Logistics plays a critical role in Canada’s military readiness and operational effectiveness. Effective logistics depends on a strong defence supply chain that comprises national defence industrial base and global suppliers. Yet Canada’s defence sector faces unprecedented supply chain risks in today’s fast-changing geopolitical landscape. Unchecked, these risks can cause disruptions, program delays, cost overruns, and sustainment issues that can hinder Canada’s defence readiness.

The Government of Canada’s ongoing work to establish a national defence industrial strategy is an important step in responding to these risks. More work remains to be done to understand and mitigate the vulnerabilities in Canada’s defence supply chain, however. Deloitte’s SupplyHorizon solution enables public and private defence organizations to harness AI to monitor their supply chains 24/7 and make timely decisions to keep programs on track and maintain Canada’s defence readiness.

Defence supply chains are complex and hard to manage

Canada’s defence industry comprises a robust network of OEMs, suppliers, and sub-suppliers across the country. Nearly 600 companies—85% of which employed less than 250 people—were active in the Canadian industry in 2022, generating $14.3 billion in revenue and employing more than 61,000.¹

The OEM network will need to become even more robust with the Government's plan to increase OPEX and CAPEX spending to approximately eight times the current levels, with increasingly more capital than operating spend through to 2029.²  

These companies are part of a wider supply chain that is more global and complex than ever, from parts and subassembly manufacturers to raw material suppliers. Each tier and link in a defence program supply chain adds new layers of risk and vulnerability to disruption due to economic, trade, geopolitical, or other reasons.

The defence industry’s unique characteristics exacerbate these challenges. Defence programs are large, complex undertakings. They can span decades in terms of procurement, introduction to service, and sustainment, and they involve significant segments of industry domestically and internationally: the F-35 Lightning II program, for example, involves around 6,000 manufacturers, suppliers, and sub-suppliers across the US, UK, Australia, Germany and beyond. The operational life of military capabilities can easily span significant shifts in terms of industrial technology and supply chain composition and support.

Key risks facing Canada’s defence industry

The defence industry faces a number of key risks in today’s volatile environment, all of which could disrupt supply chains at any tier, from OEM giants to small, highly specialized sub-suppliers:

• Geopolitical and trade factors – Foreign ownership and control of key materials, rising international tensions, and flaring trade disputes could disrupt supply chains should countries opt to use trade as leverage or as a weapon. Deloitte found that 65% of CEOs saw geopolitical instability as the primary threat to their business.³
• Intellectual property theft – Foreign company ownership and cyber-attacks can result in the unauthorized transfer or outright theft of defence-related IP and highly sensitive or classified information, all of which could compromise military readiness and effectiveness. Suppliers in the lower tiers of the defence supply chain can be especially vulnerable to phishing or other such cyber-attacks, as they may not be required or able to protect themselves from espionage or theft by state, industrial, or cybercriminal actors. In August 2024, for example, a significant cyber-attack disrupted the operations of a semiconductor manufacturer that supplies the US defence industry.⁴
• New supply chain rules and requirements – Organizations must ensure they adhere to new government measures to combat modern slavery and the use of forced or child labour in global supply chains, which draw on similar efforts by France, Germany, and the EU. Starting in spring 2025, organizations wishing to bid or work on Canadian defence contracts may require certification under the Canadian Program for Cyber Security Certification.⁵

Defence organizations must dig deeper into their supply chains

Canada’s defence organizations face a dilemma: while they depend on their supply chain, they cannot control it—outside of monitoring contractual requirements or obligations to ensure they’ve been met. The sheer size and complexity of defence supply chains makes it very hard for organizations to have useful visibility into them or gain timely, actionable insights. Organizations often focus their attention on their Tier 1 suppliers and certain Tier 2 suppliers. Gathering insights beyond this level is difficult and time-consuming, often relying on lower-tier suppliers to self-report. As a results, defence organizations’ efforts to ensure supply chain resiliency tend to be short-term, operate on poor or subjective information, and focus on the top of the supply chain.

Unfortunately, this leaves defence organizations vulnerable to risks, disruptions, and shocks arising from problems, chokepoints and interdependencies found in the depths of their supply chains. But in today’s turbulent world, it’s not enough to understand your risks involved in their systems, processes, and logistics. It’s about the risks posed by your suppliers’ systems, processes, and logistics, and those of your suppliers’ suppliers, and so on, down the line.

Today’s defence organizations need to know where components, subassemblies, and materials come from—and understand the relationships between their suppliers, sub-suppliers, raw materials providers, and more. Without this level of understanding and insight, it’s difficult, if not impossible, for defence organizations to identify vulnerabilities and take swift, decisive action to mitigate risks.

What defence industry decision-makers need is a tool that helps them access a wide range of publicly available business information—at scale, at speed, and as needed—to gain actionable insights and identify, manage, and proactively mitigate risks before they cause disruption.

And that’s why Deloitte built SupplyHorizon (Global - in English only).

Deloitte’s SupplyHorizon delivers the insights defence organizations need

SupplyHorizon is a data-driven solution that looks beyond generic, supplier-centric views of supply chain risk to provide enhanced supply chain intelligence and monitoring. SupplyHorizon integrates thousands of internal and external data sources and leverages powerful computing, advanced AI and machine learning models to look for and structure supply chain information. It enables multi-tier risk profiling and modelling and informs supply chain risk mitigation planning, whether for specific emerging risks (e.g., tariffs, geopolitical shocks), or broader risks such as those related to supplier foreign ownership or financial solvency.

SupplyHorizon enables defence industry decision-makers to see what suppliers, products, and services may be affected by issues and understand the implications in terms of logistics, profitability, and program costs and delays. This enables decision-makers to anticipate, avoid, and respond to disruptions before they become a problem—or impact Canada’s military readiness.

SupplyHorizon: real-world use case

Since 2018, Deloitte has been supporting a government defence agency program through the application of SupplyHorizon. This capability applies Open-Source Intelligence to map supply network relationships several tiers deep, enhancing identification of previously unknown potential risks and opportunities. It has been tailored to defence requirements and supply chain context through the development and implementation of a codified four-step methodology, delivered via trained analysts. To maximize the benefits for defence, the program is also delivered across multiple integrated workstreams including supplier risk, supply integrity, and local industry capability. This provides defence with a comprehensive series of options and actionable insights to improve its supply network, which it may choose to take in line with its strategic priorities and risk profile.

It's time for next-generation supply chain management

Managing defence supply chain risk is critical to maintaining Canada’s defence readiness in a fast-changing, volatile world. Deloitte’s SupplyHorizon can provide the visibility, intelligence, and insights manage and mitigate risks and keep defence programs on track—and Canada’s military at the ready.

To learn more, contact us.