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Strategies for Profitable Growth Aerospace & Defense Manufacturing
YOU'RE DOING A LOT TO IMPROVE THE WAY
YOUR COMPANY OPERATES
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WHERE DO YOU GO FROM HERE?
CHARTING THE BEST COURSE
The Aerospace and Defense (A&D) manufacturing industry is always changing.
What worked yesterday might not work today. That's why A&D manufacturers
are constantly seeking better ways to manage complexity, cut costs, and boost
productivity.
In pursuit of these objectives, A&D manufacturers are looking beyond standard
practices to new business strategies that promise solid business results. But
what strategies and practices are right for your company? And what are the best
solutions for facilitating them? To answer these questions, companies rely on
insights and advice from industry thought leaders.
STRATEGIES FOR PROFITABLE GROWTH
To relay what industry experts are thinking, Strategies for Profitable Growth explores
the most recent strategies, solutions, and best practices for each of the more than
25 major industries served by SAP.
Each brochure in this series reflects the views of independent analysts, industry
experts, and corporate executives on a specific industry. Take a closer look at
the strategies, practices, and tools in the pages ahead, and consider how they can
help your business achieve profitable growth.
HIGHLY TARGETED SOLUTIONS . . .
SAP® SOLUTIONS FOR THE
A&D MANUFACTURING INDUSTRY
SAP supports the most important busi-
ness processes in any A&D manufac-
turing organization and provides tools
to help you understand how these
processes work. One of these tools is
the solution map shown on the next
page. Based on input from customers
and industry analysts, plus the techni-
cal expertise SAP has acquired through
extensive business experience and
research, solution maps are multilevel
blueprints of processes defined for
a particular industry. They help you
visualize, plan, and implement a
coherent, integrated, and comprehen-
sive information technology solution.
They also show how various processes
are covered, including the processes
that SAP and its partners support. With
solution maps, you quickly understand
business solutions and the business
value they can bring. A complete library
of solution maps, business maps, and
business-scenario maps for the A&D
manufacturing industry is available at
www.sap.com/businessmaps
and then select Industry-Specific
Business Maps.
SAP® SOLUTIONS FOR THE
A&D MANUFACTURING INDUSTRY
SUPPLY CHAIN MANAGEMENT STRATEGIES
REDUCE SPEND BY RATIONALIZING
THE SUPPLIER BASE
To reduce global spend, A&D manu-
facturers first need to see it. But with
multiple procurement systems and
a persistent lack of enterprise-wide
purchasing visibility, many initiatives
to control spend and rationalize the
supplier base never get off the ground.
WHAT ANALYSTS
RECOMMEND
A&D manufacturers need to consoli-
date systems to get a handle on spend,
aggregate demand, and negotiate
favorable terms with trusted suppliers.
Then they need a way to enforce con-
tract agreements down to the procure-
ment level to realize the benefits of
negotiated agreements. This requires
business analytics, master data man-
agement, supply chain management,
and supplier relationship management
capabilities.
WHAT SAP OFFERS
Powerful business intelligence and
master data management capabilities,
provided by the SAP NetWeaver™
platform, help A&D manufacturers
analyze spend and consolidate demand.
Sophisticated supplier relationship
management capabilities help close
the loop between sourcing and pro-
curement so that companies can reap
the benefits of negotiated supply
agreements.
EFFECTIVE SUPPLY CHAIN MANAGEMENT IS CRITICAL FOR
A&D MANUFACTURERS. TRY THESE STRATEGIES TO HELP YOU SUCCEED
EXTEND PROCESS EFFICIENCY FROM CORPORATE
HEADQUARTERS TO SHOP FLOOR
While enterprise resource planning
(ERP) implementations are common
for managing financials at the corpo-
rate level, little coordination extends
down to the shop floor to manage
schedules and individual subprojects.
This undermines initiatives to boost
productivity and project efficiency.
WHAT ANALYSTS
RECOMMEND
Legacy systems, originally implement-
ed to fulfill company-specific processes
in accordance with an individual inter-
pretation of industry regulations and
requirements, need to be replaced to
implement industry-wide best-practice
processes and to meet customer man-
dates. The immediate issues are a lack
of system connectivity and data access.
