

Evolving macroeconomic and global trends have changed the operational needs in the A&D industry. Business leaders are focused on cost optimization efforts, improving the capabilities of their supply chain functions, and implementing security standards to meet CMMC compliance to bid, win, and execute contracts with DoD. 

Right-skilling talent, business process improvement, and leveraging technology innovation have become the operational strategic levers for all successful A&D businesses.