Top Five Manufacturing Findings from the 14th Annual Clarity Government Contracting Industry Study

For 14 years, Deltek has conducted an annual survey of government contractors, the Deltek Clarity Government Contracting Industry Study. Each year, the findings include an industry performance benchmark, a review of impactful market conditions and challenges faced, and a government contracting outlook for the coming year. The latest report provides significant insights into manufacturing—a key segment amongst government contractors. Due to intense market competition and the need to adhere to stringent government and industry regulations, managing business operations becomes difficult, particularly in complex, highly regulated manufacturing sectors such as aerospace and defense (A&D).

These are the top five findings for manufacturing in the survey:

1. Disruptive Supply Chains Persist

With supply chain difficulties persisting year over year, it’s no surprise that it remains the highest risk potential for manufacturing, with 48% of respondents citing it. Manufacturers rely heavily on their supply chain to obtain raw materials and components needed for their products. Any disruption in the supply chain, such as delayed delivery or quality issues, can result in production delays and revenue loss. Reliance on global suppliers also increases the risks related to customs, trade regulations, logistics, and geopolitical issues.

2. Keeping Up with Quality Control

44% of government contractors identified quality as another potential risk in manufacturing. As A&D manufacturing undergoes several post-pandemic challenges, persistent supply chain disruptions, a workforce still struggling to reign in talent, and increasingly rigorous compliance requirements, keeping up with quality demands poses a challenge. Several small to mid-sized businesses lack comprehensive quality systems to keep up with the dynamic market and regulatory stipulations.

3. Small Business Lagging in Automation

Over half of manufacturing participants (55%) shared that their operations processes are automated, but smaller companies' processes are significantly behind larger competitors. Companies with revenue below $20 million have only 17% of their processes automated, while companies with more than $50 million in revenue have achieved 67% process automation. Smaller companies prefer to preserve their working capital for investment in product development, product enhancement, or workforce retention, rather than restructuring operations. Due to limited revenue and budgets, the main obstacle for companies seeking to automate processes is the cost. Also, a notable portion of companies (44%) lacking automated systems and processes are skeptics of the benefits of technology and can be hesitant to adopt new and advanced tools.

4. Digital Transformation Initiatives

The primary focus of digital transformation in the manufacturing sector is to integrate enterprise resource planning (ERP) software to establish smarter systems that can effectively manage evolving government regulations and requirements. 37% of survey respondents said integrating manufacturing and ERP software is their primary initiative toward digitizing and automating systems. This integration contributes to better cost management and more accurate financial forecasting, improving profitability. Also, enterprises increasingly see value in having greater visibility into product and operation costs to track budgets and resource utilization through automation. This alignment allows manufacturers to identify and address issues quickly, resulting in better-quality products and improved efficiency.

5. The Challenges Are the Risks

This year’s Clarity report detailed the top three manufacturing challenges anticipated over the next twelve months: successfully managing the quality of outputs, addressing shortages in qualified talent, and increasing traceability. Notably, the top challenges closely mimic the top three risks: managing supply chains, maneuvering talent shortages, and maintaining production quality. The difficulties that manufacturers face in producing high-quality products are directly related to the potential negative outcomes that could occur during manufacturing. In other words, the challenges that manufacturers face contribute to the manufacturing risks. Manufacturers are struggling with issues such as supply chain disruptions, quality control failures, or lack of skilled labor, which are increasing the likelihood of negative outcomes such as equipment failures, product defects, low-quality output, or shopfloor-related issues. By addressing the underlying challenges, manufacturers can reduce the risks associated with the manufacturing process.

Deltek’s comprehensive Clarity Government Contracting Industry Study provides an in-depth analysis of various benchmarks in government contracting. The on-demand webinar provides insights into the market conditions and can help manufacturers identify their operational issues as just a “me problem” or something that affects industry peers as well.

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