Bain Analysis: Aerospace Sourcing Faces Capacity Crisis

Procurement teams in aerospace and defence are confronting a capacity crisis that could redefine how the sector manages supplier relationships. Order books across the US and Europe are at record levels, yet organisations are building backlogs rather than delivering against demand.

According to Bain, Boeing is carrying backlogs of US$695bn. Airbus continues working towards increased A320-family production but faces engine supply constraints that limit output. Lockheed Martin's missile and fire control division delivered at record rates yet saw backlog growth of 20% in a single year.

The bottleneck is not internal. In an analysis of 15 defence programmes, Bain found that 87% of companies identified supply chain issues as more impactful than labour, engineering or capital equipment challenges.

Jim Harris, Partner at Bain & Company and co-writer of the report, says: "In nearly 90% of the aerospace and defence programmes Bain analysed, supply chain constraints were cited as a key obstacle to ramping production. The companies pulling ahead are treating supplier capacity as a strategic asset, not a procurement problem."

Procurement's new strategic mandate

The competitive advantage in aerospace now belongs to organisations that can scale production and close backlogs faster than rivals. This shifts procurement from a cost-focused function to a capacity-planning discipline with broader strategic implications for the entire industry.

According to Bain, much of the constraint originates from multiple organisations relying on the same sub-tier supplier base. When demand across the industry increases, these suppliers face surges not always reflected in customer forecasts.

This mismatch between procurement forecasts and actual demand is creating systemic delays across the sector. Backlogs have left allied nations with reduced munitions stock, prevented airlines from expanding fleets and caused suppliers to lose customers to competitors.

Production growth targets between 2024 and early 2026 were between 20% and 500% higher than previous levels across the US and Europe. Procurement functions were not equipped to secure the supplier capacity required to meet these ambitious targets.

Supplier investment as risk mitigation

Honeywell Aerospace is responding to its US$19bn backlog with direct investment in its supply chain. The backlog represents a 20% increase from the previous year.

Jim Currier, CEO of Honeywell Aerospace, tells Reuters: "If I need to buy equipment for suppliers, smaller suppliers that are providing critical components for us, we will go ahead and do that as well, where necessary and where required. So, when I think of capital deployment, it's not just within our own four walls."

This approach represents a significant shift in procurement strategy. Rather than managing suppliers at arm's length, Honeywell is taking financial responsibility for their capacity constraints.

The move could show that procurement teams are recognising the risks of sole sourcing and long supplier qualification cycles. Demand for core materials used in aerospace has increased, putting strain on critical material supply chains, including rare earth minerals.

Four procurement strategies to close backlogs

Bain identifies four procurement-led strategies to address capacity constraints and accelerate production:

• Find new capacity within operations by undergoing inventory redesign and removing scrap that does not add value. This introduces buffers that can protect production continuity and prevent routine stoppages.
• Build relationships by deploying procurement personnel on-site at critical suppliers. This allows issues to be resolved in a hands-on manner and demonstrates commitment to collaboration.
• Commit volumes to the supply base to avoid risks from just-in-time manufacturing. Producing stock ahead of orders creates a stockpile of materials that allows organisations to respond to heightened demand rather than scrambling to meet it.
• Use digital tools such as predictive analytics to flag constraint risks in advance. Digital twins can identify bottlenecks and help procurement teams find solutions before they disrupt production.

Redefining procurement's role

The production gap is an industry-wide issue driven by heightened demand and persistent supply chain delays. Procurement functions that can respond with strategic supplier investments and capacity planning tools will position their organisations better against competitors.

According to Bain's analysis, the companies overcoming backlogs are those treating supplier capacity as a strategic asset rather than a transactional procurement problem. This could mean procurement's role in aerospace is being redefined from cost management to competitive advantage.

The organisations that invest in supplier relationships, commit to volume guarantees and deploy procurement teams on-site at critical suppliers may close their backlogs faster than those maintaining traditional arms-length buying relationships.