How Mission-Critical Manufacturing Processes Are Evolving in Response to Historic Industry Challenges
The aerospace and defense industries are not strangers to challenges like supply chain disruptions, geopolitical unrest, or workforce shortages. Weathering these issues has required adapting the ways work gets done and the processes driving decision-making.
There is no arguing, however, that the aerospace and defense industries do currently face more severe and even historic headwinds relative to major areas of business function. Rather than making minor shifts or adaptations in the approach to work, these industries are making rapid advancements to tackle these challenges head-on.
In this post, we introduce the major hurdles for aerospace and defense and how these industries are evolving their approach to business and manufacturing processes to adapt and thrive.
The Historic Challenges Facing the Aerospace and Defense Industries
Based on data from its 2025 Facts and Figures Report, the Aerospace Industries Association points out that the aerospace and defense industries have always had strong economic growth and financial security to help weather ongoing challenges, which include:
- Supply chain volatility
- Talent constraints
- Rapid digitization
- Geopolitical unrest
The report found that aerospace and defense continues to demonstrate strong economic impact, generating more than $995 billion in total business activity in 2024 even in the face of those ongoing challenges.
That economic success isn’t without significant adjustment. New iterations of these challenges are forcing fast and strategic shifts in priorities.
Here are four ways aerospace and defense manufacturing is adapting to maintain a strong position amid historic industry challenges.
1. Responding to Supply Chain Volatility With Reshoring and Other Strategies
While some industries, like retail, struggle to adapt their supply chains to shifting consumer trends, the aerospace and defense industries struggle with adapting to ever-increasing consumer demand. For decades, global sourcing strategies were built around cost efficiency, but in a climate where current commercial orders far outweigh the time and resources available to fulfill them, aerospace and defense companies have begun rethinking their supply chain strategies.
Reshoring is reshaping the supply chain, allowing manufacturers to leverage suppliers in their home country rather than overseas. Doing so has several advantages:
- Reduces dependency on global suppliers, which can add time and cost to manufacturing processes
- Shortens lead times by bringing manufacturing processes closer to home
- Improves quality control and oversight with closer proximity
- Strengthens supply chain security by eliminating international risks
- Captures growing government investment in domestic manufacturing and defense priorities
Dive Deeper: Mitigating Supply Chain Risks
Deloitte Insights notes that some aerospace and defense companies are also exploring other strategies, including:
- Supply chain consolidation
- Vertical integration
- Long-dated supply contracts
- Multi-country manufacturing
- Digital solutions for greater supply chain visibility and compliance
Companies looking to reshore their supply chains must develop a robust and trustworthy relationship with a domestic supplier capable of handling complex parts and assemblies within tight timelines without sacrificing quality.
Supplier relationships have become integral to the success of a manufacturing program rather than a cost-based transactional relationship. Your domestic supplier must offer engineering expertise, production flexibility, scalability, and capacity management to ensure a successful partnership.
2. Managing Talent Constraints With Workforce Development and Technology
The manufacturing sector as a whole is experiencing a talent gap caused by factors like an aging workforce population, increasing retirement rates, and a competitive labor market due to such high demand for skilled machinists, programmers, inspectors, and manufacturing engineers.
Manufacturers are responding to the workforce shortage in two ways:
- Investing in workforce development: Internship or apprenticeship programs, continued education opportunities, employee training initiatives, technical education partnerships, and knowledge-transfer programs all help not only attract talent, but ensure those employees can develop and grow within the company and become proficient in using increasingly sophisticated technical systems and tools.
- Partnering with local and regional organizations: Recruiting from potentially untapped talent pools within the broader community helps manufacturers look beyond standard recruiting and leverage in-house training and education to close critical skills gaps.
The Aerospace Industries Association found that recruitment is often not the problem – it’s retaining talent once they are on board. Recommendations include employee empowerment, reevaluating the employment value proposition, investing in employee development (see above), and focusing on a long-term employment retention strategy.
3. Getting Competitive About Rapid Digitization and Digital Transformation
Digital transformation as a term perhaps needs an upgrade, as the transformation has happened. It is no longer something to plan for – it is a foundational driver of aerospace and defense manufacturing and has, in fact, undergone a secondary transformation with the introduction of AI and agentic AI.
Dive Deeper: The Evolution of Digital Transformation in Aerospace and Defense
A recent Deloitte report projects that 36% of tasks performed across industrial products manufacturing could benefit from augmenting human capabilities with agentic AI. While most manufacturers haven’t pivoted fully over to AI solutions due to regulatory requirements and operational considerations, it is routinely being introduced across aerospace and defense processes to demonstrate how AI streamlines decision-making and efficiencies in complex scenarios.
Dive Deeper: AI-Powered Data Analytics in Aerospace & Defense Manufacturing
Outside of AI initiatives, digitization is a heavy-hitter in the aerospace and defense industries, with a number of technological approaches guiding manufacturing:
- Advanced automation
- Connected equipment
- Real-time production monitoring
- Digital quality systems
- Predictive maintenance
- Data analytics
Digitization becomes critical for workforce proficiency, as well as taking some of the pressure off skilled labor, as many processes can be automated to identify performance issues, accelerate quality verification, and adapt more quickly to changing customer requirements.
4. Identifying Trusted Manufacturing Partners in the Face of Geopolitical Unrest
Global conflicts, events, and shifting geopolitics directly impact the aerospace and defense industries with massive spikes in demand for advanced weaponry, satellites, and aerospace capabilities.
While there is certainly no issue with economic solvency, manufacturing priorities have had to shift dramatically. Manufacturing capacity has become a top concern, along with cybersecurity readiness, and regulatory compliance. These factors can quickly slow down the manufacturing process, making trusted supplier relationships all the more critical.
Aviation Week asked the question: “Can organizations deliver product at rate, with quality, with certainty, and can they sustain it under pressure?” Regulatory constraints make switching to a cheaper foreign supplier an impossibility, leaving manufacturers to consider the best way to handle their supply chain or manufacturing network. The article posits several possible pathways:
- Looking for a partnership focused on a single program or product
- Looking for a partnership that can grow into a broader joint venture, minority investment, or capacity lock-in
- Investigating an acquisition to remove production bottlenecks with direct ownership
Dive Deeper: Making the Most of Your Supplier Partnership
Regardless of the partnership approach, manufacturers should focus on building an integrated supplier program based on transparency and clear communication – efficient and collaborative problem solving is the best path to a competitive advantage.
There is no single advancement or technology breakthrough that will determine what’s next for the aerospace and defense industries; rather, it is shaped by continuous evolution in response to the challenges that similarly continue to evolve.
OEMs looking to scale and succeed in today’s tumultuous climate should embrace innovation, trusted partnerships, and investment in employees and emerging technologies to underpin reliability and long-term value.