Once these issues are addressed, com-
panies can implement more sophisti-
cated project life-cycle management
(PLM) solutions to help them manage
areas such as collaborative design.
This will help improve innovation and
speed time to market.
WHAT SAP OFFERS
SAP offers market-leading ERP and
PLM capabilities that leverage the SAP
NetWeaver platform to extend func-
tionality across the entire enterprise.
Companies benefit from a powerful
exchange infrastructure to facilitate
integration; master data management
to share consistent data across the
enterprise; and a sophisticated portal
that enables uniform, role-based access
to data, applications, and services.
IMPROVE ASSET AND INVENTORY MANAGEMENT
CAPABILITIES
Inaccurate demand forecasting and
supply planning lead to excess inven-
tory and suboptimal use of capital
assets such as plant equipment.
Companies need better inventory
management, especially for spare
parts, to succeed in the aftermarket.
WHAT ANALYSTS
RECOMMEND
Companies should move away from
point solutions and integrate systems
for more robust supply management
activities. This requires supply chain
management and capabilities for parts
tracking and valuation. Customers in
both commercial and defense sectors
are now requiring radio frequency
identification (RFID) devices to sup-
port real-time asset and inventory
tracking processes. This requirement
means that manufacturers must
approach asset management from
a life-cycle cost perspective.
WHAT SAP OFFERS
SAP provides supply chain manage-
ment and business intelligence that
integrate into back-office ERP and
PLM capabilities. This helps companies
improve supply forecasts, reduce
inventory-carrying costs, and even
execute sophisticated processes such as
collaborative inventory replenishment.
PROGRAM MANAGEMENT STRATEGIES
MOVE FROM EARNED VALUE REPORTING
TO EARNED VALUE MANAGEMENT
Used mainly by defense contractors to
identify cost and schedule variances,
earned value reporting is often ap-
proached as a governmental reporting
requirement to be fulfilled at the end
of each accounting period. In this
context, variances have time to per-
petuate themselves throughout the
program before they are identified.
Companies need to be more proactive.
WHAT ANALYSTS
RECOMMEND
Earned value management helps com-
panies identify variances in real time
before they disrupt the program.
Stand-alone reporting solutions should
be replaced with a unified system to
coordinate budgets, schedules, prod-
uct development, inventory manage-
ment, and supplier collaboration. In
addition, a wide range of program par-
ticipants need access to data and func-
tionality. This makes usability a critical
success factor.
WHAT SAP OFFERS
SAP offers a powerful project system
backbone that integrates with plan-
ning and execution activities. Where
necessary, SAP NetWeaver can be used
to integrate with legacy project tools.
SAP NetWeaver also provides a flexible
portal environment that provides
user-friendly, role-based access to all
functions connected to the program.
In addition, SAP capabilities for RFID
and auto-ID improve inventory
tracking to meet the U.S. Department
of Defense (DoD) requirements.
THESE STRATEGIES CAN HELP MINIMIZE RISK AND MAXIMIZE
EFFICIENCY FOR THE PROJECT-ORIENTED A&D MANUFACTURING
INDUSTRY
INCREASE COLLABORATION
AND INFORMATION VISIBILITY
In the United States, the DoD's capa-
bilities-based acquisition initiative
requires greater coordination among
design, production, and testing groups
and supply chain planning and exe-
cution. A&D organizations across the
industry spectrum seek enhanced
integration to speed time to market,
increase productivity, and add value
to the new product development
process. A key feature to enable this
is the visibility of real-time program
management information.
WHAT ANALYSTS
RECOMMEND
A&D manufacturers should prioritize
IT investments to improve informa-
tion flow, increase revenue, and pro-
vide better support to customers.
This requires significant upgrades to
decades-old legacy systems. Require-
ments include sophisticated inventory
management, project life-cycle man-
agement, supplier collaboration, as
well as the master data management
and information exchange capabilities
needed for support.
