Schnitzer Group

Welcome to our latest e-mail newsletter. In this edition, we focus on a topic that is currently gaining significant momentum: Defence and Prevention

Few market sectors are expanding as dynamically as this one. As a result, we are receiving an increasing number of inquiries and project assignments from companies operating in this environment. We support organizations taking their first steps into the sector as well as those seeking to further develop their existing activities. One thing becomes clear time and again: the defence industry operates under its own set of rules, requirements, and framework conditions. Success requires not only technical expertise but also a solid understanding of industry-specific processes, supply chain structures, regulatory requirements, and market dynamics.

For the Schnitzer Group, this environment is no longer unfamiliar territory. Over the past years, we have built extensive experience within the defence sector and understand the critical success factors for projects involving supply chains, manufacturing operations, supplier development, and quality assurance.

At the same time, we observe a clear industry trend. While many areas of the automotive sector continue to face economic challenges and investment uncertainty, numerous suppliers are actively exploring new growth opportunities. The search for future-proof markets is accelerating, and security-related industries are increasingly moving into focus.

We are convinced that many of our readers are closely monitoring these developments and may already be evaluating opportunities within this sector. With this newsletter, we aim to provide valuable insights, current industry perspectives, and practical guidance to support your decision-making and stimulate new ideas.

We hope you enjoy reading this newsletter.

Inside Defence – Backgrounds and Perspectives
Exclusive Interview

Defence Ramp-Up: Why the Real Challenge Is Not Manufacturing Capacity, but Supply Chain Capability

Europe's defence industry is experiencing an unprecedented period of growth. Production programs are being expanded, manufacturing capacities are increasing, and additional supplier capabilities are urgently being sought. Yet one key finding is emerging across the industry: manufacturing expertise is rarely the primary bottleneck. Instead, the greatest challenge lies in building resilient, qualified, and sustainable supply chains capable of supporting long-term growth. In an exclusive interview, Andreas Kohler, Managing Director of the Schnitzer Group, exchanged views with a European Supply Chain Executive from a leading manufacturer of military land systems on the opportunities and challenges facing new suppliers entering the defence sector.

The interview partner is responsible for European supply chain operations at a leading manufacturer of military vehicle platforms. The company develops and produces protected wheeled vehicle systems for numerous NATO and allied nations. With production volumes increasing rapidly and new facilities being established, the organization is currently undergoing a major expansion phase. The key focus is no longer technology alone but supplier qualification, supply stability, and sustainable partnerships.

Editorial Note: The interviewee and the represented company remain anonymous for confidentiality reasons.

Topic 1: From a niche market to an industrial growth opportunity

Andreas Kohler (AKo): Many suppliers from the automotive industry see significant growth potential in the defence market. How is this trend affecting your organization?

Interview Partner: We are currently experiencing a substantial ramp-up of our operations. New manufacturing and logistics capacities are being established, particularly in Germany. The market is expanding at a pace we have not seen before. One example is one of our vehicle programs. Historically, annual volumes were approximately 100 vehicles. Going forward, we expect production levels to increase to several hundred vehicles per year. This fundamentally changes the requirements placed on the entire supply chain.

Interestingly, our biggest challenge is not with long-established strategic suppliers. These partners already possess the capacity, expertise, and infrastructure required to support our growth. The real challenge is different: How do we increase supply chain resilience? How do we reduce single-source dependencies? How do we develop new suppliers before bottlenecks occur? Today, we need a supply chain that can do more than simply deliver products. It must be capable of withstanding disruptions and supporting long-term demand growth. This is why we are placing significant emphasis on dual-sourcing strategies, safety stock concepts, and sustainable supply assurance.

AKo: This is precisely where we see substantial value creation opportunities. Many companies possess strong technical capabilities, but often lack full transparency regarding their actual production capacities. Structured capacity assessments and supplier development programs can help identify risks early and secure sustainable growth.

Interview Partner: Absolutely. This level of transparency will become increasingly important in the future. The growth is not limited to a single OEM; it is affecting the entire defence sector simultaneously.

Topic 2: Why automotive expertise alone is not enough

AKo: Many automotive suppliers are currently evaluating entry into the defence market. What experiences have you had with these companies?

Interview Partner: Many organizations initially underestimate the real barriers to entry. From a technological perspective, most automotive suppliers are highly capable. Welding, machining, forming, and electronics manufacturing are rarely the limiting factors. The real challenges stem from qualification requirements, approvals, certifications, and documentation obligations.

A typical example is the processing of armour steel. Suppliers involved in protection-relevant applications for German defence programs may require specific qualifications in accordance with German military technical delivery requirements (Technische Lieferbedingungen, TL). In certain cases, manufacturer qualifications such as Q3 certification may be mandatory.

