The aerospace and defense (A&D) industry has operated at the forefront of technological innovations over the last century. However, legacy A&D organizations risk being left behind by new entrants that are disrupting the market with rapid innovations, more efficient operations, and new perspectives. For example, SpaceX is making reusable launch systems commercially viable, Virgin Galactic is turning space tourism into reality, and the revival of supersonic passenger flights by Aerion is just the tip of the iceberg in this era of continuous innovation.
These new innovators directly challenge the business models of legacy A&D firms. So, how should legacy organizations respond? The first step is to formulate a response strategy and identify what has changed in the industry. Next, they need to take a page from the new entrant’s own playbooks and embrace technological innovation, to apply it to their own operations.
Tracing two decades of disruptions
Over the last several years, scale-ups-turned-startups, founded on a digital DNA, have significantly altered the competitive dynamics of the industry. Here are some of the key shifts underpinning this disruption:
- Stricter emission standards and emerging cybersecurity and liability policies have led to rising compliance costs for legacy players. The new entrants, who are more digitally mature, raise their competitiveness by easing compliance adherence and the resources that go into it.
- Industry 4.0 components have reset the barrier of profitability for slow adopters. In the meanwhile, early movers and startups are boosting the competitiveness of their portfolio with cutting-edge digital infrastructure that supports paradigms such as the circular economy, connected factory, 360-degree asset visibility, and so on.
- Gaps in infrastructure funding and volatile supply chain dynamics reinforce the need for supply chain resilience. The uncertainty of demand makes dynamic scalability, collaboration, and responsiveness across extended supply chains critical to a firm’s success.
- Finally, airline operators and defense customers are constantly pushing their suppliers for lower cycle times when it comes to Maintenance Repair and Operations (MRO) in A&D.
Amidst these disruptions, legacy players have been pressed to innovate faster and with a low margin of error while minimizing the cost and complexity of operations. A&D manufacturers can achieve this by building a solid foundation on which they can innovate rapidly, operate at optimized costs, maximize cross-sell and upsell opportunities, and rapidly iterate on the employee and customer experience. Creating a digital infrastructure that mirrors the physical in A&D’s asset-heavy ecosystem is the key to achieving the necessary visibility, efficiency, and competitiveness that new entrants enjoy. This will enable legacy A&D players to continue to favorably compete against new rivals.
The need for operational excellence
As the A&D ecosystem evolves, achieving operational excellence is quickly turning into an imperative for survival rather than an end in itself. Despite deploying cutting-edge technologies in products, services, and operations, the aerospace and defense industry has been slow in adopting digital technologies as compared to other sectors such as manufacturing and consumer products.
While most A&D manufacturers and service providers leverage enterprise technology systems such as Enterprise Resource Planning (ERP), Product Lifecycle Management (PLM), and Manufacturing Operations Management (MOM) to support their operations, creating highly effective integration across these tools and enabling digital twins is an ongoing struggle. However, maximizing the value of data with integrations remains key to achieving operational excellence, and this makes it imperative to build traceability, visibility, and digital control across the A&D value chain.
Unlocking business value through integrations
Systems integration is the key to seamlessly connecting and contextualizing business functions. By integrating systems, A&D firms can ensure data accuracy across planning, manufacturing, and maintenance operations. This is critical to achieve responsiveness, agility, and consistent quality products and services in the face of challenging internal and customer service level expectations.
Integration may seem simple in concept but can be challenging to implement in reality. The digital approach to integration delivers tightly coupled processes while providing flexibility for development, maintenance, and evolution of applications. Organizations should strive to implement digital integrations across the enterprise technology landscape for their business functions to deliver operational excellence to internal and external customers.
So, what does operational excellence look like in an A&D organization? Here are two examples:
- A leading aircraft manufacturer recently undertook an initiative to integrate their PLM, MOM, and SAP ERP systems more effectively. With extensive use of SAP Fiori, the engineers can now finish airplanes in half the time they previously did. How? Crews now have access to all parts and inventory visibility, work instructions, drawings, and activity reporting on a single mobile device. In the past, they used to have to work across devices, print drawings, understand inventory, and record activities.