WHAT SAP OFFERS
SAP delivers powerful collaboration
capabilities to help companies coordi-
nate projects and share information
more efficiently. Inventory data can be
shared and external suppliers can be
incorporated into the product devel-
opment process at the earliest stages.
SPREAD RISK THROUGH DISTRIBUTED
PRODUCT TEAMS
Leading A&D manufacturers are
reducing their financial risk on pro-
grams by establishing a partner network
and outsourcing project elements
that were previously regarded as core
competencies. On the defense side, this
is driven by the adoption of the lead
system integrator model, which man-
dates that contractors allow more sub-
contracting. On the commercial side,
distributed product teams are also
helping to reduce costs, boost produc-
tivity, and enhance process efficiency.
WHAT ANALYSTS
RECOMMEND
To manage distributed product teams,
companies need sophisticated supply
chain management technology to
coordinate the multilevel bid and
delivery process. Companies also need
ways to connect with outsourcing
partners to coordinate activities, track
progress, and ensure quality. Most
companies will need to revamp their
IT infrastructures to streamline the
flow of design and program informa-
tion across teams of external partners.
WHAT SAP OFFERS
SAP helps A&D manufacturers face
internal processes outward to incor-
porate suppliers and improve inter-
action among distributed teams. An
intuitive portal with a customizable
interface ensures usability while
leading-edge collaboration technology
and workflow processes help teams
work together efficiently.
AFTERMARKET MANAGEMENT STRATEGIES
INTEGRATE MANUFACTURING
AND MRO
With tremendous intellectual capital
invested in the assets they produce, A&D
manufacturers are moving into main-
tenance, repair, and overhaul (MRO)
and aftermarket services such as spare
parts supply. For defense contractors,
this move is in response to the DoD's
performance-based logistics mandates.
On the commercial side, this is an
attempt to develop new sources of
revenue in a tight marketplace.
WHAT ANALYSTS
RECOMMEND
To succeed in the aftermarket, A&D
manufacturers need to extend design
and production information for MRO
purposes. This requires improved infor-
mation flow from legacy applications
as well as tighter integration across
functional areas such as materials
management, teardown and overhaul,
work execution, and asset manage-
ment. Administrative and reporting
capabilities to support multinational
operations and integration to financial
software are also required.
WHAT SAP OFFERS
SAP provides a host of capabilities to
support aftermarket services. These
include aircraft maintenance planning
and execution, line maintenance with
an electronic logbook, overhaul plan-
ning and execution, and resource-
related billing. Configuration control
functionality also helps minimize
parts obsolescence while a component
maintenance cockpit helps monitor
all parts removed from an airplane.
ANALYSTS RECOMMEND THESE STRATEGIES FOR SEIZING
THE MRO AFTERMARKET
IMPROVE SERVICE LEVELS WITH CUSTOMER
RELATIONSHIP MANAGEMENT CAPABILITIES
The A&D aftermarket is a services
market. And with services typically
generating two to five times the rev-
enue of the original sale, forward-
thinking companies are seeking ways
to improve service levels. This requires
a focus on maintaining customer
relationships.
WHAT ANALYSTS
RECOMMEND
To assume a strong customer service
orientation, companies need to over-
haul their installation, repair, and main-
tenance activities to shift revenues
from product sales to services. This
entails far more than Web access to
technical catalogs and parts data.
Companies need sophisticated master
data management as well as forecast-
ing and logistics capabilities to manage
service parts planning and minimize
the problem of parts obsolescence
across multiple inventory locations
and suppliers.
WHAT SAP OFFERS
SAP provides robust customer rela-
tionship management capabilities
that integrate with back-office ERP
and inventory management functions.
Powerful business intelligence, sup-
ported by market-leading master
data management capabilities, helps
improve forecasting while comprehen-
sive parts-management capabilities
help ensure a positive customer
experience.
MOVE TOWARD A LIFE-CYCLE SUPPORT MODEL
A&D manufacturers are increasingly
required to consider support and
maintenance concerns in original
design plans ' especially under DoD
initiatives such as network-centric
warfare and performance-based logis-
tics. This requires long-term planning
that takes into account the costs asso-
ciated with an asset over its entire
life cycle.
