WP Value Chains Final 050108

8/3/2019 WP Value Chains Final 050108

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Itatd Va CaiI Aac ad DMaagg rlatshps ad cmplxty up ad dw th alu cha


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A.T. Kay | InTegrATeD VAlue ChAIns In AerospACe AnD Deense 1

Th arspac ad ds dustry s jyg ts strgst

mart r, accrdg t th 2007 AviATion Week A&D Prgrams

Crc. Dmad by th wrlds arls ctus t cras,

grmt ds spdg s at ts hghst dcads, prduct

s at rcrd lls, th rll-ut w cmmrcal ad ds arcrat

ctus uabatd ad mr at tchlgy s rqurd at a

astr-tha-r pac. G ths dyamcs, th dustry s cmplld

t m tward mr tgratd alu chasbuldg cllabrat

partrshps btw mauacturrs ad supplrs t captur sgf-

cat pprtuts cmptt adatag. Th challg, hwr,

ctus t b maagg rlatshps ad cmplxty xcut.

T a tt makt v cd t

tat tday aac ad d idty (t

A&D cytm) i dmtati t bttm-

i va cabati, aid ivati ad

d t makta tia amak va

cai itati.1 Cabati ad tit

itati am maact ad i,

wit a ytm itat at t ad, i aid t

cat a m twkd, cativ ad -

dctiv tctad div cc i t

makt. A t aizati bcm ica-

iy twkd, bt vitay ad bay,

mta cc wi i ti abiity t

ai a cmtitiv advata m ti c-

tiv va cai.

Yt bi twkd it v a im

y cai d t ma bi integratedit

a va cai. T i a damta dic

btw a twkd y cai ad a it-

atd va cai. I a itatd va cai,

t cdiati xta itac i jt a

imtat a t cdiati ita it-

ac, ad tcy ivati i a ad

ibiity am a at cmai.

A.T. Kay ct vy t A&D

idty t tat va cai itati

i it ivay acctd widy ac-

ticd. pati i t A&D va cai

a t viwd a ctim m ta-

actia i ctm t y itatd

tatic at (see fgure1 on page 2). pim

itat, t att a i va cai

itati, av at i mt t t

va cai. Ti- ctact av at

i va t t va cai. Ti-tw ad

-t ctact, t tat d t av a

1 Value chains are deined as all the interactions that create and add value in the process rom innovation, new product development and raw material supply toinished product and liecycle support.


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InTegrATeD VAlue ChAIns In AerospACe AnD Deense | A.T. Kay2

t at i mt t t va cai, td t

v ti immdiat dwtam ti y. T

am ac w a amay. sm fm

ti bi a dmiaty a iddt

aticiat i a twkd c. Icaiy, a

cmai mv tam it i ti, ti

cti tadiy aw t c fi

d m t xt w ti at ta d-

tadi ti ad dw t va cai.

sc a amay i a tt tat t a

idty va cai abiity t mt it ct, -

mac ad cd bjctiv. T cc

ay aizati witi t idty dd

citicay t mac ad caabiiti

tmay t, i mt ca. A away,

t wakt ik ca dty t cai.

Mart-Ctrc iat

Cmai a aki ti ctm wat ty

wat ad d. T tak i t dv ad div

t dct t makt ad ww t ctm

ad dfity b t dct a bcm

bt. Bt t ctm-div qt i-

vati xtd a byd wat wa c a dcid-

i ditiat, a idivida bi c

cmtcy tcy. T d cm-

Figure 1

Assessing value chain partnerships in aerospace and defense*

Transactional supplieror customer Fully integratedstrategic partner

100806040200

*Companies were evaluated on a scale of 0 to 100 to calculate the degree of integration in the value chain.