Many companies possess excellent manufacturing capabilities but have limited awareness of these specific requirements. In addition, documentation requirements can be extensive. Traceability, material certification, process validation, approvals, and long-term compliance must be maintained throughout the product lifecycle.

For many medium-sized companies, meeting these requirements represents a greater challenge than the actual manufacturing process itself. The capability to manufacture typically exists. The real challenge is successfully navigating the qualification process.

AKo: This is exactly where we support suppliers today. Most organizations do not require technology transfer. What they need is a structured qualification and supplier development roadmap. The capability already exists but must be aligned with defence-specific requirements and secured for sustainable growth.

Interview Partner: That is an excellent summary. Companies considering entry into the defence market should not start by asking: "Can we manufacture this product?" Instead, they should ask: "What requirements must we fulfill to become an approved supplier?"

Topic 3: Supply chain risks, geopolitical framework conditions and new dependencies

AKo: In addition to qualification requirements, geopolitical considerations are becoming increasingly important. How are these developments affecting your sourcing strategy?

Interview Partner: Significantly. In previous decades, procurement decisions were primarily driven by cost, quality, and delivery performance. Today, additional factors such as geopolitical risks, export regulations, compliance requirements, and supply chain resilience have become critical decision criteria.

Many organizations are discussing "China-free" or at least China-risk-reduced supply chains. In practice, however, achieving this objective is far more complex than many assume. What matters most is realistic risk management combined with full supply chain transparency. At the same time, we are actively pursuing European and, wherever possible, German sourcing strategies. This is driven not only by supply security considerations but also by export control requirements and end-use regulations.

In addition, international regulatory frameworks such as ITAR (International Traffic in Arms Regulations) and EAR (Export Administration Regulations) must be considered whenever U.S.-origin technology, components, or technical data are involved. National export control regulations and customer-specific compliance requirements add another layer of complexity. Companies entering the defence market must understand that not only the product itself is evaluated, but also the entire environment in which that product is developed, manufactured, and supplied.

AKo: This is fully aligned with our experience. Many of today's risks no longer exist solely at the direct supplier level but extend across the entire supply chain network. Transparency regarding sub-tier suppliers, ownership structures, and countries of origin is increasingly becoming a key success factor.

Interview Partner: Exactly. Professional supply chain risk management will play an even more important role in the future than it does today. Organizations that achieve transparency and resilience within their supply chains will gain a significant competitive advantage.

Topic 4: What a leading military vehicle manufacturer really expects from new suppliers

AKo: If you had to give a recommendation to a potential supplier, what would be the most important prerequisites for a successful business relationship?

Interview Partner: Many people expect a list of required certifications. In reality, our evaluation starts much earlier. We first assess the overall stability of the company. Ownership structure, compliance culture, financial health, and long-term strategic direction are all key factors in our supplier selection process.

Only then do we evaluate technological capabilities. However, the so-called "soft factors" are equally important: Does the supplier understand the expected production volumes? Do they understand where the market is heading? Are they willing to support long-term growth? Does their business model align with our requirements? Are they prepared to invest alongside us and build sustainable partnerships?

The most successful partnerships are rarely created through the lowest price or the most impressive presentation. They are built on mutual understanding, transparency, trust, and long-term reliability. Many of our strategic suppliers have been working with us for decades. These partnerships were established long before the defence market became the focus of public attention.

AKo: That is a very important point. During periods of rapid growth, it becomes evident that sustainable partnerships and professional supplier development often create more value than short-term capacity expansions.

Interview Partner: Exactly. The real challenge is not finding new suppliers. The challenge is identifying the right partners and building a successful and sustainable future together.

For new suppliers, entering the defence market therefore requires far more than a technical manufacturing assessment. Success depends on a structured capability development approach covering qualification, documentation, compliance, capacity management, financial stability, and supply chain transparency.

Only when these elements are consistently demonstrated and sustainably managed can manufacturing capability evolve into true defence supply capability.

Conclusion

The defence market offers attractive growth opportunities for many organizations. At the same time, the discussion with a European Supply Chain Executive from a leading military vehicle manufacturer clearly demonstrates that successful suppliers require much more than modern equipment and available production capacity.

For companies planning to enter the defence sector, supplier development, capacity assessments, risk analysis, and supply chain resilience will become critical success factors.

This is precisely where the Schnitzer Group can contribute significant value: from systematic capacity assessments and supplier qualification programs to the stabilization and development of critical supply chains. The defence industry is entering a period of sustained growth. Organizations that prepare early, invest in capability development, and establish resilient partnerships will be best positioned to participate in this transformation.

