The A&D Minute: Navigating turbulence–enhancing supply chains in aerospace and defense for a secure future

In today’s dynamic and often unpredictable business environment, the aerospace and defense sector faces significant challenges that can jeopardize operational integrity and financial stability. From global pandemics to geopolitical tensions and economic fluctuations, disruption has become the new normal over the past five years and is likely to continue, driven by geopolitical instability, challenges in commercial aviation, and shifting defense priorities.

These disruptions have exposed vulnerabilities in complex global supply chains, underscoring the critical importance of supply chain resilience—the ability to anticipate, withstand, and recover from adverse events.

The imperative of supply chain resilience

With up to 70% or even more of A&D product costs “bought in,” the resilience of supply chains is critical for the success of A&D companies. As firms navigate increased uncertainty and the string of one-off disruptions (Figure 1), monitoring risks while being able to map the financial, reputational, and operational impacts becomes essential.

Over time, investing into supply chain resiliency facilitates innovation. As supply chains become more transparent, leaders can allocate resources from addressing supply chain issues to research and development, new product initiatives, and market expansion strategies.

A&D supply chain disruption today

Volatility in the supply chain continues in 2025. Complex, multi-tiered supply chains in the A&D sector continue to face numerous challenges from various sources (Figure 2). Not all supply chain volatility is created equal: OEMs must consider how to improve the resiliency of their suppliers against customer-driven disruptions, internal challenges, supplier disruptions, and unfavorable macroeconomics, considering both short- and long-term impacts. For example, tariffs planned or implemented by the new U.S. administration could have a strong impact on aerospace grade materials as well as on broader A&D trade flows between the United States and Canada, Mexico, and EU. Additionally, uncertainty around whether the tariff threats are negotiation tools or signs of longer policy shifts makes the path forward less clear.

These new disruptions exacerbate continuing challenges from the COVID-19 pandemic: constricted supply of raw materials like titanium and steel; disruptions in the supply of plastics; and challenges with ramping supply on key inputs such as semiconductors, forgings, and castings. Inflation and workforce shortages continue to add to the difficulties, while cybersecurity threats pose significant risks to operations and data integrity.

In the defense industrial base, in particular, long lead times for specialized components further complicate recovery efforts. Geopolitical and economic instability, such as the war in Ukraine, exposed weaknesses in supply chains, prompting a shift towards localization and reducing heavy reliance on foreign supply. Traditionally, there has been hesitation around over-investing in supply; however, industry’s significant ongoing investment into solid rocket motor production, for example, highlights a greater willingness to build domestic capacity–especially on critical supply chain links. Building that sort of momentum will be crucial to circuit breaking the long-term impacts of supply chain bottlenecks.

Developing supply chain resilience

Aerospace and defense companies must take action to ensure their supply chains are resilient because few of them do today (Figure 3). Adopting or developing a framework for resilience can help determine where companies are mature and where there are gaps that need closure. An approach that blends speed with realistic expectations is key to gaining traction.

Implementing resilience-building measures

To strengthen supply chain resilience, setting up a supply chain control tower leverages digital tools and real-time data to monitor the entire supply chain, detect potential disruptions early, and facilitate rapid response. This proactive approach enables companies to stay ahead of potential issues, minimizing the impact of disruptions.

Developing and implementing advanced planning and scheduling systems is another key process. By integrating data from across the supply chain, these systems allow for more accurate forecasting, proactive planning, and optimized decision-making. This data-driven approach enhances the ability of companies to adapt to changing circumstances.

Also, driving workforce development initiatives aimed at addressing the skills gap can ensure supply chain leaders effectively drive resilience efforts. By investing in training programs, companies can create a more agile and adaptable workforce capable of managing today’s supply chain challenges.

Strengthening supplier relationships

Supply chain organizations should aim to build stronger, more collaborative relationships with suppliers through the development of an end-to-end model for supplier relationship management. Suppliers should be categorized based on strategic importance, performance, and risk profile, allowing for tailored management strategies. Then, suppliers can be evaluated based on key capabilities, identifying areas for improvement and potential risks that need mitigating.

Companies may also need to provide customized support to troubled suppliers. Support can range from financial assistance to operational guidance or even helping to explore strategic acquisitions to strengthen the supply base. By fostering collaboration, companies can create a more resilient supplier ecosystem capable of resisting disruptions.

Building resilience together

Transforming the supply base

The A&D industry needs to dramatically revise its supply chains in response to shifting market dynamics. AlixPartners assists organizations in strategically reshaping their supply base to enhance resilience. Some clients have started to diversify sourcing to Vietnam, India, and Mexico under a “China+1” strategy. Countries like India, Malaysia, Philippines, and Indonesia are also experiencing increased A&D investment as alternative production hubs.

This can include consolidating suppliers to take out complexity and improve efficiency, enhancing sourcing strategies for critical components, and exploring nearshoring options to counter geopolitical risks.

Dual sourcing identifies and qualifies alternative sources of supply that are vital or key material. It does not only mean sourcing from two suppliers but also includes other forms like sourcing from one supplier with two manufacturing sites or in-house manufacturing coupled with buying from a supplier). This diversification reduces dependence on one source, increasing flexibility and responsiveness in the case of a disruption.

Developing an inflation defense strategy

With rising inflation causing challenges, AlixPartners supports the process of creating robust strategies to protect companies against inflation. AlixPartners looks at big-picture macroeconomic trends to estimate various cost impacts across categories and indices. AlixPartners builds inflation impact models that quantify what these rising costs really mean for the overall cost structure of the company, not just at the component level but also through product portfolios.

Leveraging tools and methodologies

AlixPartners utilizes a suite of in-house tools and methodologies to drive effective solutions for A&D companies. The Supply Chain Resiliency Analyzer is a digital tool that provides real-time supply risk assessments and facilitates mitigation scenario planning by connecting live data feeds. This tool empowers companies to make informed decisions and quickly adapt to changing conditions.

The Supply Chain Watchtower provides a comprehensive supplier risk assessment, scoring suppliers across multiple dimensions such as part shortages, delivery reliability, financial stability, and quality. This fully customizable system offers real-time insights into every aspect of the supplier relationship. These risk scores enable teams to prioritize resource allocation across program management, engineering, quality, and supply chain functions, focusing on areas that require immediate attention to prevent minor issues from escalating into critical operational impacts.

The Global Trade Optimizer serves as a comprehensive database that enables companies to map their supply chains, identify alternate suppliers to minimize single points of failure, and model different scenarios to optimize resilience and cost efficiency. The Spend X-Ray tool analyzes spending patterns to uncover opportunities for cost reduction, which is particularly relevant in an inflationary environment.

To address inflation specifically, the Inflation Control Tower allows companies to track inflation comprehensively and develop effective mitigation strategies. Additionally, the Sustainability Playbook guides companies in implementing sustainability initiatives, which can enhance supply chain resilience while also addressing broader environmental goals.

The necessity of supply chain resilience

For an era in which supply chain resilience is not just an option, but a necessity, partnering with AlixPartners can be transformative for A&D companies. With AlixPartners as a trusted ally, A&D companies can confidently navigate the complexities of today’s business landscape. By building resilient supply chains, they position themselves for sustained success in an ever-evolving world, ensuring they are prepared to face future challenges head-on while seizing opportunities for growth and innovation.