Brief

Aerospace and Defense: Winning the Race to Scale

Increasing capacity across the supply chain is becoming a key source of competitive advantage.

著者：Ty Hollingsworth, Jim Harris, and Ali Rekik

First published on 7月 14, 2026
min read


概要 US and European aerospace and defense companies are targeting production increases up to six times the current rate, the fastest pace in a generation. Supply chain constraints are blocking delivery in nearly 90% of programs analyzed, outranking labor, capital, and engineering as a key obstacle. Lower-tier suppliers must often scale faster than any single customer, creating bottlenecks that most prime contractors can’t anticipate. Production scalability is becoming a new source of competitive advantage. The aerospace and defense industry is about to find out which companies can deliver on their commitments. Order books are at historic highs, but deliveries aren’t keeping pace. Boeing’s backlog has reached $695 billion. Airbus continues to target monthly A320-family production increases despite ongoing engine supply constraints. In defense, MBDA’s backlog represents nearly eight years of revenue, and Lockheed Martin’s missiles and fire control division grew its backlog 20% in a single year even while delivering at record rates. The gap between orders and output is structural, and it is widening. Historically, backlogs signaled strength. Today, they signal an industry’s inability to convert demand to output. As orders pile up, competitive advantage is shifting toward companies that can scale production faster than rivals. Supply chain constraints are a core obstacle. In a recent Bain study of 15 defense programs, companies cited supply chain constraints more consistently than labor, engineering, or capital equipment shortfalls (see Figure 1). The problem runs deeper than most prime contractors can see. When multiple programs draw simultaneously on the same sub-tier supplier base, suppliers face a sharp surge in demand that no single customer’s forecast reveals. Figure 1 Most aerospace and defense companies cite supply chain as a key constraint to ramping programs Note: 10 programs cite supply chain explicitly in primary source disclosures, and 3 are inferred from supply chain investments and management context rather than explicit statements Sources: Bain analysis of executive commentary, earnings calls, SEC filings, and government testimony across 15 ramping programs in US and European commercial aerospace and defense Why production can’t keep up Production growth targets across US and European programs are running 20% to 500% higher than levels set between 2024 and early 2026. Current backlogs underscore how companies have failed to keep up with new orders. The result: Allied nations are unable to replenish depleted munitions stockpiles, airlines are waiting longer for fleet expansion, and suppliers are losing contracts to faster-moving competitors (see Figure 2). Figure 2 Aerospace and defense production growth targets are running up to six times higher than recent levels Note: Non-exhaustive selection of representative ramping programs excludes development-stage/low-rate initial production programs Sources: Company SEC filings; corporate press releases; Janes; Defense News; Breaking Defense; Aviation Week; Flight Global; Bain analysis Some constraints are well-known: sole sourcing, long supplier qualification cycles, commodities such as energetics and rare earth minerals that are inherently hard to scale. Others are less obvious and often harder to address. For instance: Sub-tier suppliers face a steeper hill than primes. Commercial aerospace and defense companies are increasing demand on the same supply base simultaneously. When multiple companies depend on the same supplier to ramp production, the supplier absorbs the combined demand. Meeting the surge requires building far more capacity than any single customer needs, often at a growth rate that exceeds any one customer’s demand. Solid rocket motors illustrate the point. L3Harris supplies more than 10 US missile programs and is expanding solid rocket motor capacity sixfold to support that demand. Despite these growth rates, the scale benefits are limited because each program brings its own specifications and documentation. Scaling hurts unit economics. Conventional wisdom suggests that higher production rates reduce costs. In aerospace and defense, the opposite is often true during a ramp-up. Programs running on fully depreciated equipment with experienced labor produce at unit costs that are hard to match once new production comes online. Capital costs reset, learning curves restart, and working capital spikes at precisely the moment cash is under pressure. At the same time, inefficiencies in internal processes amplify the negative impact. Engineering changes, heavy documentation, and shifting deadlines may be manageable at lower rates. At scale, they become serious liabilities. Scaling costs are rarely captured in existing contracts, forcing suppliers to choose between margin and delivery. Risk of false signals slows progress. Capacity investment requires multiyear commitments—something that the industry rarely provides. In defense, short budget cycles and shifting priorities mean that demand signaled in provisional agreements may not materialize. Suppliers who invest ahead of it bear the risk alone. In commercial aerospace, airframers and engine makers struggle to give each other firm enough volume commitments to underwrite expansion. What leaders do differently The companies making the fastest production gains share a common trait: They treat supplier capacity as a strategic asset rather than a procurement problem. Four actions stand out. Action No. 1: Unlock capacity within existing operations. Start with factors the organization controls. Yield improvement, scrap reduction, and inventory redesign are the fastest routes to increased supply at a fraction of the cost. Many programs carry quality issues that are tolerable at lower rates but material at higher ones. Inventory logic also has to change. Buffers should be right-sized part by part to protect production continuity, not minimized to reduce carrying cost. The cost of a line stoppage routinely exceeds the cost of carrying strategic inventory. Action No. 2: Become a preferred customer. Stress-test every requirement imposed on suppliers against the reality of higher production rates (including first article inspections, line validations, documentation, and change approval cycles). Many were designed for lower rates and can be streamlined without compromising safety or quality. The most effective primes create dedicated supplier engineering teams, deploy people on-site at critical suppliers, and resolve constraints hands-on. For the most critical categories, engagement may need to go further into joint ventures or selective capacity coinvestments at key suppliers. GE Aerospace provides a useful example. The company committed to investing more than $100 million in its suppliers in 2026, partnered with critical suppliers to redesign parts for manufacturing, and helped implement lean practices. Action No. 3: Commit to the supply base. Second sourcing and long-term agreements remain relevant, but most long-term agreements extend duration without committing firm volumes, which is what suppliers need to invest. Multiyear commitments backed by risk sharing unlock investments that pressure alone will never produce. For example, in a break from industry norms, MBDA is producing to stock ahead of orders, investing €1 billion to take demand risk onto its own balance sheet. Suppliers respond differently when demand is visible in committed capital, not just forecasts. Action No. 4: Use digital and AI to compress the timeline. Predictive analytics on supplier performance can flag constraint risks weeks before they become missed deliveries. Automated demand signals can push validated forecasts to suppliers in near–real time. Digital twins can identify bottlenecks before they bind and test capacity changes, informing capital commitment. Airbus illustrates the potential impact: Its industrial data platform Skywise cut A350 delivery lead times by 33% by accelerating the resolution of non-quality issues across engineering, production, and suppliers. For companies that have addressed the three fundamentals above, digital and AI offer the largest single source of competitive advantage over the next five years. The aerospace and defense production gap is not a temporary disruption; it is a structural shift that will separate the industry's winners from the rest in the coming decade. The companies that recognize this first and build the supply chain depth to match their engineering ambition will be harder to compete with, harder to displace, and better positioned for every demand cycle that follows.