--- Interview conducted online on July 21, 2026 ---

VDA, ISO, AQAP – What are the interfaces?

Quality beyond compliance

For many companies, the requirements of the defence industry initially appear to be an entirely different world. However, organizations with experience in ISO 9001, IATF 16949, and established VDA methodologies already possess a strong foundation. Both industries pursue the same objective: identifying risks early, controlling processes, securing supply chains, and providing verifiable evidence of product conformity.

AQAP (Allied Quality Assurance Publications) does not replace an existing Quality Management System, nor should it be confused with APQP (Advanced Product Quality Planning). AQAP 2110 incorporates the requirements of ISO 9001:2015 and supplements them with NATO-specific contractual requirements. For highly complex aerospace and defence programs, AQAP 2310 builds upon the AS9100 / EN 9100 standard and extends it with additional customer-specific obligations.

Many methods are directly transferable

Automotive suppliers already utilize well-established tools that can provide significant value within defence programs:

APQP and maturity assurance processes
Product and Process FMEA
Inspection planning and control of critical characteristics
VDA 6.3 process-oriented auditing
Supplier development and escalation management
8D problem solving, root cause analysis, and effectiveness verification
Change management and traceability

While these methods are not synonymous with AQAP requirements, they provide a robust operational foundation for implementing them effectively.

Where AQAP goes further

The key differences lie in AQAP’s strong contractual focus and the involvement of governmental quality assurance authorities. A Government Quality Assurance Representative (GQAR), acting on behalf of the customer, may be granted access to quality-relevant processes, documentation, inspections, and manufacturing facilities. These rights can also extend to sub-tier suppliers. Nevertheless, full responsibility for product conformity always remains with the supplier.

AQAP also requires a highly structured and auditable implementation of contractual requirements, including:

A contract-specific Quality Plan
Clear traceability between requirements, implementation, and evidence
Formal configuration management
Defined communication, approval, and release processes
Flow-down of applicable requirements to sub-suppliers
Controlled management of deviations and concessions

The Quality Plan defines responsibilities, resources, inspections, and verification activities necessary to demonstrate compliance with contractual requirements. While it is not simply another name for an APQP plan, it shares several methodological similarities with automotive quality planning.

The added value of Schnitzer Group

Our strength lies at the intersection of both worlds. We do not simply transfer automotive methodologies into defence programs. Instead, we combine the operational discipline of the automotive industry with the compliance and assurance requirements of AQAP-driven environments.

That means:

We turn requirements into executable processes
Quality Plans, Compliance Matrices, and Configuration Management are not treated as isolated documents. We integrate them into engineering, procurement, manufacturing, quality assurance, and supplier management processes, ensuring practical implementation throughout the organization.

We bring quality to the shop floor
Our focus extends beyond formal compliance. The real objective is to ensure that requirements are effectively translated into daily operations through work instructions, inspections, approvals, and clearly defined responsibilities.

We manage complex supply chains
Drawing on extensive automotive experience, we support supplier audits, escalation management, maturity assessments, and on-site supplier development. This expertise helps ensure the AQAP-compliant deployment and control of contractual requirements throughout the entire supply chain.

We combine prevention with demonstrable compliance
FMEA, inspection planning, and structured problem-solving methodologies reduce operational risk. At the same time, Quality Plans, requirements traceability, and configuration management ensure that compliance can be demonstrated confidently to both customers and governmental quality representatives.

Our commitment

VDA, IATF 16949, and AQAP are not interchangeable frameworks. However, they are based on a shared quality philosophy: Quality must be planned, risks must be controlled, and results must be verifiable.

The Schnitzer Group combines the speed, problem-solving capabilities, and operational excellence of the automotive industry with the contractual rigor, transparency, and compliance requirements of defence programs. The result is more than compliance alone: it creates resilient processes, robust supply chains, and sustainable program success.

Schnitzer Group – WE MAKE PROJECTS WORK!

Networking & Industry Exchange – Let’s Connect!

The security and defence sector, together with its supply chain network, continues to gain strategic importance in response to the current geopolitical environment. At the same time, topics such as economic resilience, secure supply chains, and capacity expansion are moving higher on corporate agendas. This trend extends far beyond traditional defence companies and increasingly affects organizations operating in automotive, mechanical engineering, metal processing, electronics, IT, logistics, construction, and medical technology.

Let’s Start the Conversation. We invite you to connect with our experts at upcoming industry events focused on automotive, manufacturing, supply chain management, and defence. Take the opportunity to discuss current market developments, challenges, and opportunities while exploring the synergies between established industries and rapidly growing defence-related sectors.

Meet the Schnitzer Group at the following events: