Why Aerospace and Defence Manufacturers Are Moving to Dynamics 365 Business Central

Aerospace and defence manufacturing leaves very little room for administrative gaps.

A missing certificate of conformance can hold up a shipment. Poor lot traceability can turn a routine quality investigation into an AS9100 audit issue. One engineering change, if it is not reflected correctly across production and purchasing, can create weeks of disruption.

That is why ERP decisions in this industry are about more than finance, inventory, or production planning. The system has to provide a reliable chain of information from the material that enters the factory to the finished component that reaches the customer.

For small and mid-sized aerospace and defence manufacturers in the UK, US, and Canada, this is where Microsoft Dynamics 365 Business Central is increasingly relevant.

This guide looks at where legacy systems typically create problems, where Business Central fits, what an implementation actually requires, and what manufacturers should look for in an implementation partner.

Where Legacy ERP Systems Start to Struggle

Most aerospace component manufacturers are not starting from a blank sheet of paper.

They may already have an older on-premises ERP, accounting software surrounded by spreadsheets, or a specialist manufacturing application that handles production reasonably well but leaves finance and reporting disconnected.

The problem is rarely one dramatic software failure. More often, it is a collection of small gaps that become expensive when they occur in a highly regulated manufacturing environment.

For example, a manufacturer might have:

• Serial and lot information maintained partly in spreadsheets rather than one system of record.
• Engineer-to-order or configure-to-order quotations handled separately from production.
• Production routings that are not properly connected to purchasing requirements.
• Certificates of conformance, material certificates, and inspection records stored in email or shared folders.
• Finance teams closing the month using operational information that is already out of date.

Individually, these issues may seem manageable. Together, they create a significant operational risk.

A shortage of one component can hold up an entire assembly. An investigation into a nonconforming part can require people to search across several systems. A margin problem may not become visible until after production has already consumed labour and materials.

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The cost of getting traceability wrong

Aerospace is different because the consequences extend beyond operational inconvenience.

AS9100 nonconformances can affect supplier evaluations and contract opportunities. ITAR and export-control requirements can create legal and compliance exposure. A product recall or traceability investigation can quickly become a regulatory matter rather than simply a customer-service issue.

ERP implementation itself also carries risk.

Panorama Consulting Group's 2026 ERP Report, based on more than 2,400 implementations studied between September 2025 and January 2026, reported that 73% of discrete manufacturing ERP projects failed to meet their original objectives. Among projects that missed their targets, average cost overruns reached 215%. Discrete manufacturing recorded the highest failure rate of the segments covered in the study.

The figures should not be interpreted as an argument against ERP replacement. They are a reminder that implementation discipline matters just as much as software selection.

For aerospace manufacturers in particular, data quality deserves serious attention. Old item masters, historical lot records, BOMs, routings, and open production orders rarely transfer cleanly into a new ERP without preparation.

Why Business Central Can Be a Good Fit

Business Central occupies a useful position for small and mid-sized manufacturers that need stronger manufacturing and financial controls without taking on the complexity of a larger enterprise ERP.

For many independent aerospace component manufacturers, subcontractors, and Tier 2 and Tier 3 suppliers, that balance can be important.

The platform brings manufacturing, inventory, purchasing, sales, and financial information into the same system rather than requiring each function to operate around separate data sources.

Three areas are particularly relevant to aerospace manufacturing.

1. Serial and lot traceability

Business Central includes serial and lot tracking as part of its core item-tracking capabilities.

Microsoft's documentation describes both forward and backward tracing through the Item Tracing functionality. A quality team can use that information to establish relationships between a serial or lot number and associated customers, work orders, and supplier lots.

That matters when a manufacturer needs to answer a seemingly simple question:

Where did this material go, and what finished products were affected?

The faster that question can be answered, the easier it becomes to investigate quality issues and demonstrate traceability during an audit.

2. Manufacturing and production control

Aerospace component production frequently involves make-to-order, engineer-to-order, subcontracted operations, complex routings, and production BOMs.

