How can EMS providers plan defense new business development with supply chain consolidations underway? Defense game changing in the way budgets are issued and contracts are awarded. EMS providers must see where design trends and opportunities exist. Focus turns to mastering logistics.
A recent spate of defense headlines is causing concern among many in the defense electronics supply chain. Banners like these are at the very least disconcerting:
- Lockheed to close Minnesota plant by 2013
- Contract ends For BAE Systems and plant closes and unemployment increases
- Northrop closes shipyard; Even beneficiaries of military industrial complexes feeling pinch
- Boeing sends more than 1,000 layoff notices
- General Dynamics announces third round of layoffs in 2010
So, what is an electronics manufacturing services (EMS) provider serving the defense sector to do? How do EMS providers plan business development in the defense sector with supply chain consolidations underway? And what do these portend for 2011 and the out years? To answer these questions, let’s look at some data points:
Steady defense growth for the past decade. This has been spurred by the gutting of DoD to unacceptable levels in the post-Cold War ‘90’s; by the events of 9-11, and two simultaneous war theaters – has reached a reckoning point. Coupled with politically correct domestic entitlement spending, the country has reached projected deficit levels requiring everything – including defense – to be on the table for rationalization.
Some $100 billion in overall defense spending reductions has already been leavened into the next five budget years, with another $100 billion likely to be subtracted by Congress over that same time frame.
But, these reductions do not grossly diminish the current (or emerging demands) for electronics assembly and systems in the armed services.
DoD Budget through 2015
Rather, a reapportioning of emphasis is underway that shifts money away from large (and debatably effective) weapons systems into more IT-centric, ISR, EW, unmanned and communications platforms.
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Understanding military / defense service providers
EMS providers must bore into platforms to see where design trends and opportunities exist: Like looking at adoption rates for low power CPU’s (such as Intel’s i5 or i7Core devices); understanding the proliferation of standard bus architectures that have driven the military embedded computing market in North America from $850 million in 2007 to nearly $1 billion in 2009 (according to VDC Research); gauging the importance of high density interconnect and high frequency materials; examining the defense contracting process; supplier selection criteria, and the most effective ways to respond to defense RFP’s and audits.
Looking at the full scope of such considerations will help EMS providers determine entry points for discussion and for leveraging problem-solving differentials.
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