概要

US and European aerospace and defense companies are targeting production increases up to six times the current rate, the fastest pace in a generation.
Supply chain constraints are blocking delivery in nearly 90% of programs analyzed, outranking labor, capital, and engineering as a key obstacle.
Lower-tier suppliers must often scale faster than any single customer, creating bottlenecks that most prime contractors can’t anticipate.
Production scalability is becoming a new source of competitive advantage.

The aerospace and defense industry is about to find out which companies can deliver on their commitments.

Order books are at historic highs, but deliveries aren’t keeping pace. Boeing’s backlog has reached $695 billion. Airbus continues to target monthly A320-family production increases despite ongoing engine supply constraints. In defense, MBDA’s backlog represents nearly eight years of revenue, and Lockheed Martin’s missiles and fire control division grew its backlog 20% in a single year even while delivering at record rates. The gap between orders and output is structural, and it is widening.

Historically, backlogs signaled strength. Today, they signal an industry’s inability to convert demand to output. As orders pile up, competitive advantage is shifting toward companies that can scale production faster than rivals.

Supply chain constraints are a core obstacle. In a recent Bain study of 15 defense programs, companies cited supply chain constraints more consistently than labor, engineering, or capital equipment shortfalls (see Figure 1). The problem runs deeper than most prime contractors can see. When multiple programs draw simultaneously on the same sub-tier supplier base, suppliers face a sharp surge in demand that no single customer’s forecast reveals.

visualization — Most aerospace and defense companies cite supply chain as a key constraint to ramping programs

Why production can’t keep up

Production growth targets across US and European programs are running 20% to 500% higher than levels set between 2024 and early 2026. Current backlogs underscore how companies have failed to keep up with new orders. The result: Allied nations are unable to replenish depleted munitions stockpiles, airlines are waiting longer for fleet expansion, and suppliers are losing contracts to faster-moving competitors (see Figure 2).

