Looking Ahead into 2023 Aerospace and Defense Industry Predictions

The aerospace and defense (A&D) industry has shown signs of a strong rebound in 2022, but supply chain and talent issues continue to limit the industry’s growth in 2023. According to Deloitte’s outlook survey, supply chain disruptions and talent shortages may be the biggest ricks or challenges for A&D organizations in 2023. Inflation also remains a challenge for the entire industry–54% of respondents in Deloittes’ survey report that price increases are one of the key risks this year.

The defense segment remained stable through 2022 and is expected to outperform the commercial aerospace segment as in increase in defense budgets in the wake of Russia’s invasion of Ukraine is boosting demand for military equipment globally. The US defense budget for FY2023 emphasizes perceived strategic threats from China and Russia, with a key focus on electronic warfare and cybersecurity. The president’s request of $872B represents more than an 8% increase.

According to Deloitte’s outlook survey, 88% of surveyed senior executives indicated that they believe the general business outlook for the A&D industry for the next year is “somewhat to very positive.”

2023 Aerospace & Defense Industry Trends to watch

Focus on supply chain visibility and resilience mitigates broader set of risks

Companies across the defense sector have been forced to learn more details about their supply chains, and where the vulnerabilities and risks are. In order for companies to quickly adjust to sudden disruptive changes, they’ll need a few important tenets:

  • Rapid detection, response, and recovery
  • End-to-end, data-driven, supply change control that allows a company to view raw materials, semi-finished goods and finished products starting from the “suppliers suppliers” to the “customers’ customers”. And it will be important to prepare for these disruptions before they happen via scenario planning and war gaming.
  • Emergency stockpiles, safety stocks, and diversified sourcing from offshored, nearshored and/or reshored suppliers
  • Collaboration of private and public supply chain stakeholders

Companies will likely emphasize supply chain diversification, including local sourcing and nearshoring, to avoid concentration risk. They’re also likely to build relationships with suppliers from countries with free trade agreements (FTAs).

Moreover, companies will need to reinforce the need for cybersecurity, cloud privacy, and the resilience of the systems and automation to be prepared effectively for ask risks with core operations and with key suppliers.

Acceleration of digital thread and smart factory can drive improved efficiencies

Smart factories are built on Industry 4.0 technologies that combine cyber digital and physical systems. And they can bring even greater value when they are connected through the digital thread – a single, seamless strand of data stretching from the initial design of a product through to its operation. It connects engineering, supply chain, manufacturing and aftermarket touchpoints.

A good starting point is to connect the PLM, ERP/MES and asset management toolsets. The continuous flow of data between these systems forms a body of knowledge that will help maximize quality, efficiency and compliance.

It can drive unprecedented value:

  1. Designing with 360-view of product lifecycle
  2. Differentiating products with increased flexibility and improved quality
  3. Driving manufacturing efficiency by connecting disparate systems
  4. Identifying new ways to deliver service
  5. Enriching the sales and marketing experience

A new federal initiative, AM Forward, is a voluntary compact among large manufacturers to help their smaller suppliers increase their use of additive manufacturing or 3D printing. Investments like this could help drive supply chain resilience and reduce lead times.

Attracting, retaining, and developing top talent remains a challenge

While the majority of jobs losses related to COVID-19 have been added back, the workforce turnover rate remains high, and an aging workforce is contributing to the current shortage. Meanwhile, automation and advanced digital technologies are driving the need for a workforce with more advanced aerospace engineering, math, data science and digital skills.

According to the Deloitte outlook survey, three out of five senior industry executives surveyed believe that offering clearer pathways for career progression is the best strategy to attract, retain, and develop top talent.

Lowering emissions and implementing sustainable manufacturing remain business priorities

According to the International Data Corporation, 80% of global manufacturers will incorporate environmental sustainability in their products by 2024, which can improve sales by 3%. Sustainability has already become an integral part of business decision marking as both consumers and corporate purchasers increasingly consider carbon footprints when making buying and investment decisions.

A&D primes set a target to reduce greenhouse gas (GHG) emissions, water, waste, and energy and are progressing toward meeting their 2025 and 2030 sustainability targets. For instance, major A&D primes have set a target to reduce more than 50% of GHG emissions by 2030.

GHG emissions scope

In addition to the well-established steps (such as switching to alternative energy sources or improving energy efficiency), a much larger variety of emissions-reducing innovations is now available, including low- or zero-carbon raw materials, greener product designs, and improved overall product usage that strengthens the circular economy.

Innovation accelerates growth in emerging areas

Emerging markets such as space, supersonics/hypersonics, and AAM are poised to change the industry landscape and capabilities in the coming years. 2023 will likely be an important year for these emerging markets in terms of investments, technology evolution, and regulation. According to Deloitte’s outlook survey, organizations are most likely to invest in space-related technologies and AAM in 2023.

2023 could see further developments in earth observation/remote sensing, satellite communications, and technology development. As industries are combating climate change, space companies can monitor and track Earth and benefit manufacturers with advanced technologies such as IoT to improve productivity and reduce emissions.

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