Business Central's manufacturing capabilities bring these processes into the same operational environment as purchasing, inventory, costing, and finance.

That creates a more connected flow from planning through production and ultimately into financial reporting.

For manufacturers, the benefit is not simply having another production screen. It is having fewer gaps between what was quoted, what was planned, what was purchased, what was produced, and what was ultimately invoiced.

3. Extensions and industry-specific functionality

Not every aerospace requirement is going to be available in a standard ERP configuration.

Manufacturers may need additional quality functionality, PLM integration, export-control processes, or sector-specific document management.

Business Central's extension model allows additional capabilities to be introduced without rewriting the core application. For aerospace manufacturers, that can be important because the ERP needs to evolve as requirements change while remaining maintainable through future upgrades.

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What a Business Central Implementation Looks Like

An aerospace ERP implementation should not begin with configuration screens.

It should begin with understanding how the business actually operates.

A practical implementation typically moves through five broad stages:

1. Discovery and process mapping
2. Data preparation, migration, and validation
3. Business Central configuration and required extensions
4. User acceptance testing
5. Go-live and post-launch support

The exact scope will vary from one manufacturer to another, but the principles remain similar.

Start with the processes that affect compliance

Discovery is particularly important for aerospace manufacturers because this is where many of the industry's specific requirements need to be translated into ERP processes.

For example:

• Which items require serial tracking?
• Which materials require lot tracking?
• How is nonconforming material identified and quarantined?
• Where are certificates of conformance stored?
• How are material certificates associated with the relevant transaction?
• How are inspection records linked to production or shipment information?

These decisions should be made before configuration is finalised.

If a critical requirement is discovered during user acceptance testing, changing the system becomes considerably more disruptive.

Do not treat data migration as an IT exercise

Data migration is often underestimated.

An aerospace manufacturer may have years of item history, supplier records, lot numbers, serial numbers, production data, BOMs, routings, and open work orders.

Moving that information into Business Central is not simply a matter of exporting one database and importing another.

The business needs to decide:

• What data is actually required?
• Which records are accurate?
• Which historical information should be retained?
• How should legacy item numbers map to the new item structure?
• Are BOMs and routings still valid?
• Which open production orders need to move across?

Cleaning and validating this information before migration can prevent a significant amount of post-go-live disruption.

Scope determines cost and timeline

There is no universal Business Central implementation timeline for aerospace manufacturing.

The answer depends on factors such as the number of legal entities, manufacturing complexity, routing structures, historical data requirements, integrations, and security or segregation requirements.

That means an implementation estimate should be treated as an estimate—not a guarantee.

The internal team matters too.

An operations representative and someone from quality or compliance should have meaningful involvement in the project, alongside IT. Those people understand how the processes work in practice and can make informed decisions during testing.

An executive sponsor should also have enough authority to resolve issues when decisions become blocked.

The software is rarely the only reason an ERP project succeeds or fails. Process ownership, data quality, testing, and change management are equally important.

Choosing a Business Central Partner for Aerospace

Choosing the ERP is only half the decision.

The right business central implementation partner can have an equally significant impact on the outcome.

A generic manufacturing demonstration is not enough. An aerospace manufacturer should test whether the partner understands the specific requirements of the sector.

Ask questions such as:

How have you configured Business Central for AS9100-related traceability requirements?

Generic lot tracking is not necessarily the same thing as designing processes around aerospace quality requirements.

How have you approached ITAR-related data segregation?

The answer should go beyond saying that Business Central is secure. The partner should be able to explain how security, access, data location, and organisational processes would be addressed for the customer's specific environment.

Can you demonstrate an engineer-to-order aerospace manufacturing scenario?

A partner should be able to demonstrate how engineering changes, BOMs, routings, purchasing, production, inventory, and costing work together—not simply show a generic manufacturing presentation.

