Value chain collaboration

Citation

Tabibzadeh, R. and Wireman, D. (2003), "Value chain collaboration", Aircraft Engineering and Aerospace Technology, Vol. 75 No. 6. https://doi.org/10.1108/aeat.2003.12775faa.001

Value chain collaboration

Value chain collaboration

Ramin Tabibzadeh and David Wireman are based at Deloitte Consulting

Keywords: Aerospace industry, Value chain, Collaboration, Defence

Aerospace and defence companies now face considerable pressure to improve collaboration throughout the value chain and across the whole product lifecycle. The commercial aerospace market is in steep decline, and dominated by a handful of companies. There is now severe competition to win fewer new orders and an increased need to get new products to market quickly. Defence companies face stiffer competition for fewer programmes, and those programmes are often conducted on behalf of multiple sovereign governments – each with offset requirements and ever more demanding on cost and schedule compliance. End customers in both markets want to buy availability and service rather than the end product alone, and this is an increasing element of an aerospace company's profits.

Significant productivity improvements have been realised by aerospace and defence companies over the past decade. However, process and technology improvement efforts to date, while often quite successful, have largely been focused along narrow, functional silos. Furthermore, despite a decade of ERP implementations, data are still in varying conditions of accuracy and remain dispersed across hundreds of legacy systems. Little success has been achieved in integration and co-ordination processes and information between business units, functions or programs. Aerospace companies are generally ill-prepared to efficiently perform within current complex value chains, where individual companies often simultaneously act as partner, multi-tier supplier, customer, and competitor with one another.

In the future, aerospace and defence companies will be increasingly forced to operate in cross-company project teams that require tight collaboration across the supplier, customer, and partner continuum. Even greater significance will be placed on deploying processes and tools for collecting, analysing, managing, and reporting cross-company information. Current efforts to integrate business processes and business systems with ERP and other company applications will not be enough to support information and integration requirements.

Successfully addressing this “white space” across functions, between processes, and with other companies within the value chain (that is, collaboration across the entire value chain) is the key to achieve operational excellence.

Value chain collaboration (VCC) focuses on the information, policies, and tools that link functions, processes and stakeholders and it has seven core essential capabilities. Taken collectively, these capabilities define the entire spectrum of collaboration required within the aerospace industry. However, applicability of these capabilities to defence contractors will vary depending on a company's position within a value chain and phases of programme lifecycle being worked. OEMs and large Tier 1 participants, supporting programmes ranging from conceptual development through after market support, are likely to find that all of these capabilities are applicable across one or all of the programmes under work. Lower tier participants or companies supporting programmes in only one or a few lifecycle phases, will find that focusing on only a few appropriate collaboration capabilities will satisfy their needs. These capabilities are given below.

1. 1.

   Trading partner development. Partner, supplier and sister company relationships strategically managed across programmes.

   The most frequently overlooked collaborative capability is Trading Partner Development. Because VCC requires participation and investment by trading partners, their early and active involvement is required for successful deployment. Achieving this participation requires action along two fronts. Within a company pursuing collaboration, cultural and structural challenges must be taken ahead on. Historical norms regarding the treatment or mistreatment, of trading partners as suppliers must be put aside for new perspectives which regard all participants within a value chain as partners to some degree, worthy of trust and access to accurate and up-to-date information.

   Existing policies and practices (both officially sanctioned and unofficially accepted) which hold trading partners at arms length, drive partners actions based on inaccurate schedules, or create unnecessary difficulties and costs for partners must be re-examined. Contracts should be evaluated, and renegotiated if necessary, to permit the degree of integration and flexibility necessary to allow continual adjustments to “promise dates” as “need dates” move based on production schedules.

   Simultaneous to these inwardly focused activities, companies pursuing collaboration must develop and deploy a comprehensive strategy for managing trading partners. This requires stratification of the trading partner base and articulation of distinct strategies for dealing with each stratum.

   Issues such as the degree, types and timing of integration to be pursued, new measures to be put in place, expectations regarding integration with lower tiers, and technology and security considerations must be addressed. A plan for enrolling trading partners must be developed, defining the value they will receive as a result of agreeing to participate in collaboration efforts. A “Trading Partner Council” must be established to provide a forum for receiving inputs from trading partners regarding collaboration-related issues. A trading partner certification process should be developed to provide insight into the strengths and deficiencies existing within the trading partner base. A trading partner development and investment program must be initiated to ensure the presence of current and future required capabilities within the trading partner base.

   Trading partner development activities are necessary to support collaboration efforts regardless of a company's position within the value chain or the phases of a programme's lifecycle they support. These activities serve as the foundation for deployment of all other collaboration efforts by establishing the working relationships necessary for the creation of a tightly integrated value chain, with all of its associated benefits.

2. 2.

   Integrated business capture. Integrated new business pursuit activities co-ordinated across value chain functions, sites, and multiple trading partner tiers.

   Integrated business capture capabilities co-ordinate customer contacts across the value chain, enable integrated cross-company campaign teams and drive to a better understanding of the geopolitical impacts provided by an entire value chain. These capabilities facilitate multi-functional and multi-company inputs to proposal preparations, improve the accuracy of proposal cost and schedule estimates, and improve customer relationship management. Additionally, these capabilities improve the timeliness and completeness of customer requirements capture, flow down and improve the focus and effectiveness of lobbying efforts.

