U.S. Dept. of Defense Teaches Lockheed Martin the Importance of Digital Threads

Lockheed Martin is the lead contractor for the U.S. Dept. of Defense’s F-35 Lightning II Stealth Joint Fighter program. The Defense Contract Management Agency has come to an informal agreement with Lockheed to provide services at a value of US$71 million as compensation for providing parts, dating back from 2015 until early 2020, that did not include their history or information regarding their remaining service life. The issue was uncovered during the Pentagon’s inspector general’s 2019 audit.

The announcement is an example of how seriously final customers take traceability and that failure to comply with contractual terms will result in mediation being sought. Manufacturers need to ensure transparency throughout their supply chains by creating a digital thread of relevant information pertaining to individual parts.

The F-35 Lightning II Joint Strike Fighter is the fifth-generation stealth fighter and is deployed by the U.S Air Force, U.S. Marine Corps, U.S. Navy, and allied nations. Depending on the model, each aircraft is valued at between US$89.2 million and US$115.5 million, with 550 aircraft having been delivered so far.

Maintenance teams require individual data records for 1,000 of the F-35’s 50,000 parts. Lockheed Martin’s 2021 to 2023 support contract specified that the firm must supply the required data for the applicable parts 99% of the time in order to collect its fees. However, it has been reported that, for example, a parts delivery in 2018 only included the required data for 20% of the applicable parts. Consequently, maintenance technicians were unable to install them.

Lockheed Martin’s 2019 Annual Report shows that its Aeronautics business generated revenue of US$23.7 billion and so the US$71 million recompense will not have a significant direct financial impact. However, the firm needs to upgrade its parts management system and uncover the reasons why parts are being delivered to the Department of Defense lacking the required information.

ABI Insight “Honeywell Digitalizing the Trade of Aircraft Parts” highlights the lack of trust in the aircraft parts market. Lockheed Martin should consider replicating Honeywell’s adoption of blockchain technologies, whereby all the relevant information pertaining to the individual part is contained in a digital record; helping to engender trust between buyers and suppliers of aircraft parts. Investments in digital threads for traceability demonstrate that the parts are genuine and meet buyers’ requirements; giving buyers and staff on the factory floor confidence that the parts can be installed.

Manufacturers need to invest in technologies that support traceability (supply chain management, Enterprise Resource Planning (ERP) systems, Customer Relationship Management (CRM) systems) as projects scale. In the case the of the F-35 program, the target is to produce 131 aircraft annually, which represents a 47% increase compared with 2018 and approaching a 200% production increase compared with 2016.

While Lockheed Martin is the lead contractor for the F-35 program, there are hundreds of intermediary and component suppliers. Giants like Lockheed Martin can stomach a compensation bill; others further down the supply chain can ill afford to do so. Clients require traceability and all members of the supply chain need to adhere to the requirements to keep assembly lines running.