Defence supply chains are becoming more complex than ever. For many defence organisations, the number of suppliers and sub-tier suppliers they depend on has reached hundreds of thousands.
This complexity is becoming increasingly difficult to navigate. Especially as defence firms typically use traditional and outdated legacy technology that hampers supply chain visibility. For example, the UK Ministry of Defence (MoD) acknowledged long-standing issues with its many legacy systems earlier this year, which is harming its ability to make supply chain improvements. Key problems identified with legacy systems were limited functionality and fragmentation of the MoD’s inventory management.
Beyond defence, other industries such as manufacturing and automotive are facing increasingly convoluted supply chains that must accommodate rapidly changing risks. In fact, according to Gartner, 53% of supply chain leaders say supply chain complexity reduces their ability to implement change. To overcome this challenge, defence organisations need technology that enables transparency and is adaptable enough to manage growing complexity.
The challenges
For defence organisations with supply chains spanning numerous tiers, across different countries, and involving multiple moving parts, deep visibility is critical. Without deep visibility, defence firms are at risk of, for example, the slow delivery of critical materials and components needed for military operations and equipment production. However, rising supply chain complexity makes this extremely difficult. And without visibility and control of the entire supplier base, defence firms can’t react quickly to supply chain shocks or identify and onboard new suppliers at pace.
Increased geopolitical instability means visibility has become even more important. Blockages caused by sanctions, war, and other geopolitical events are more frequent and unpredictable, requiring organisations to be agile in order to adapt. For example, shipping disruptions in the Red Sea following the “War” in Gaza have resulted in disruption to the flow of materials, parts and other goods that defence firms rely on.
However, many defence organisations are stuck in the past when it comes to managing risk, or even identifying opportunities to find savings and innovate. They rely on outdated manual processes and Excel spreadsheets, rigid ERP systems, and dispersed data, leading to gaps in visibility. The changing supply chain environment underpins exactly why defence firms must take a smarter and more flexible approach to procurement. In fact, with the Labour government voted in, defence spending will rise to 2.5% of GDP, giving the industry more incentive to modernise procurement technology. This will help shift attitudes away from cost-saving and into defence innovation.
Strategies for supply chain success
To achieve full visibility across highly complex supply chains, defence firms must equip themselves with the right tools to mitigate disruption, make better informed decisions, and identify areas to add value.
Technology like cloud-based Source-to-Pay (S2P) offers tremendous strategic value by providing a single source of truth, helping organisations manage all spend and suppliers. Effective S2P increases supply chain observability and improves collaboration with suppliers on mitigating risk, innovating and more. But not all S2P solutions are created equal. Outdated legacy technology is a challenge in most defence organisations. Such systems limit data quality and access, making it difficult to take quick, informed decisions and understand the trade-offs involved in specific supplier decisions. What’s more, cumbersome legacy technology can slow collaboration, making it difficult for stakeholders across multiple departments to work towards common goals and objectives.
As geopolitical uncertainty and disruptions continue, defence organisations stuck using poorly architected S2P technology will be affected by limited visibility. Being unable to swiftly adapt to disruption, means critical military equipment and resources may not arrive on time.
Defence organisations need smart procurement platforms that can pull in data and insights on the entire supply chain to identify dependencies and properly assess risk. These technologies must provide a single source of truth for all relevant information, from suppliers, internal sources and third-party information providers.
Platforms must also be flexible enough to expand data models and embrace emerging technology that can deepen observability into complex supply chains. For example, defence organisations should look to embedded AI solutions to reduce complexity and assist in contract management, supplier performance management and other critical processes to improve efficiency and decision-making within the sector.
Levelling up tomorrow’s defence
With advances in Generative AI, many vendors are now offering use cases for supply chain risk visibility. These will continue to expand, and defence leaders should be sure that solutions also support them refining and creating their own use cases to not be hundred by vendor roadmaps and R&D investment. To realise the true potential of Generative AI, leaders must think holistically and ensure they have an adequate data foundation and roadmap strategy.
Outdated, legacy processes and systems are unable to comprehend the complexity of modern defence supply chains. Only with modern platforms and systems can today’s defence industry companies make their supply chains simple, providing both transparency and a platform for organisations to adopt automated processes that save valuable time, mitigate risk, and increase agility.
A smarter approach to procurement empowers defence organisations with a 360-degree view of all spend and supplier data in one place. With complete visibility into defence supply chains, procurement will be more able to predict risk, navigate uncertainty, and identify opportunities for future growth.
