How Digital Shifts Shape Defense & Aerospace? Get Insights
The Aerospace and Defense (A&D) sectors are poised for transformative advancements, making it crucial to grasp the upcoming landscape. Understanding the next horizon is key to strategizing defense initiatives effectively. This involves collaborating with defense and aerospace companies, leveraging their expertise and innovative solutions to bolster national security and stay ahead in the evolving global landscape.
Transforming A&D Operations for Unprecedented Value
While A&D firms have a history of technological innovation, including digital applications within products, a new frontier lies in integrating digital across all operations. This transformation promises improved speed, efficiency, and product quality, leveraging digital tools and analytics in design, production, and maintenance.
Research by AIA suggests A&D's digital transformation could unlock significant annual EBITDA gains reaching approximately $20 billion, stemming from a collaborative effort between Original Equipment Manufacturers (OEMs) and suppliers, aiming to boost revenue and optimize costs across various stages, including design, supply chain, production, and post-sale services. It ensures improved efficiency and innovative customer offerings. While some defense and aerospace companies lead the way, challenges like legacy processes and fragmented systems remain. Achieving full digital potential requires a comprehensive overhaul, encompassing talent, strategy, technology, and data, to enable A&D to deliver improved value across the entire value chain.
Challenges & Opportunities in A&D's Digital Evolution
A&D firms have demonstrated the most significant progress in digitizing back-office operations and research & development. This R&D advancement likely reflects the industry's technical expertise and emphasis on digital engineering, reinforced by Department of Defense (DoD) initiatives. However, even within the sector, there's an acknowledgment of the need for improved digital implementation across the entire value chain, especially in the manufacturing and supply chain, where most value creation potential lies. Defense and aerospace companies need a targeted plan to get digital's full benefits.
Advancing digital maturity in A&D is hindered by unique sector challenges, including stringent customer requirements, expensive development, lengthy product life cycles, traditional procurement structures, and stringent safety standards. Despite these hurdles, some A&D leaders are demonstrating how to effectively overcome these obstacles.
Digital Transformation for Defense and Aerospace Companies
Despite A&D's advanced digital prowess, some designs remain paper-based, hindering productivity and quality. To achieve significant improvements, the industry must prioritize analytics-driven productivity and digital twins, although adoption remains limited. Digitizing engineering, a priority for most defense and aerospace companies, can address these challenges. However, retroactive digitization is costly, favoring digital design from inception. Furthermore, the lack of standardized engineering practices necessitates industry-wide adoption of common standards and data sharing. Additionally, cross-functional collaboration with reputable defense and aerospace companies is crucial, ensuring engineers understand downstream user needs for optimized design and functionality.
Digital Disconnect in Defense and Aerospace Companies' Supply Chains
Despite being the primary cost driver for most, the supply chain lags in digital adoption. Only a small fraction of defense and aerospace companies utilize digital tools extensively for demand planning, procurement, and component tracking. The main obstacle cited is fragmented data across various aspects like spending, supplier performance, and inventory, making informed decision-making difficult. This issue stems partly from the industry's history of growth through acquisitions, further amplified when data sharing is required between OEMs and suppliers for collaboration.
Leading Actions of Defense and Aerospace Companies
Some A&D companies are pioneering supply chain digitization. One OEM utilizes product sensors and analytics for real-time inventory forecasting, optimizing costs, and improving customer satisfaction through enhanced asset uptime. A few Tier-1 suppliers are finding blockchains for improved part traceability. Additionally, several companies are implementing digital procurement strategies to identify cost-saving opportunities and automate sourcing. These examples demonstrate innovative approaches within the industry, while a notable instance of transformative supply chain data utilization originates from a different sector.
Lacking Digital Transformation Opportunities in Manufacturing
Digital maturity in A&D manufacturing also falls behind. A small percentage of surveyed companies leverage digital tools for maintenance, automation, and performance optimization. Industry 4.0 offers a transformative roadmap with the help of AR, IoT, VR robotics, and sensors, but the A&D sector is notably absent from the leading examples. Nonetheless, some defense and aerospace companies have made significant strides. One OEM optimizes job scheduling by combining part and talent data, while a few Tier-1 suppliers utilize AI-driven predictive maintenance for improved equipment uptime. Others have digitized workflows and performance management, resulting in developed outcomes and cost reduction. These instances highlight successful digital integration within A&D manufacturing.
Untapped Potential of Digital Transformation in Services
Services are the least digitally mature area within the A&D value stream, with few companies utilizing digital tools to create tailored customer offerings. However, the potential for digital transformation in services is significant, including e-commerce, workflow integration, and new data-driven services. Some companies are leading the way by leveraging data and analytics to develop customer value. Engine OEMs are also pioneers in applying digital tools for this purpose. The value derived from effective services is immense, with proper aircraft sustainment resulting in a substantial multiple of the initial sale value. While specific opportunities vary, defense and aerospace companies can utilize digital tools to improve operational performance, automate service delivery, understand customer lifetime value, simplify support, and improve transparency through blockchain implementation.
Simplifying Support Functions for Improved Efficiency
Optimizing support functions through digital tools is a universal aim, yet most A&D companies haven't fully realized this potential. Few companies utilize digital analytics for talent management or financial decision-making. However, some are making headway. One company leverages advanced analytics to identify employees at risk of leaving. Workflow automation is another focus, with one OEM automating significant portions of its bid and proposal process, building on earlier digitization efforts in engineering and manufacturing. These examples showcase the successful application of digital tools to simplify & improve support functions within the A&D industry.
Debunking Myths- Redefining Digital Leadership in A&D
The assumption that digital leadership necessitates mastery of all aspects of digital maturity is inaccurate. Research indicates only 13 key practices strongly correlate with higher company returns. Surprisingly, these practices are not technology-focused; IT infrastructure is crucial but needs to be improved for digital leadership. Instead, digital leaders excel in business and organizational capabilities, such as strategy, talent development, and change management. The belief that digital leadership is exclusive to tech giants is also untrue. Data reveals digital leaders span diverse sectors, sizes, and ages. This offers encouragement to A&D firms, but it requires a shift towards prioritizing the key practices most associated with digital leadership.
Implementation Challenges in A&D's Digital Transformation
Although most reputable defense and aerospace companies have a digital vision, translating it into actionable business cases and measurable outcomes takes a lot of work. Only a few companies effectively quantify the value of digital initiatives, with difficulty arising from the evolving nature of digital capabilities. While most have designated leadership for digital transformation, understanding broader talent needs remains a hurdle, intensifying competition for skilled professionals. Agile methodologies are crucial for digital maturity, but adapting to rapid development cycles in a traditionally slow-paced industry poses difficulties. Despite familiarity with data, many lack a clear strategy for its use, and data accessibility remains an issue. Scaling digital adoption is often hindered by overambitious goals, narrow focus, or lack of front-line involvement. Successful implementation requires effective communication and tangible demonstrations of improvement.
Overcome the Defense Challenges with Choctaw Global
Trust Choctaw Global as one of the leading defense and aerospace companies in the digital era. Join us to overcome the challenges and improve operational efficiency and innovation. Reach out now to see how our expertise can help develop in the defense sector. Contact us as soon as possible for your defense needs.