WHAT ANALYSTS
RECOMMEND
To move toward a life-cycle support
model, A&D manufacturers require
analytical tools to optimize design
and parts-sourcing decisions based on
the finished product's lifetime costs.
Companies are also moving toward
"predictive maintenance" in which
operational data drives demand for
spare parts by predicting repair and
maintenance requirements. This
reduces asset downtime and lowers
inventory. To achieve these goals,
manufacturers need sophisticated
product development tools that can
integrate mechanical, electronic, and
software design content.
WHAT SAP OFFERS
SAP NetWeaver provides a flexible
platform that facilitates integration
with predictive tools such as Smart
Signal. Integrated line maintenance
capabilities, moreover, support parts
notifications that are triggered by
operational events.
ARE YOU READY?
STRATEGIES AT A GLANCE
SUPPLY CHAIN
MANAGEMENT
- Reduce spend by rationalizing
the supplier base ' to close the
loop between sourcing and procure-
ment and realize negotiated benefits
- Extend process efficiency from
corporate headquarters to shop
floor ' to boost productivity and
manage projects more efficiently
- Improve asset and inventory
management capabilities ' to
reduce stock levels and improve
spare parts management for the
aftermarket
PROGRAM MANAGEMENT
- Move from earned value report-
ing to earned value management '
to address problems in real time and
prevent costly program delays and
overruns
- Increase collaboration and infor-
mation visibility ' to improve
efficiency and speed time to market
- Spread risk through distributed
product teams ' to improve pro-
gram efficiency, ensure quality, and
distribute exposure through the use
of qualified alliance partners and
suppliers
AFTERMARKET
MANAGEMENT
- Integrate manufacturing and
MRO ' to leverage manufacturing
know-how for the service-support
aftermarket
- Improve service levels with CRM
capabilities ' to assure a stronger
customer service orientation and
develop the relationships that are
critical for success in a services
market
- Move toward a life-cycle support
model ' to incorporate support
considerations into the original
design and manage predictive main-
tenance requirements
CHANGE IS NEVER EASY
BUT TO STAND STILL IN TODAY'S MARKET IS TO FALL BEHIND
INDUSTRY-STANDARD PRACTICES
VERSUS INDUSTRY-LEADING PRACTICES
Trends show that many companies are moving away from traditional practices and adopting
forward thinking "leading practices" to support profitable growth in key areas.
THE ROAD TO PROGRESS
The business processes and information
systems throughout your company
were developed over decades, and many
of them are undoubtedly considered
very entrenched. Reengineering them
to industry-leading practices won't
happen overnight, and requires
a strong commitment at the highest
levels. This is especially true when it
comes to integrating processes across
departments and divisions.
The good news is that companies that
persevere can expect the following
rewards:
- Better insight into the overall
business
- Streamlining of processes
that have grown overly
complex and inefficient
- Significant reductions in risk
and exposure
- Increased flexibility to
respond to market changes
THE FUTURE LOOKS BRIGHT . . .
EMERGING TECHNOLOGY AND TRENDS
In the years ahead, companies in the
A&D manufacturing industry will
become increasingly integrated. This
will enable the coordination of supply
requirements with customers' MRO
needs as manufacturers move toward
life-cycle support models. It will also
facilitate predictive maintenance
models, as envisioned by DoD's
network-centric warfare initiative.
As the outsourcing trend continues,
companies will turn to portals to face
internal processes outward to trusted
suppliers, subcontractors, and cus-
tomers. This will facilitate distributed
product teams and help spread pro-
gram risk.
All of this requires a technical infra-
structure that supports master data
management and content consolida-
tion. This will be enabled as legacy sys-
tems are replaced or integrated with
open-standards technology platforms
such as SAP NetWeaver. Eventually,
services-oriented architectures will
emerge that are capable of decoupling
business processes from underlying
systems, allowing these processes to
run across multiple systems in a flexi-
ble manner. Such an architecture
will speed integration, enable business
change, and enhance a company's
ability to innovate.
