Briefing: Foreign growth and supply chain challenges

The impact on US and European defence industries caused by the squeeze on domestic military budgets is - to an extent - offset by growth beyond domestic borders. But the resulting increase in the globalisation of supply chains brings several challenges, a UK-based aerospace and defence consultant has argued.

While globalisation and supply chain integration are "not really new", an important aspect of business operations has emerged over the last two years in the form of risk management, the consultant said.

David Shouesmith, vice-president of global management consultancy PRTM, noted: "There's a Western-hemisphere view of recession and gloominess, but in the Middle East and in countries such as the UAE [United Arab Emirates], for example, this is not necessarily the case - and companies are operating globally."

However, as Western companies grapple with successfully maintaining their "viable" domestic businesses while becoming increasingly globalised, they face a "complex, organisational challenge", Shouesmith added.

One of these challenges is balancing national security needs - laid out by domestic governments - with global growth. Contractors must work within the limitations imposed by domestic legislation while pushing for foreign expansion.

The US International Traffic in Arms Regulations (ITAR) are an example of such legislation.

"There is sensitivity around ITAR, and this can constrain the amount of globalisation one can have in a supply network", said Shouesmith. This may be especially challenging when doing business in countries seeking high-end military technology transfer, such as India.