Lessons from A&D in Local Sourcing with Industry Certifications, Regulation, and Offsets
For those with total cost on their minds, re-shoring remains a hot topic – especially from the standpoint of factoring both price and risk into the supply chain equation. But in certain industries and categories, in-country or local sourcing is in fact the right strategy from the start. I came across an article in AMD that points out just how critically industry certifications and regulation can factor into the sourcing equation for markets such as A&D with specific requirements.
For example, in the area of certifications, consider how “AS9100 (Rev. C)-certified manufacturers are able to produce the most complex components in-house, and then work exclusively with its National Aerospace and Defense Contractors Accreditation Program (Nadcap) supply chain for part finishing to manage all the burdens that a purchasing agent is normally required to perform through multiple vendors … [in these markets] … machining experience, equipment capability, capacity, and quality systems will affect a supplier’s ability to deliver on a timely, consistent basis.”
Or take regulation. An increasing number of “defense-related companies are requiring that members of their supply chain be International Traffic in Arms Regulations (ITAR) compliant and registered. This is often required for a company involved in the manufacture of goods or services covered under the United States Munitions List (USML), or a component supplier to goods covered under the USML. This, in turn, means that the supplier must be registered with the State Department’s Directorate of Defense Training Controls (DDTC) and maintain rigorous internal processes dictated by ITAR regulations.”
A&D presents its own unique set of issues and requirements when it comes to sourcing and supplier capabilities and risk profiles. Moreover, when going global, offset agreements can have the opposite role of requirement companies to identify local sources of supply in markets in which they’d otherwise never seek out suppliers (which can often require significant investments in supplier development). Regardless, when it comes to qualifying new productions lines, parts, components, or suppliers, one thing is clear – A&D stands out as perhaps the most stringent industry in understanding and monitoring supplier capabilities, certifications, and practices.
And with apologies to those who grew up in automotive procurement, always touting their procurement requirements and processes as the gold standard (e.g., PPAP, first article testing), if you’ve done it before in A&D, you can do it locally or globally for just about any industry or environment!