If the answers remain vague, there is a risk that aerospace-specific requirements will only become visible during testing.

That is an expensive time to discover that the proposed solution does not match the way the factory operates.

Support after go-live matters too

The relationship should not end when the ERP goes live.

Aerospace and defence manufacturers regularly deal with changing programs, new contracts, evolving customer requirements, and new production processes.

Your ERP needs to accommodate those changes without turning every adjustment into another major implementation.

That makes ongoing support, optimisation, integrations, upgrades, and process improvement part of the partner evaluation—not an afterthought.

The Next Step: AI and Automation

AI is becoming a bigger part of the aerospace and defence technology conversation.

Deloitte's 2026 Aerospace and Defense Industry Outlook highlights the move from experimental agentic AI projects toward broader deployment, particularly around areas such as procurement, planning, logistics, and administrative work.

Within Business Central, manufacturers can also look at capabilities such as Copilot-assisted forecasting, automated purchasing processes, and natural-language access to business information.

But there is an important prerequisite.

AI cannot compensate for fragmented or unreliable operational data.

If lot information sits in one application, production information in another, certificates in shared folders, and financial information somewhere else, adding AI does not automatically create a trustworthy business process.

The foundation has to come first.

Build the Foundation Before Chasing AI

For an aerospace manufacturer, one useful test is simple:

Can your current system quickly tell you which customers received products associated with a particular lot?

If answering that question requires someone to open multiple spreadsheets, search emails, contact production, and manually reconcile records, there is a more fundamental problem to solve.

Business Central can provide a connected foundation across finance, manufacturing, purchasing, inventory, and traceability for small and mid-sized aerospace and defence manufacturers.

That foundation can then support further automation, analytics, integrations, and AI initiatives.

The goal is not simply to replace an old ERP.

It is to create an operating environment where production teams, quality teams, finance, and management are working from the same information—and where the business can respond quickly when something changes.

Frequently Asked Questions

Is Dynamics 365 Business Central AS9100 compliant out of the box?

No ERP system is, by itself, "AS9100 compliant."

AS9100 applies to an organisation's quality management system and processes rather than certifying a particular ERP product.

Business Central does provide capabilities such as serial and lot tracking and documentation controls that can support an AS9100 quality system. Depending on the manufacturer's requirements, additional quality functionality or PLM integration may also be required.

How is Business Central different from Dynamics 365 Finance & Operations for aerospace manufacturers?

Business Central is generally positioned for small and mid-sized organisations that need ERP functionality without the scale and complexity associated with larger enterprise deployments.

Finance & Operations is designed for larger and more complex organisations, including businesses with extensive global operations and multi-entity requirements.

For many independent aerospace component manufacturers and Tier 2 or Tier 3 suppliers, Business Central can therefore represent a more proportionate ERP option.

Can Business Central handle ITAR data segregation?

ITAR compliance is not a single ERP feature.

It depends on factors including data hosting, access controls, user permissions, organisational procedures, and the specific compliance requirements applicable to the business.

A Business Central implementation can be designed with appropriate security and access controls, but manufacturers should validate their specific ITAR requirements with their compliance and legal teams before finalising the solution.

How long does a Business Central implementation take for an aerospace manufacturer?

There is no standard timeline.

A project involving complex routings, multiple entities, extensive historical lot and serial data, integrations, and detailed user acceptance testing will naturally take longer than a simpler deployment.

Manufacturers should plan around the actual scope and internal resources rather than assuming that an ERP implementation can be completed in a few weeks.

Ready to Evaluate Business Central?

If your aerospace or defence manufacturing operation is dealing with disconnected production data, traceability challenges, manual quality documentation, or an ERP that is struggling to keep pace with growth, the first step should be understanding where the current process is breaking down.

Dynamics Square can help assess your manufacturing, traceability, compliance, and ERP requirements before you commit to a particular implementation approach.

Book a free consultation with Dynamics Square to discuss your aerospace and defence manufacturing requirements.