A New Supply Chain Strategy for Defense Contractors

Prime contractors must adopt new approaches to wring costs from the supply chain.

The business environment for US defense contractors has become far more challenging over the past several years. Sequestration, shrinking defense budgets, and a reduction in the number of funded programs has limited growth of the industry, creating a pervasive winner-take-all dynamic.

Traditional approaches to supply-chain improvement are insufficient for these challenges. Simply rolling up supplier costs and passing them along to the end user is a guaranteed way to lose business to the competition. Siloed efforts within functional groups and a rigid application of a “one size fits all” methodology lead at best to incremental improvements and one-time benefits. To remain competitive, prime contractors must take action to systematically wring costs from the supply chain.

BCG has developed a proven transformational approach that leads to sustained improvements in supply chain management. This framework is based on specific underlying performance challenges and current supply-chain maturity levels. With it, BCG helps clients recognize sources of supply chain risk and develop mitigation plans to deliver gains. Supply chain capabilities are upgraded through the focused deployment of training and tools.

By becoming more strategic in their sourcing and supply chain management, contractors can reduce costs, win new business, and improve their financial performance in a market that keeps getting tougher.

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