Supply chain risks and innovation
Given the shift towards new products and new geographic markets, KPMG's A&D Outlook shows that supply chain failure continues to be viewed as a major risk for A&D organisations with 87 per cent of respondents citing this as a major threat to achieving their growth agenda. Supply chain risk was ranked as the second greatest risk facing A&D manufacturers second to only concerns about the threat of another economic downturn.

However, less than one-in-ten of the respondents reported that they have visibility into their Tier 2 suppliers. Only around half of the respondents are able to claim that they have ‘enhanced visibility' into their Tier 1 suppliers and some Tier 2 suppliers.

As Erich L. Gampenrieder, KPMG's Global Head of Operations Advisory noted in the 2016 Global Manufacturing Outlook, "The best way to reduce the risk of supply chain failure is by achieving greater visibility, and managing it cross-functionally deeper into the end-to-end supply chain."

While improved visibility will be key, A&D organisations are taking many steps to improve their supply chain's flexibility and responsiveness. Almost two-thirds (64 per cent) of A&D respondents say they have plans to invest according to the demand to improve their supply chain operations. And 60 per cent say they will invest in supply chain analytics.

The rapid adoption of sensors and Internet of Things (IoT) technology is capturing significant attention and investment from supply chain leaders. Almost a third (32 per cent) of respondents said they would definitely be investing into IoT technologies for their supply chain. And an almost equal number said they would be prioritising data and analytics capabilities in order to support their evolving supply chain.

"A&D organizations are seeing massive opportunity that can be achieved - and value that can be delivered - by connecting their products and improving their value through IoT, sensors and new business models enabled by data and analytics," adds Doug Gates. "The more advanced organizations are thinking about how they combine data from their sensors with external data sources to create even more value for their customers and more sustainable growth opportunities for themselves."
END