Source: A.T. Kearney

40 60Tier three

80Tier one Prime

integratorTier two

Transactional supplier or customer

Pursues mainly buy-sell relationships,with little or no collaboration

Focuses on costs and quality

Does not have formal contracts withpartners

Maintains hierarchical relationshipsalong the value chain

Fully integrated strategic partner

Collaborates with partners and seeksstrategic alignment

Aligns organization to a value chainapproach

Values flexibility and offers incentivesto promote it

Develops relationships along thevalue chain


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xity tday dct ad ytm ma

tat i fm a t tcica, facia

ad ik-bai caabiity t dv a w ai-

i jt ft, xam, it w. T ty

t d witt tami ac t va cai

wd vy ctai t dt, badt ad

d ivati.

Tday A&D ctm, t d ,

dmad:

Moreinnovation

Greaterexibilitytoincorporateemergingtech-

i v t ytm i

Fastertimetomarket

Managedriskandcost-effectiveoutcomes

Longer-termproductsupportandservice

Wit ti i mid, aizati a mvi

ac t itatd va cai i a t t

mt ti ctm d m ivativ

dct. pyica cati i bcmi ica-

iy imtat a bi k tatic

ati wit ba fm i bt--

bd tcy.

T im a dfity am t it-

ati ad. Ty av mty mvd away

m taactia atii t am m

a va cai itat . Ty a am

t mt iticatd atii maa

i t , taki it acct a baac

tad am at.

hwv, may tam i ti k

at t va cai a a i dict i-

ctm atii, viwi ac taacti

a a aat itac by ad . T

taactia bi, a vy idtif it,

df a y cai imy i tm by ad

taacti at t cmmdity v. raiz

tat at tam aticiat may td

twad t cmmdity d t va cai,

ty ca b cty bttck. Aca iabiity t

y 3/16-ic titaim at, t

mat ad at-cty at Bi w

787 Dami, wa at a cacadi i

dcti back. o : I a iti-

catd, ba, vita y cai, t ack vii-

biity, itati ad iticati a tam

ca v a tbm a bm wit a i-

tc, advacd dwtam aticiat.

A ctm qimt cat t

t dit ti t y cai, w biv

taid bi wt wi b ad by

mvi m a taacti-bad i c-

tm t a tatic ati, ciay at t

w ti t va cai.

Cmplxty is th issu

staticay div ati a t witt

cmxity. uay, a a mb atici-

at a ivvd i a itatd va cai,

ai m tatic at t taactia

cmmdity i. ratii am t

aticiat a mtiactd: o aizati

mit b byi m at cmay, i

t it, i wit it, cmti aait it, ad

ad i a jit dct vic ati-

ia at t am tim. T wd cti-

ti, cativ cmtiti, m t

cmx atii. A vy dt

td, ev at ti t y cai, w

a cmmittd t bi a itat, bt w

mt a k maacti kw-w.

Jt dtadi t wid ctm

mtim ctadicty atii at a

enterprise level canbecomean issue.Managing

t may attdat itddci ad ik

bcm m difct, t. rik a xacbatd

a cmai ty t immt a y

cai cct c a dci ivti ad

tity ycizi d-t-divy tim.

Viibiity am t aticiat ad ac

t va cai bcm icaiy cai

a ytm itac w m cmx. Wi

im itat ca im ti ytm t

m d, ty cat aiticay d a

y cai aticiat.


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o t miitay id, cmxity i cm-

dd d t t Itatia Tafc i Am

rati (ITAr) ad t ati tat

im ctait i iibiity ad

imati tat ca b xcad ac y

cai aticiat. T ticti a td

t imit t ad cabativ dct

dvmt ty tat a bcm v i

t idti.

is th itgratd valu Cha Ursal?

T day t vticay itatd bmt

a v. Bt av cmai witi t A&D

cytm ccy acivd a tima, it-

atd va cai caactizd by y cti-

i ati? T aw i yad .

W ay y bca m cmai a

cd t timat ctm ad t

va cai a t t wic ty

t cmt c ad ti iq i it.

oati ti iciv ctiv, ty ca

aticiat caby i it b it t t

themand adoptnew, fresh and exible strat-

i. sc aizati mbac ti ad

iti i t va cai ad it t ti

advata a a cmtitiv ditiat.