EMERGING A&D MANUFACTURING MANAGEMENT TRENDS
INCLUDE:
PERFORMANCE-BASED
LOGISTICS
Defense contractors entering the MRO
aftermarket are moving away from
task-and-fee arrangements toward
performance-based agreements that
base payment on the availability of air-
craft. This is fueling the drive toward
optimized parts sourcing, collaborative
inventory replenishment, and life-
cycle support perspectives.
COLLABORATIVE CONTRACT
MANAGEMENT
As programs and product develop-
ment continues to require coopera-
tion between organizations, companies
are looking for ways to manage con-
tracts collaboratively. This requires
enhanced capabilities for exchanging
information, including financial and
project management information.
WHEN YOU CHOOSE THE RIGHT PARTNER
A COMPLETE FAMILY
OF A&D SOLUTIONS
SAP continually interviews A&D
industry thought leaders to identify
the biggest challenges and trends fac-
ing your company today. This knowl-
edge, combined with our experience
with customers worldwide, has led to
the most comprehensive portfolio of
solutions for the A&D industry.
For example, the robust SAP NetWeaver
platform easily integrates SAP and
non-SAP solutions for a lower total
cost of ownership. mySAP™ Business
Suite ' built on SAP NetWeaver ' offers
powerful, adaptive business solutions
with best-of-breed functionality,
industry-specific capabilities, and sup-
port for Web-based collaboration. And
the SAP xApps™ portfolio of packaged
composite applications delivers next-
generation business practices that
transform existing functions into new
cross-functional processes.
SAP also offers affordable, scalable
solutions developed expressly for small
and midsize A&D companies. And
we back all our solutions with ongoing
support and services to help you
achieve your business objectives and
maximize return on investment.
SAP MEANS ROI FOR A&D
For additional information on how SAP solutions can help your company operate
more efficiently and profitably, please visit www.sap.com/aero-defense
THE BEST RUN A&D BUSINESSES RUN SAP
SAP solutions are currently used by the leading manufacturing companies
in the aerospace and defense industry around the world, including:
- Aermacchi (Italy)
- Agusta-Westland Helicopters
(UK/Italy)
- Airbus (Europe)
- Airbus Aircabin (Germany)
- Alenia Aeronautica (Italy)
- Alenia Spazio (Italy)
- AMS (UK/Italy)
- Alvis Vehicles (UK)
- BAE Systems (UK)
- Bombardier Aerospace (Canada)
- BWXT Y-12 (U.S.)
- Dassault Aviation (France)
- Daher Lhotellier Montrichard
(France)
- Denel Aviation (South Africa)
- EADS (Europe)
- Eclipse Aviation (U.S.)
- Embraer (Brazil)
- Eurocopter (Germany/France)
- Fiat Avio (Italy)
- Goodrich Aerostructures (U.S.)
- Gruppe Rüstung (Switzerland)
- HDW Shipbuilding (Germany)
- Hellenic Aerospace (Greece)
- Honeywell (U.S.)
- ITT Night Vision (U.S.)
- Korean Aerospace Industries
(Korea)
- Kraus Maffei Wegmann
(Germany)
- L3 Communications (U.S.)
- Latecoere (France)
- Mauser-Werke Oberndorf
Waffensysteme (Germany)
- MBDA Missile Systems (Europe)
- MTU (Germany)
- National Steel & Shipbuilding
(U.S.)
- Oerlikon Contraves (Switzerland)
- Panavia (Europe)
- Pilatus (Switzerland)
- Pratt & Whitney America (U.S.)
- Pratt & Whitney Canada (Canada)
- Raytheon (U.S.)
- Rheinmetall (Germany)
- Rhode & Schwarz (Germany)
- Rolls-Royce (UK/U.S./Germany)
- Samsung Aerospace Industries
Ltd. (Korea)
- Sikorsky Aircraft (U.S.)
- Singapore Technologies
Aerospace (Singapore)
- Snecma (France)
- SKF Sarma (France)
- Steyr Daimler Puch (Austria)
- Textron Systems (U.S.)
- Thales (France)
- Volvo Aero (Sweden)