Table of contents
Customer Profile
- Industry: Aerospace & Defense
- Product: Government-contracted satellites
- Production Model: Outsourced manufacturing with internal procurement oversight
- Complexity:
- Hundreds of PCBs per satellite
- Thousands of unique electronic components
- Long lead times (26–78+ weeks) on critical ICs
The Situation
The manufacturer had already committed to a federal delivery schedule, with long-lead electronic components ordered months in advance.
On paper, readiness looked solid. Their tracking relied on:
- Excel spreadsheets maintained across teams
- An ERP system loosely connected to procurement
- No authoritative system tying purchase orders → receipts → inventory → production readiness
Critically, the company assumed parts would arrive on their original quoted delivery dates, rather than tracking real-time supplier commits.
The Trigger Event
As production approached, the company consolidated what they believed were 100% of required components onto pallets and shipped them to Cofactr for kitting.
Cofactr performed a full inventory reconciliation against the BOM.
What Cofactr Found
The reconciliation revealed two costly problems:
1. Excess Inventory
- Estimated overbuy: 5–15% of total component spend
- Estimated dollar impact: $1–3 million in unnecessary inventory
- Causes included:
- Engineering changes not reflected in purchasing
- Duplicate buys driven by spreadsheet version drift
2. Critical Shortages
- Missing parts count: fewer than 10 unique components
- Total value of missing parts: < $3,000
- Lead times on missing parts: 52–78 weeks
These parts were:
- Already designed into the boards
- Fully qualified and certified
- Not easily replaceable without triggering redesign and recertification
Why This Stopped Production
Without those specific components:
- Circuit boards could not be assembled
- Satellite integration could not begin
- The production line sat idle
Although >99.9% of the BOM value was physically present, production could not start.
Financial Impact
The downstream impact far exceeded the cost of the missing components:
- Idle production costs: $250k–$500k per month
- Schedule slippage: 6–12 months
- Contract penalties: low seven figures
Total estimated impact: $5–10+ million, driven by delays—not material cost.
All originating from a parts gap worth less than 0.01% of total program spend.
Root Cause Analysis
Every failure traced back to three systemic issues:
Engineering–Procurement Disconnect
- ECOs were not reliably propagated to purchasing
- Buyers continued ordering obsolete or revised-out parts
Inventory Accuracy Below Acceptable Thresholds
- Warehouse accuracy likely <95%
- Required accuracy for high-mix electronics manufacturing: ≥99.5%
No Active Open-Order Management
- Supplier delays were not tracked or escalated
- Buyers relied on original promise dates rather than updated commits
These issues occurred despite procurement being outsourced through a contract manufacturer.
Key Lesson
Outsourcing procurement does not eliminate risk, it transfers responsibility, not accountability.
Effective procurement requires:
- Continuous reconciliation between engineering, purchasing, and inventory
- Real-time visibility into open orders and supplier delays
- Systems designed for exception detection, not static reporting
Spreadsheets cannot provide this level of control.
Final Takeaway
In this case:
- $3,000 in missing parts
- Led to $5–10+ million in losses
- And 6–12 months of schedule delay
At aerospace scale, procurement failures are rarely expensive because of what’s missing. They’re expensive because of what can’t move forward without it.
Ready to let Cofactr handle sourcing, negotiations, storage, kitting, and delivery while your team focuses on building products? It’s free to get started with Cofactr today.
Frequently Asked Questions
What is the main lesson from this satellite procurement failure?
The case shows that even tiny component shortages can halt aerospace production, creating massive financial losses when systems lack real-time visibility, accountability, and cross-functional procurement alignment.
How did a $3,000 parts shortage cause millions in losses?
A handful of missing, long-lead components blocked PCB assembly and satellite integration, idling production lines for months and triggering penalties, despite over 99.9% of materials being available.
Why did the company believe it was production-ready when it wasn’t?
Readiness relied on spreadsheets and disconnected ERP data, assuming original supplier dates were accurate, without actively tracking updated commitments, inventory accuracy, or real-time production readiness.
What caused the excess inventory discovered during reconciliation?
Excess inventory resulted from engineering changes not reflected in purchasing, duplicate orders from spreadsheet version drift, and lack of a single authoritative system governing procurement decisions.
How did inventory accuracy contribute to the failure?
Warehouse accuracy below 95% masked shortages, while high-mix electronics manufacturing requires at least 99.5% accuracy to reliably support production and prevent hidden gaps in critical components.
Why couldn’t the missing components be easily replaced?
The components were already designed, qualified, and certified into the boards, making substitutions impractical without expensive redesigns, requalification, and recertification delays.
Can outsourcing procurement eliminate supply chain risk?
No. Outsourcing transfers execution responsibility but not accountability, requiring internal oversight, continuous reconciliation, and active order management to prevent costly blind spots.
What is open-order management, and why does it matter?
Open-order management tracks supplier delays and updated commit dates, enabling early escalation and mitigation instead of relying on outdated promise dates that no longer reflect reality.
Where did the largest financial impact actually come from?
The majority of losses came from schedule delays, idle production costs, and contract penalties—not material costs—demonstrating how small procurement gaps can create outsized downstream consequences.
How can manufacturers prevent similar procurement failures?
They need integrated systems linking engineering, purchasing, inventory, and suppliers, with real-time visibility, exception detection, and continuous reconciliation instead of static spreadsheet-based tracking.
Is spreadsheet-based procurement tracking sufficient at aerospace scale?
No. Spreadsheets cannot maintain accuracy, version control, or real-time visibility required for complex aerospace programs with thousands of components and multi-year lead times.