   Integrated business capture capabilities are applicable to OEMs and large tier 1 participants involved in complex proposal efforts that require inputs from multiple internal functions and external entities.

3. 3.

   Programme management integration. Common processes and tools to gather and disseminate requirements, schedules, and metrics across the value chain. Programme management integration capabilities allow program or product line management to aggregate rapidly, share securely, and use consistently accurate cross-company/cross-tier business and technical performance metrics. Business metrics include earned value, integrated schedules, cost, and risk management information. Technical performance metrics includes product performance information such as weight, range, power, and efficiency.

   Additionally, programme management integration capabilities improve requirements definition and flow down of information across Integrated Product Teams (IPTs) and tiers of suppliers. A secure, role-based program portal provides IPTs and suppliers access to the relevant program or product information. The capabilities also include setting up the necessary governance structure to facilitate cross-company program management collaboration.

   Programme management integration capabilities are applicable to customers and OEMs as well as tier 1 and tier 2 system and sub-system integrators and components manufacturers.

4. 4.

   Collaborative product development. Cross-company and cross-tier IPTs using collaborative processes and tools to access, find, view, use, and manage information throughout product development.

   Collaborative product development capabilities provide product development teams and their customers and trading partners with the ability to conduct near real-time exchange of design and product data revisions. These capabilities streamline and integrate the configuration, change, trade study, document, and BOM management processes resulting in better sequencing of work, quicker design iterations, and improved bill of materials accuracy. These capabilities also enhance design for manufacturability and supportability as downstream functions are involved early in the product development process. Additionally, multi-tier design library capabilities reduce design cycle time and improve part re-use.

   Collaborative product development capabilities are applicable to all customers, system integrators, and suppliers who develop product or participate in the product development process.

5. 5.

   Integrated build schedule and inventory planning. Integrated, collaborative, scheduling and inventory control processes and tools to drive closely-coupled build schedule and inventory requirements across multiple tiers within a value chain. Integrated build schedule and inventory planning capabilities provide customers, OEMs and trading partners with access to near real-time, multi-tier inventory and build schedule information. OEMs and trading partners provide inputs into synchronised build schedules to better manage inventory levels, to identify and assess impacts of schedule changes across tiers and to collaboratively resolve scheduling conflicts. Improved demand management by the trading partners results in reductions in obsolete inventory, excess production, overtime and expediting activities. These benefits are matched by the OEM in reductions in stock outs/shortages, excess inventory, out of sequence work, overtime and expediting activities.

   Integrated build schedule and inventory planning capabilities are applicable across entire value chains and are best led by OEMs or large tier 1 participants involved in programs in or nearly full rate production.

6. 6.

   Transaction collaboration. Automation, streamlining and exception resolution of high-volume transactions between trading partners. Transaction collaboration capabilities improve buyer productivity through electronic generation, approval, and distribution of quotations and purchase orders, notifying trading partners and providing them access to the latest engineering changes. Transaction collaboration capabilities also enhance material handling efficiency by making improvements such as increasing the accuracy in scheduling receipt inspections. Through process redesign and implementation of technologies such as workflow, these capabilities reduce the time spent identifying, resolving and reporting exceptions.

   Additionally integration of engineering, material management, quality, and manufacturing systems provides added opportunities. These opportunities include: the reduction of shortages, “griefs”, out-of-station work, and transaction errors; the improved trading partner access to early information; and the increase visibility into trading partner progress and status.

   In summary, these capabilities can significantly reduce the administrative costs of transactions and minimise transaction delays. Transaction collaboration capabilities apply to all OEMs and tier 1, tier 2, and tier 3 suppliers.

7. 7.

   Collaborative support planning. Multi-tier integration and collaboration in planning, developing, and delivering support services to customers.

   Collaborative support planning capabilities link preventive maintenance schedules, on-line equipment health monitoring systems, and defect analysis procedures with order management, build scheduling and inventory management systems. Forecasting, planning and inventory data are shared across value chain tiers. These processes also provide a closed loop to design, triggering modifications to overcome design flaws. The disruption to production and programme schedules from short-notice spares demands is minimised, allowing a reduction in contingent stock and expediting activities.

   Collaborative support planning capabilities are appropriate for all value chain participants providing spares support to fielded systems.

   IT is a fundamental enabler of VCC capabilities. Historically data have been centred on managing and recording specific transactions and events. In the future, companies will need to get smarter, applying tools which transform data into information which genuinely supports decision-making across the complete life-cycle. Data are often in varying degrees of accuracy, dispersed across hundreds of legacy systems or in some instances not in any system at all. Common and open standards are required to allow data exchange across different organisations and entities. The architecture must be flexible, scalable and modular, supporting a variety of mainframe, client server, or web environments. Effective system integration is essential to achieve near real-time information and management visibility across the whole value chain.

   Both commercial and defence customers are demanding ever greater levels of service. Aerospace companies cannot afford to standstill.

   Manufacturers no longer rely on equipment sales alone, but are extending their business portfolio to include after market services and support. Early adopters of VCC will surely be best positioned to succeed in a fiercely competitive and demanding Aerospace market.