Challenges in the Aerospace and Defense Industry

Given below are some major challenges faced by the aerospace and defense industry: 

Talent Management:

A&D organizations are in dire need of science, technology, and engineering talent to continue to support future growth.  This is aggregated by the fact that a high percentage of skilled workers are quickly reaching the age of retirement, meaning aerospace and defense companies will experience a significant shortage of knowledge and experience. Attracting and retaining critical talent is increasingly viewed as a top strategic issue.

To overcome the challenge of talent management, organizations need to create talent management strategies, people management practices, behavior led strategy execution strategies that align people with business objectives.

Finding Growth Opportunities:

There are scenarios in which military investment spending on new acquisitions and R&D could decline from 2008 to 2016 by half. This will have a direct impact on the capabilities to develop innovative technologies and build new weapons systems. Further, there is an influx of new competition by recent consolidation of European and other foreign defense markets. This has introduced equal partners who are financially and technologically competitive.

Defense companies may need to shift from a central operating model to a portfolio management model that allows individual business units to adapt to the unique requirements of their markets.

Global Integration:

Companies will face the challenge of moving toward global integration in engineering collaboration, operations collaboration, logistics, infrastructure, national regulations and taxes, competitor companies.

Globalization can pose many challenges for organizations in the aerospace and defense industry, but companies can use global integration strategies to overcome these challenges. Companies can focus on industry-specific globalization by creating differentiation and sophisticated skill sets to effectively play in the global arena.   Look for strategic alliance partnering and focus on developing solutions to shorten product life cycles and reduce time to market for solutions.

Profitability & Cost Pressures:

The rise in the costs of various raw materials and other input costs are driving down the industry's profitability. Companies must consider the need to cut costs and improve efficiency to remain viable. There will be increased margin pressure due to rising raw material demand and this will result in increased costs for aerospace companies.

Create new business models, commercializing existing technologies, and dynamically creating new opportunities for profitable growth, despite having to work in traditionally risk-averse cultures. Focus on new innovative products, as more competitors enter the global market causing product commoditization.

Better Program & Project Management:

Organizations with complex matrices and autonomous business units often create cultural and organizational barriers to bring efficiencies across the enterprise. Customers in the industry are demanding better program and project execution from aerospace and defense companies.

This challenge could be met by increased internal collaboration by having cross-function and cross-division integration to better leverage technologies and resources throughout the enterprise. Focus on ability to deliver on time, on budget, and with the appropriate level of quality. Perform with increased customer focus and ensure that the customer perspective is the driving force behind all value-added business activities.