Supply Chain in the Defence Industry: How Not to Become a Victim of Your Own Success

Poland’s defence industry is currently growing at a pace that many industrial sectors could envy. Larger budgets, new programmes, growing order volumes and increasingly broad international cooperation all sound like good news. However, the question worth asking is different: with such dynamic growth, can a company become a victim of its own success?

When Success Becomes a Problem

More often than one might expect, the answer is “yes”. The problem is not a lack of orders, but rather the inability of the entire supplier ecosystem to keep pace with growth or a lack of the required capabilities within the supply chain. Ammunition production is a perfect example. One of its key components is propellant, which requires nitrocellulose for its production. At present, nitrocellulose is not produced in Poland. This is a real gap that needs to be addressed before it becomes a bottleneck for the entire programme.

When preparing for new projects in the defence sector, it is worth looking at the supply chain through the lens of three areas, a principle that can be referred to as 3C.

Capacity: Do Suppliers Have Sufficient Capacity?

The first question concerns production capacity: does the supply chain have sufficient capacity to meet growing order volumes? And will the supplier be able to deliver to us when its other customers are competing for the same capacity?

Growing order volumes require not only available production capacity today, but also the ability to scale in the future. Insufficient capacity can very quickly turn business success into delays, extended lead times, and competition for access to raw materials or components.

Capability: Will Today’s Capabilities Be Enough for Tomorrow?

The second question concerns capabilities: do suppliers have the required technological and organisational capabilities? Are we buying only today’s technology, or rather future development capability?

New materials, automation, increasing quality requirements, and cybersecurity mean that a supplier’s capabilities today do not necessarily guarantee its ability to meet future requirements. The key issue therefore becomes not so much the supplier’s current offering, but its ability to develop in line with our evolving needs.

Compliance: Do We Understand the Risk at Tier 2 and Tier 3 Levels?

The third question concerns compliance: does the entire supply chain meet the required standards? And do we actually understand the risks hidden at the sub-supplier level, at Tier 2 and Tier 3?

In the defence and dual-use sectors, responsibility does not end at Tier 1. Regulatory compliance, information security and component traceability apply to the entire supplier ecosystem. One weak link, even if hidden several levels down the supply chain, can put the entire project at risk.

From Declarations to As-Is / To-Be Analysis

The answers to the questions arising from the 3C principle cannot be based solely on supplier declarations or the intuition of procurement teams. They should result from a thorough analysis: defining the current state(As-Is),defining the expected target state(To-Be), and identifying the gap that needs to be closed.

Preparing an organisation for further growth must take into account the readiness not only of the organisation itself, but also of its suppliers and their suppliers. Otherwise, even a company in an excellent market position may become a victim of its own success. The orders may be there, but the ability to fulfil them on time and in compliance with requirements may not.

What Next?

The question we most often hear from our clients at this point is: what specifically should be done to increase supply chain security? There is no one-time, universal answer. It should result from a strategy developed individually for a given procurement category, taking into account the specifics of the market, available suppliers and the pace of programme growth.