Finding Success as an Aerospace & Defense Supplier
Analyst outlooks for the Aerospace and Defense (A&D) industry point to significant, continued growth as strong travel and communication demand fuel the commercial sector, and a changing military landscape feeds more defense spending. Small- and mid-sized businesses looking to enter or increase their presence in A&D as suppliers should be encouraged by this view, but they will need to act with awareness and intention to find success.
Here, we recap key takeaways from our recent panel participation with A&D industry leaders and supplier CEOs on how the A&D supply chain environment is shifting and what small- to medium-sized suppliers can do to start or solidify relationships in the space.
Present Yourself as a Partner (Not a Transaction)
A&D industry leaders are adopting more partnership-oriented approaches with suppliers to form stronger working relationships rather than treating suppliers as commodity vendors. While there is growing pressure for lower cost and a trend toward more firm fixed-price contracts, these leaders view several other factors as highly important and are collaborating with suppliers to support their ability to address them.
For example, quality and compliance are both important supplier selection factors, as A&D suppliers must consistently deliver high-quality materials and products. Contractor questions surrounding quality and compliance are likely to include: Does the prospective supplier have a strong quality management system in place that’s certified to industry standards (e.g., AS9100D:2016, ISO 9001:2015, QSLM)? Are they International Traffic in Arms Regulations (ITAR) certified? Can their operations meet unique, project-specific quality requirements? Now, A&D contractors are more actively working with smaller companies to equip them better to meet relationship requirements in a mutually beneficial manner.
Understand A&D’s Ebb-and-flow Environment
A&D industry growth outlooks have moved some suppliers to consider whether they should put all their eggs in an A&D basket, or instead scale their pursuits into aerospace and defense as more of a bolt-on to existing business. For small- to mid-sized businesses especially, the latter approach is normally lower risk.
Generally speaking, Aerospace & Defense contracts stemming from government and military sectors take a great deal of time to unfold, are episodic, can be subject to changes in government spending agendas like the recent budget reductions at NASA and layoffs at JPL, and have an up-and-down roller-coaster-like trajectory. Betting the whole farm on a fairly narrow aerospace project would introduce a level of vulnerability that’s usually unwise to take on. Pursue A&D supplier opportunities that enhance and diversify an established business.
This high growth period has also seen the dissemination of more RFPs, spurred in part by higher numbers of commercial contracts. The nature of commercial contracts runs counter to the government- and defense-related contracts. Commercial RFPs and contracts typically entail shorter turnaround times and smaller projects. The faster sales cycle is attractive, but it also means that you must be able to respond to RFPs and deliver faster.
Don’t be Passive, be Proactive.
A&D programs and contracts have a life cycle – once they’re over, they’re over. Many suppliers get frustrated when they close out excellent work for a big prime on a program or contract only to find no clear line of sight for getting onto another program or contract with the company.
This frustration is reasonable, but it’s essential to understand why this phenomenon occurs and what suppliers can do to mitigate it.
The four largest companies in the A&D industry each have more than 100,000 employees, and the next tier of companies is not far behind. The sheer size and scale of these organizations and employees being allocated to different programs and projects mean cross-project communication and note comparison don’t always occur. It is common for respective leaders of different contracts or programs not to know one another’s full slate of suppliers. Secrecy requirements also commonly restrict program stakeholders from sharing specific supplier information.
Suppliers should approach big primes as communities rather than monolithic companies. You and your employees should actively advocate for your business and intentionally network across these big companies’ various divisions, departments, and contracting paths. Seek out small business programs and events now commonplace in most big primes. The depth and breadth of small business resources and entry points have increased as government contracts require higher percentages of project work and contracts awarded to small businesses.
Position Your Business for Supplier Success
Strong signals for continued growth in the Aerospace and Defense industry should instill optimism in small- to medium-sized businesses interested in establishing or expanding a supplier presence. That said, diving in headfirst without a solid understanding of what lies beneath the surface is not recommended.
To support your company’s success as an A&D supplier, listen closely to what contracting organizations need and open a dialogue regarding how your business can help and potential barriers to overcome. View how deeply you should commit your company’s resources to Aerospace and Defense pursuits in the context of the industry’s ebb-and-flow nature and not risk your core business. Lastly, don’t expect one stretch of good work to lead to the next automatically. Go on offense in building relationships across these organizations and evangelize the value your organization can deliver.
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Want to strengthen your supplier partnerships and get more business? Need help forming a strategic plan to establish or expand your Aerospace and Defense industry presence? Request a Free Consultation with a vcfo expert who can help. We’ve partnered with leaders from more than 6,000 businesses in our 28-year history and are ready to put our experience to work for you.