The State of the A&D Industry: Acceleration Economy Ready for Takeoff

The aerospace and defense industry has traditionally been slow to adapt to change, and that is understandable. Supply chains are large and complex, which lengthens product development and delivery timetables. But OEMs are learning that time is no longer on their side. Every year more and more change gets packed into the business cycle. Technological innovations are rapidly changing the landscape in many ways, from growth in air travel to increasing demand for cheaper, more reliable aircraft, combined with the emergence of new technologies and supply chain models. And customer expectations for faster delivery of high-quality products have never been higher. How can OEMs compete and succeed in this new era?

Celestica has published a timely new report, “The State of Aerospace and Defense: Welcome to the Acceleration Economy” that examines the market forces driving this transformative era we call the Acceleration Economy and provides recommendations for how A&D OEMs can rise to the challenge by fostering innovation, speeding time to market and enhancing competitive advantage.

The report begins with the good news: the steady growth the industry has been enjoying for the last several years is expected to continue into 2019 and beyond. The commercial aviation industry is seeing strong passenger demand, lower commodity prices (including crude oil), and growth in emerging markets. And according to Deloitte, several governments have already started increasing their defense budgets, including purchases of next-generation military equipment.

Yet, while growth creates opportunities, it also creates many challenges. The Acceleration Economy places enormous pressure on OEMs to lower their operations costs while simultaneously providing higher product reliability and faster time to market. These seemingly opposite forces are driven by three powerful forces:

1. Higher-than-ever customer expectations Demanding customers translate to ever-increasing demands for faster delivery, lower prices and an always-on service relationship.
2. Constant technological innovation. The current crop of emerging technologies is driving a new super-cycle of digital transformation that will have a profound and lasting impact on the industry.
3. Globalized innovation and competition.  Products are made and sold everywhere; and innovation and competition can come from anywhere. 

Success requires becoming more nimble, adaptive and innovative in delivering products, services and experiences on a globalized scale, and optimized for the end customers’ exacting expectations. Our report not only explains what success looks like, but guides readers on how to achieve it by embracing five key principles: 

1. Transform or risk irrelevance
2. Extend innovation
3. Expect to be challenged
4. Put quality and efficiency hand-in-hand
5. Make flexibility an imperative

Following these five principles will enable an OEM to modernize its supply chains, but that cannot be a solo undertaking. Those that create and maintain deep and lasting partnership networks will be best positioned to spot changes, pick-up new ideas and fend off global rivals.

The report concludes with our 2019 predictions for the A&D industry, based on the events, transactions, trends and challenges that have had significant impact throughout the past year.

You can download the full report, “ The State of Aerospace and Defense: Welcome to the Acceleration Economy”.