W ay bca m cmai

t may, w tcti t wk t

d taactia ytm wi maitaii a

amt myic c. uab t ay a-

t ta ti adi dck, ty jt dt

aciat t ttiay diat bwi

ct ad dw t va cai ,

xam, a at aiva m ti i

a at divy t ti ctm (see fgure

2). sc aizati a t cmmittd t

t va cai cct, by dcii dat.

ov t tm, ti mac ack

t wi div tm m t cai.

A imtat cmm dimi xit

witi bt aw. A ta cmmdity

at at d t va cai a cmx

tcica bm at t t xtm ca av

t am ttiay ttiyi ct dc-

Figure 2

The supplier bullwhip effect

Supply fluctuations are magnified as they progress down the supply chain. A little snap of the curveat the supplier end ripples down toward the customer in successively higher peaks and wider troughs.

Source: A.T. Kearney

Tier-threesupplier

(raw materialsor piece part

manufacturer)

Tier-twosupplier

(componentmanufacturer)

Tier-onesupplier

(sub-systemintegrator)

Primeintegrator

Customer

Tier-threesupplier

(raw materialsor piece part

manufacturer)

Tier-twosupplier

(componentmanufacturer)

Tier-onesupplier

(sub-systemintegrator)

Primeintegrator

Customer


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ti ad divy t t ctm. Bt-actic

cmai dv ti cmmat wit

t at ad v t va cai aticiat

atii. xam, ty may adt it-

mdiay tati t da wit ib cmmd-

ity-v i at d wi adti t

ati maamt aac t mt

cmx, xiv ad tim-cmi i

at t t d (see sidebar: Best Practices in

Integrated Value Chains on page 7).

xam, Bi i maai c a

ctm-ai itati w, wit it a-

t ta at t cmmdity v ad it

wi-bx di at t mt iticatd v

t Dami itatd va cai.

paticiat cmmittd t tday ty

itatd va cai a at t a mb

itatd act. It ti t va

cai itati; it at t b a ctiv

ytm itat attd t d c a:

Bringing new technologies rapidly to bear in

cmx ytm

Managingand controllingcosts,scheduleand

mac

Focusingoncorecompetencies

Moving beyond the traditional position in a

ytm icyc

Incorporating(orat least considering)foreign

b-ambi ad cmt t a acc

t i makt

Puttg Mr valu Yur valu Cha

A aizati tat civ it a

y taactia i i a awkwad i-

ti w bi a a ca b

t at wad. I t cmx A&D c-

ytm, bi wt qi aii t

aizati t a va cai cct ad bid-

i atii ad dw t va cai.

Wit ti i mid, t wi a v

aac tat A&D cmai ca tak t

add va t t va cai.

itgrat prduct dsg ad dlpmt

wth supply cha ucts. raiz t da-

mta dic btw immat ad mat

tci. T m mat t tcy,

t cmxity ad t w ca i

cifcatiwit a ccmitat ik b-

cc. A am cmmittd t iti

t bai immat tcy (it wkd

i t ab, it wi wk t dcti i)

wi b bjct t ctia ca. uay, t

ctm wi cti t amt, add, mdiy

ad twi k t di tat mvi,

wic qi t vita y cai t b c-

tinuallyexible.Andmore often than not, the

t dvmt cyc, t m iky t

tcy wi b bt by t tim it ady

t t makt.

W wkd wit a nt Amica i-

tc qimt maact avi bm

wit -tim divi t it ctm, w

d cad qicky. Wit aitac, t

fm dvd a itatd va cai bad

tw-ti dct di citiai cmm-

aity, w ct ad w cmmaity, i

ct. W advid t fm t va it ca,

m iv i citica cmt

toincreaseitsexibilityandtomaintainlonger

ad-tim atii i dict-

ab, m cty cmt. A a t, -

tim divy icad t 90- ct witi

ix mt, ad d ad tim dd m

ix t it wk t tw t t wk. T

vaci ma: Imv y va cai

di. I it y taty t cmtitiv

vimt a cad ad y va cai

di at, t it tim a di. Ti

c ac t fm abiity t idtiy ad

tabi it ditictiv y cai a

im itat, b-ytm itat, iia

designmanufacturer(ODM)ortier-one,-twoor

-t ctact at t dct vic va

cai ta.