Some constraints are well-known: sole sourcing, long supplier qualification cycles, commodities such as energetics and rare earth minerals that are inherently hard to scale. Others are less obvious and often harder to address. For instance:

Sub-tier suppliers face a steeper hill than primes. Commercial aerospace and defense companies are increasing demand on the same supply base simultaneously. When multiple companies depend on the same supplier to ramp production, the supplier absorbs the combined demand. Meeting the surge requires building far more capacity than any single customer needs, often at a growth rate that exceeds any one customer’s demand. Solid rocket motors illustrate the point. L3Harris supplies more than 10 US missile programs and is expanding solid rocket motor capacity sixfold to support that demand. Despite these growth rates, the scale benefits are limited because each program brings its own specifications and documentation.
Scaling hurts unit economics. Conventional wisdom suggests that higher production rates reduce costs. In aerospace and defense, the opposite is often true during a ramp-up. Programs running on fully depreciated equipment with experienced labor produce at unit costs that are hard to match once new production comes online. Capital costs reset, learning curves restart, and working capital spikes at precisely the moment cash is under pressure. At the same time, inefficiencies in internal processes amplify the negative impact. Engineering changes, heavy documentation, and shifting deadlines may be manageable at lower rates. At scale, they become serious liabilities. Scaling costs are rarely captured in existing contracts, forcing suppliers to choose between margin and delivery.
Risk of false signals slows progress. Capacity investment requires multiyear commitments—something that the industry rarely provides. In defense, short budget cycles and shifting priorities mean that demand signaled in provisional agreements may not materialize. Suppliers who invest ahead of it bear the risk alone. In commercial aerospace, airframers and engine makers struggle to give each other firm enough volume commitments to underwrite expansion.

What leaders do differently

The companies making the fastest production gains share a common trait: They treat supplier capacity as a strategic asset rather than a procurement problem. Four actions stand out.

Action No. 1: Unlock capacity within existing operations. Start with factors the organization controls. Yield improvement, scrap reduction, and inventory redesign are the fastest routes to increased supply at a fraction of the cost. Many programs carry quality issues that are tolerable at lower rates but material at higher ones. Inventory logic also has to change. Buffers should be right-sized part by part to protect production continuity, not minimized to reduce carrying cost. The cost of a line stoppage routinely exceeds the cost of carrying strategic inventory.

Action No. 2: Become a preferred customer. Stress-test every requirement imposed on suppliers against the reality of higher production rates (including first article inspections, line validations, documentation, and change approval cycles). Many were designed for lower rates and can be streamlined without compromising safety or quality.

The most effective primes create dedicated supplier engineering teams, deploy people on-site at critical suppliers, and resolve constraints hands-on. For the most critical categories, engagement may need to go further into joint ventures or selective capacity coinvestments at key suppliers. GE Aerospace provides a useful example. The company committed to investing more than $100 million in its suppliers in 2026, partnered with critical suppliers to redesign parts for manufacturing, and helped implement lean practices.

Action No. 3: Commit to the supply base. Second sourcing and long-term agreements remain relevant, but most long-term agreements extend duration without committing firm volumes, which is what suppliers need to invest. Multiyear commitments backed by risk sharing unlock investments that pressure alone will never produce. For example, in a break from industry norms, MBDA is producing to stock ahead of orders, investing €1 billion to take demand risk onto its own balance sheet. Suppliers respond differently when demand is visible in committed capital, not just forecasts.

Action No. 4: Use digital and AI to compress the timeline. Predictive analytics on supplier performance can flag constraint risks weeks before they become missed deliveries. Automated demand signals can push validated forecasts to suppliers in near–real time. Digital twins can identify bottlenecks before they bind and test capacity changes, informing capital commitment. Airbus illustrates the potential impact: Its industrial data platform Skywise cut A350 delivery lead times by 33% by accelerating the resolution of non-quality issues across engineering, production, and suppliers. For companies that have addressed the three fundamentals above, digital and AI offer the largest single source of competitive advantage over the next five years.

The aerospace and defense production gap is not a temporary disruption; it is a structural shift that will separate the industry's winners from the rest in the coming decade. The companies that recognize this first and build the supply chain depth to match their engineering ambition will be harder to compete with, harder to displace, and better positioned for every demand cycle that follows.