- Leading aircraft engines manufacturer, Rolls-Royce records complete data on each engine manufactured by the company. With complete parts serialization, coupled with IoT sensors that stream live data indicating engine health, the organization can minimize the time spent on the ground and keep engines running safely through their lifecycle.
That A&D organizations must invest in digital is a unanimous consensus among industry thought leaders. A McKinsey survey shows that digital technologies can deliver a potential $17 billion gain in procurement, supply chain, manufacturing, and aftermarket services. However, despite 84% of A&D businesses knowing that digital investments are critical for their future survival, only 25% are making these investments. A&D players looking to stay competitive need to rapidly unleash an aerospace and defense Industry 4.0 vision built on the foundations of Industry 4.0 technologies.
A&D 4.0: Key tenets
The above examples highlight the tangible benefits of A&D investments in Industry 4.0. As a contributor to the Industry 4.0 Working Group, SAP envisions an A&D 4.0 strategy that encompasses four tenets: intelligent products, factories, and assets and a digitally empowered workforce. Currently, these tenets are enabled by two key factors:
- Industry 4.0 technologies leverage data from digitized processes and turn it into insights at the point of an action or a decision.
- Enterprise technology systems are integrated to expose workflows with deep insights, oversight, and control.
Let's consider these two factors in greater detail with two use cases.
How Industry 4.0 technologies propel A&D 4.0
Currently, the top quartile of performers in A&D bring in 15% greater RoI than their bottom-quartile counterparts. These companies leverage deep automation through their manufacturing processes, deploy IoT sensors on their finished products to keep them within 24x365 oversight, and use AI for cognitive decisions in supply chain and procurement operations. In addition, these technologies can directly impact the value delivered by a business to the A&D ecosystem. For instance, extensive and granular part serialization using blockchain helps A&D organizations deliver higher levels of safety by spotting trends in machine failures while reducing the cost of compliance and garnering greater trust in the downstream ecosystem.
How systems integration empowers smarter A&D operations
A&D organizations use multiple enterprise technology solutions to support their R&D, manufacturing, service, repairs, and supply chain functions. Integrating the systems that support these functions can unleash new insights, efficiencies, and responsiveness for the underlying operations. For example, by integrating the PLM, MOM, MDM (Master Data Management), and ERP; A&D manufacturers could maintain a digital twin that bridges the gaps between the as-designed, as-built, and as-maintained configurations of their manufactured units. This is an important step in the shift towards as-a-service business models, pre-emptive maintenance programs, and developing observability for each product through its lifecycle.
A&D 4.Now: Excel with SAP
While A&D organizations have been utilizing SAP systems for a long time, few have leveraged SAP S/4HANA or the BPI toolsets that are now a part of the SAP ecosystem. Nonetheless, the SAP environment remains the leading choice for maintaining intelligent assets, supporting smart manufacturing processes, shouldering supply chain processes, and building a reliable and resilient supplier network. With new BPI capabilities such as SAP Signavio, A&D enterprises can also identify the most promising transformation areas as they aim for operational excellence. However, such transformations can take up to a year, and despite technological upgrades, resistance to change amidst the workforce can reduce the potential of an enterprise technology overhaul.
Today, solutions such as Base90 by HCLTech can help A&D organizations quickly realize the promises of A&D 4.0 with a pre-configured SAP S/4HANA deployment. Geared to deliver supply chain excellence and streamlining of processes, Base90 also enables a company to enable organizations to integrate MOM and PLM systems and to differentiate themselves with edge solutions. Base90, coupled with HCLTech’s world-class process and technical expertise, empowers A&D firms to achieve strategic transformations that help them meet the emerging challenges and opportunities of a rapidly evolving ecosystem.
Closing the physical, digital, and human loop with Industry 4.0 technologies and digital systems is a necessary first step to achieving operational excellence and the requisite competitiveness. A&D businesses should look at this as a chance to gain a leading edge in the A&D industry of the future.