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impr supply cha cmptcy. ea

ii-avvy w dtad -

i tcy ad ma ad w t ic

mt itat it a iy ctii y

cai. simifd taacti ci i -

tia t a itatd va cai. I t cai

cti, xam, a-bad, idivida-

ava ytm ca cm vaab maa-

mt tim ad ca t i cty bttck.

o cit dcd it ca d (po)

ci tim m 30 day t ta day

by cvti t ctic cata. T cata

ctai qty dd i m avd

i at vifd ic, ad, i may ca, t

atmatd ava c i ikd t bdti

t. ui t cata t fm by t

c tatic i itad maai ac

taacti. siifcaty, m fm a dci

ti maa t by iki ti a cata

wit ti by-id cata. W a a d i

acd, a d t t cdi i i

tid atmaticay i t -ad y a

acd dtmid v. ectic cata,

ikd IT caabiiti ad taacti t

vid taiab bft: o cit td

tat 95 ct it ca w bi d

cticay ad po ci tim dd

t ta a day m amt a mt. Ctm

atiacti c amt dbd.

icras supply cha sblty. A a-

mt wit a tatic at ca aciitat i-

mati ai, ab tcy ad ica

cmmicati. I ctat, a amt wit

a taactia i ca qi itt m

ta fcit taacti xcti ad

a y iabiity. static ati,

t, qi it miti ad ma-

ai a aticiat. o iia qimt

manufacturer (OEM) that outsourced signi-

cat mt t va cai t tid-aty

i ad iitiay tctd a it a-

mt i a i tyica ci ati-

i, bai it vic v amt (slA)

a t ma t i mac.

Ti iz ft a aac d t b-timi-

zati t va y cai. By tct-

i amt t mak tm aiat t t

i , it imvd aimt am t

i ad acd t y cai -

mac. o-tim divy icad m 70 -

ct t m ta 95 ct. Witi t slA,

ac bi mt w a idtiy t at-

i va cai vac ad atia

ici, icdi itcta ty ai

ad jct maamt.

establsh sld grac structurs. T

bt vac tct vid ca i-

biiti, acctabiity ad itatd mac

mtic, wi cizi ty cat b tiy

dictatd by t im. Cctivy, t tct

mt div ytm ct, cd adc ad

mac, ad cat idivida ad cctiv

acctabiity d-dct t. Ty mt

a ciz tat t d cmmitmt ad

wi may vay widy am aticiat.

xam, t $250 bii, i-ati

dvmt t Jit stik it (Js)

F-35, involving Lockheed Martin, Northrop

Grumman,BAE(SYSTEMS)andscoresofother

ba i, i mac mtic

tat ca m qaitativ t qatitativ v

t i t jct. Did t cv va

maj div va ytm avaiabiity

mii caab at, aicat avaiabiity ad

mii iabiityt mtic a tid t a

dcad- i cifc mit a

t Js dvmt ad dcti icyc.

T a i a ytm tat iitiay vid a

i qaitativ vaati ac i

a t aticiat i t am. A t a

mat, t ytm witc t a qatitativ

vaati ac i mac.

Dvi mtic tat ac at-

ma it ccad idtiy t ack

6


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I a cmx vimt, viva

t dd mbaci t ,

ibiiti ad titi

a itatd va cai. A ad

cmai i t A&D idty

dtad w a itati (ad

a it ma ad qi) ca t

m va i t va cai, ad

t a i a iti t aciv

a taiab cmtitiv advata.W ciz bt-actic cma-

i a t tat d t wi:

Mtr ad maag bth

mmdat ad upstram supplrs.

Bt-actic fm ay cd ma-

amt tam y cai

aticiat t ti immdiat -

i bca ty dtad t

ik. hy d attmt at v-

tica itati wa itdd t

miimiz ik ad maitai c-

t v t dcti c,

m aw matia cmt t

dct divy. Bi iy

bicizd tback wit t -

dcti it 787 Dami xm-

iy t difcti w tam

aticiat d t mt ct, -

mac cd bjctiv.

