WASHINGTON — More than three years after the COVID pandemic began to upend supply chains around the world, some defense executives say they are starting to see signs of recovery. But supply delays and shortfalls are still posing serious challenges to some major programs.
The lockdowns and other tumult prompted by the worldwide spread of COVID in early 2020 disrupted the flow of materials, parts and other goods defense firms rely upon. Most, if not all, defense companies have at one time or another attributed delays or losses to supply chain problems.
In late April calls with investors to report results for the first quarter of 2023, industry leaders again highlighted the lingering effects of the pandemic — but some said they see reason to be optimistic.
“It’s getting a hell of a lot better,” Raytheon Technologies chief executive Greg Hayes said of the stabilizing supply chain.
Raytheon’s president and chief operating officer, Christopher Calio, said the supply of electronics — a frequent sticking point for many defense contractors — is one of the areas that has become less problematic.
But Hayes noted supply chain issues have still constrained the company in several other ways.
He singled out the company’s difficulty obtaining rocket motors, which has hurt its ability to produce weapons, including the Javelin anti-tank missile, Stinger missile, and the tube-launched, optically tracked, wireless-guided, or TOW, missile. Raytheon and its partner on the Javelin, Lockheed Martin, have sought to increase production of the weapon, thousands of which have been rushed to Ukraine to help in its fight against Russia.
“As we work through those supply chain issues on rocket motors, that should also drive extraordinary growth in the top line over the next couple of years,” Hayes said.
Lockheed Martin executives reported silver linings within the supply chain cloud in an April 18 earnings call.
“Ultimately, the supply chain delivered, I think, for the most part,” Lockheed Martin chief financial officer Jay Malave said.
But, he said, Lockheed saw some pockets of lingering supply chain troubles “that continue to plague us,” particularly in its missiles and fire control and rotary and mission systems sectors. Lockheed’s on-time delivery also didn’t improve from the latter half of 2022, Malave said. He expects “more of the same” for the rest of the year, and said a “significant recovery” might not happen until 2024.
And L3Harris Technologies chief executive Chris Kubasik said in an April 28 earnings call “I believe the worst is behind us, relative to all the macro headwinds” such as supply chain problems and inflation.
David Keffer, Northrop Grumman’s chief financial officer, said the company saw “signs of modest progress” in the first quarter, but expects “our supply base will experience areas of pressure for some time.” Keffer also said inflation has started to ease, but will still cost the company more money over time, particularly on long-term programs.
And Boeing chief executive David Calhoun sought to temper investors’ expectations for a speedy supply chain recovery.
“We did not expect the supply chain to come ripping back,” Calhoun said.
Lockheed chief executive Jim Taiclet said the firm is preparing to enact company-wide best practices to improve the supply chain under a concept he called “one Lockheed Martin,” which aims to bring together demand across the company’s various units. This will allow Lockheed to better manage its demand and conduct more bulk purchases of supplies like raw materials and mid-stage components, he said.
The company-wide supply chain focus will also be better for Lockheed’s supply base, Taiclet said, because suppliers will have more reliable demand.
Calio said the company recently held a conference with about 70 of its most vital suppliers to discuss ways to keep the supply flowing. Calio said Raytheon has about 2,000 projects underway to improve its supply chain, including renegotiating contracts, moving its work to lower-cost sources and redesigning parts to cut costs.
Calio also said Raytheon is taking a deeper dive into its supply chain to understand and better manage how suppliers use raw materials such as aluminum, titanium and nickel. And Raytheon still sees labor challenges hampering supply chains and is looking for ways to address them, he said.
Kubasik said L3Harris redesigned several of its products to be able to use 1,300 alternative parts, opening up its supply chain options and reducing uncertainty. L3Harris predicted that as supply chain pressures continue to ease, deliveries will improve and foster improved profit margins in the second half of 2023.
But at the Space Development Agency, supply chain problems are still very real — and may hinder its plan to launch important satellites this summer.
SDA has been praised for launching its first 10 data transport and missile tracking satellites within 30 months of contract award, but has also faced supply issues. But its initial mission, originally slated for last September, was pushed to early April due in part to supply setbacks.
SDA Director Derek Tournear told reporters April 19 the agency continues to deal with supplier challenges, noting that the issues could delay delivery of four L3Harris-built missile tracking satellites. Those spacecraft are scheduled to launch in June as part of the organization’s second “Tranche 0″ mission.
“There were supply chain issues with some of their components on the space vehicle bus that took longer to get in-house than what was the original plan,” Tournear said during a briefing at the Space Symposium in Colorado Springs, Colo. “L3Harris is pulling that schedule in, but there’s very little margin right now.”
The company, which received a $193 million contract in October of 2020 to build the satellites, has been working to mitigate supply chain impacts since it started designing the spacecraft, according to Ed Zoiss, president of space and airborne systems for L3Harris.
He told C4ISRNET in an April 17 interview the engineering team sourced components as they designed them, trying to get ahead of future shortages.
“Supply chain has been a challenge the whole time — even when you secure parts,” Zoiss said. “We’ve had suppliers that have come back and decommitted parts on us, which is unfortunate. The biggest challenge that we’ve had has really been our supply chain and access to parts along the way.”
Zoiss declined to provide a delivery target for the Tranche 0 satellites, but said they’re progressing well through the integration phase and are in the “home stretch.”
“Sometimes you find something in the home stretch, sometimes you don’t find something in the home stretch, and you decide what to do as you proceed forward,” he said.
Author: Stephen Losey
Source: DefenseNews
