An unprecedented amount of innovation in the global aerospace sector – some of which is challenging assumptions and creating market opportunities where they didn't previously exist - is forcing customers and suppliers to rethink their approach to cost management.
The main drivers for this change are the increased commercialisation of the sector, which is opening up opportunities for innovative newcomers, combined with the pressure on global air forces and others in the defence sector to reduce spending. However, in order to take advantage of some of the innovations currently under development, organisations should be prepared to get involved at the earliest possible stage in order to deliver maximum value. One area of innovation that aptly demonstrates the opportunities that might exist for global air forces in the future is training systems for fighter pilots. The world's air forces have about 6,000 basic and advanced trainer jets in use currently and many of them will require renewal in the next 5-10 years. These existing trainer jets, which are supplied by the likes of BAE Systems, Pilatus and others, are used to train fighter pilots around the world and a number of different models are required in order to meet the needs of individual pilots depending on their level of competence. Such essential training equipment is costly of course but the initial outlay is in fact only a part of the picture. The total cost of ownership of a dedicated trainer jet can be much greater when maintenance, repair and other on-going costs are factored in over a thirty or forty-year time period. While little has changed for decades, it now seems that such training jets could soon become obsolete. While unmanned aerial vehicles (UAV) or drones are strongly tipped to be the technology of choice when flying aircraft in combat zones in the future, some significant refinement is required before they can be put to use in critical military manoeuvres. Recognising the need to provide a lower-cost solution in the meantime, a research-led partnership has recently launched the Dart jet - an end-to-end jet training system which is modular in design so it can be produced in situ from pre-assembled units. The total cost of ownership of a Dart jet is likely to be significantly lower than that of traditional alternatives. This is because instead of procuring replacement parts and running endless maintenance checks, replacement units can be ordered and fitted as and when needed. In addition, the commonality of parts used in the Dart jet means that it can be readily adapted according to the individual pilot's ability, so only a single, core trainer jet is needed. As with all disruptive technologies, of course, take up of the Dart jet will depend on corporate vision, agility and strong cost leadership. From a supply chain perspective, any decision to do away with existing trainer jets in favour of the new Dart jet would inevitably have major repercussions. Instead of having separate supply chains to build and through life support the aircraft, the modular nature of the Dart jet, which can be constructed to meet specific criteria using the same common parts, means that a significantly rationalised supplier model could be adopted. This simplification of the supply chain would bring considerable operational efficiencies, strengthen relationships and shorten lead times. In the case of the Dart research project, it is significant that the RAF has been involved from the outset, working alongside leading Cranford University-qualified aircraft designer, Tristan Crawford. It is highly likely that the organisation's real-world insights about the costs and operational issues associated with traditional trainer jets over many decades will have informed some of the project's research and development activity. It is also interesting in this particular case that we are seeing technologies originating in the commercial sector being developed for a specific military application. Such collaborations are an example of cost leadership in action. Instead of focusing on delivering relatively small-scale cost savings by increasing volumes in order to drive efficiencies, or by harder negotiations with suppliers, they are looking beyond this. By identifying game-changing technologies and getting involved in research projects at design stage, it is possible for organisations to leverage far more significant cost savings of say 50% or more. Of course, there are risks attached to taking this approach – for example, some research projects could come to nothing – but the potential gains are massive and ignoring these could ultimately leave organisations at a competitive disadvantage. In the space sector, recent moves to open up the market globally to private sector players have led to a wave of innovation. One key example of this is the development of reusable rocket launchers, which as it matures could represent another significant area of supply chain disruption. A number of players are currently vying for the dominant position in this marketplace including Elon Musk's Space X, Jeff Bezos' Blue Origin and Airbus. The successful landing of Blue Origin's New Shepard at the end of 2015 was quickly followed by Space X's successful attempt to land its Falcon 9 launcher on 22 December – a sign that the innovation race is gathering pace. While the supply chains used to manufacture rocket launchers are already established, the pace of change in the sector means that OEMs may need to outsource more supplies in the future as part of their plans to increase production. In particular, aftermarket services are likely to become more important in the future. Taking a cost leadership approach, there is a potential opportunity for technology companies in the sector, and some other hi-tech businesses, to earn a first mover advantage – they just need to back the right OEM of course. Before deciding to acquire some disruptive technology, organisations need to make sure they understand the total cost of ownership of any existing system in order to evaluate how much value the new technology will deliver accurately. In the case of trainer jets, the cost of the technology depends to some extent on how much it is used but other factors such as the cost of ongoing maintenance, and any downtime due to long lead times, should also be taken into account. Only then, can those responsible for cost calculate its intrinsic value and the savings potential of the new technology. Looking further ahead, industry should expect many more disruptive innovations to come to market in the future. With this in mind, it is worth investing now to ensure organisations have strong cost leadership principles in place to make the most of any opportunities. Michael Minall is director and aerospace and defence sector specialist at Vendigital, a firm of procurement and supply chain specialists. https://vendigital.com/
