The Dirty Truth of A&D Supply Chains

Poor Supply Chain Visibility

Which of the below suppliers brought counterfeit steel from Russian manufacturers?

The answer: You do not know.

No one can identify which A&D manufacturers are compliant, and which are not.

Our industry has extensive infrastructure in place to try and assess compliance, but it does not work. The best we have are annual audits performed by individual auditors — all of whom have different interpretations of "compliant". There are other methods, such as FAI of course, but here the subjectivity of the reviewer is even stronger. (Read more in our previous blog here).

The result? Our understanding of supplier quality does not extend past finger-in-the-air estimates. We send questionnaires, perform irregular source inspections, review hundreds of FAIs, but still rely on hope.

The Implication of Poor Supply Chain Visibility

And this hope is ill-founded. The FAA estimates that a full 2% of airplane parts are counterfeit. And the Pentagon estimates that up to 15% of spare and replacement parts it purchases are counterfeit.

These numbers pertain to full-blown counterfeits. How much higher is the percentage of non-conforming parts?

The challenge is that small errors from low-tier suppliers — where visibility is worst — propagate fastest throughout the entire supply chain.

As we can see, the acquisition of Russia-originated, counterfeit steel by a single Tier 4 subcontractor has poisoned the entire supply chain. One small error has compounded into billions of dollars of recalls and repairs.

Worst of all, unlike the image above, A&D inspectors struggle to trace the counterfeit to its source. So, not only does non-compliance occur with great frequency, but we cannot identify where it originated.

Compare this to finance. In finance, when there is an instance of insider trading, regulators know precisely what trades were involved, at what times, and by whom. They can pinpoint the offending trades and take appropriate action.

However, in aerospace, regulators, customers, and manufacturers are not aware of noncompliance. They do not know the specific work order on which that noncompliance occurred. Nor can they identify the individual stakeholder who was involved in that noncompliance, nor the process breakdown that led to it.

So, they cannot take appropriate action on specific quality breakdowns. The result? Customers become intolerant of adopting a new supplier. They "stick with what they know". In a supply chain of poor quality — and limited visibility into the source of this poor quality — this makes sense.

But, as mentioned in this previous blog, an unwillingness to adopt a new supplier crushes innovation in A&D. When a customer is unwilling to move away from a supplier, the supplier has no incentive to improve the quality of their services.

In summary, a system of self-reported quality control is like a school where students not only set their own work, but also review and mark their own work. In this school, external inspectors do cursory audits of student self-reporting once a year.

The question: would you trust the grades at that school?

The Antidote to Poor Supply Chain Visibility

We need to overcome the chronic lack of visibility in A&D supply chains. In practice, that means customers need access to real-time, granular supply chain and quality data.

In this future, customers know when quality breakdowns occur, can pinpoint the source of that breakdown, and can take rapid action. Not only this, but customers can analyse potential suppliers with gold-standard data they can trust.

This is what we have built at Carnegie.

Once-in-a-generation technological progress has enabled us to build a Quality Automation System (QAS). A QAS is a next-generation QMS. With Carnegie’s QAS, manufacturers automate their repetitive, manual quality tasks. From calibration, to logging NCs, to performing due diligence on RFQs, Carnegie’s QAS enables manufacturers to eliminate manual tasks.

Our mission is to achieve Zero Human Error across A&D supply chains.

With our QAS, you can access verifiable data for supplier due diligence. You can tell which of your suppliers maintains high standards of quality — as well as identify when there are quality breakdowns. You can rapidly assess the capacity of a supplier to fulfill a work order. You can know immediately when a supplier in your supply chain has identified Russia-originated, counterfeit steel.

Carnegie provides transparency to A&D supply chains.

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Feb 24, 2024