A tdcy imy t am tat

cmt maact wi

fd aw matia by taki a

it ti bm, t mi atti-

tdca itiy va cai

ik. Bi tback a ma-

iz w dct cmxity ca

cat it w t bm w

bii w tcy t makt.

Fd th ptmal balac ad

supprtg grac prcsss.

p vac ca dc y

cai maamt cmxity wi

vidi ik maamt ad mit-

iati caabiiti. ratii

ad vac c tat

wity idtiy i ad wk

cativy at vi tm a

tia. ti a iit iv

ad tak i ky, bca a i,

wt tam dwtam,

wi d t at m tim.

Maag tral ad xtral

tracs. T i btitt i maamt it-

a itac c a ctm -

vic, ii, y cai ad

maacti, a w a xta

itac. Ti i i ctat t t

fm tat mt da wit iatd

ctia i ad ita dat-

mt wki at c .

Muchoftheproblemwehave

wit bi cmxity tday i

ad ita cati ad ack

cmmicati, aid a vy

dt. xam, a i-

tday a t wk m cy

wit cmmdity ci, ctact-

i ad am maamt.

Ds ways t smply.

rat ta maacti d-

ct at w vm tat at

attactiv t may cmmcia -

t- i, bt-actic

cmai bid md (at

ta idivida at) tat ca

b d i vai di. Wi

cmmaity i a way t maa

cmxity, it i a iifcat ca-

i t t i-cmxity,

w-vm A&D makt. hwv,

titi cmmaity -qty xit by cati viibiity

it c-am at, cm-

t ad b-ytm, ad

ictiv .

D t submt t th prs-

sur t w tchlgy. Bt-

actic cmai d t ay

tcy tat i ti d dv-

mt v. T, ty

d t av t at a d

( d ) y ba caa-

biity t t t tcy.

egag th supply cha uc-

t arly. lad a t tiy cai b t dct

dvmt ad di cti

i w dw t at twad -

dci t dct. Ad ty mak

ctai t y cai cti

a t tcica y makt

kwd t a t ad

ct dtadi y

ti, i r&D adma,

ad dcti ad y caiik. lad a dtad tat

ty mt maa t timi ad

qaity dvmt ad i-

i itac a cy a t

owofphysicalgoodsandmaterials.

Dlp stratgc partrshps.

sc ati ab tc-

y ivati, vid at

imati ai ad a m

qt cmmicati. Wki

witi t tatic ati,

bt-actic cmai fcity

miat ctti-d, tcy-

div dct ad ytm m

di t dcti by ti

cabati ac t va cai.

Bst Practcs itgratd valu Chas



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tqi addi t imicit d

a way t vaat ad adat t itat w

at ad aat xiti . At t am

tim, ac aticiat mtic mt tat

ytm-v mac a a mt. I ay

i ai t m, t a i wi

. A iticatd xcti ti ytm

i madaty.

emply rs maagmt tls ad capa-

blts. exta i a citica mt

i y itatd va cai, wic ma

maai ad mitiati ik mt b a c-

ta c. o tdi va tat a mc a a

t va cai cyc tim i cmd by

i. T bt t vid ay at

a tam i t y cai wi avidi

bwi ct. tat a, ct-

icsmanufacturingservices(EMS)suppliermoved

maacti t Cia t b c t it c-

tic cmt c. At t am tim, m

EMSrmsimplementedjust-in-timemanufactur-

i, witcd t batc ci ad ycizd

ti dcti wit cmt maact

t d qicky t ca i t makt ad

ctm dmad. I ti ca, t fm a b-

ftd m w ab ct amby wk. By

shipping directly to customer warehouses, EMS

i dc t t t itatd va

cai ad cyc tim, wi i may ca imi-

natingwaittimes.Moreover,someEMSsuppliers

a tabii dct dvmt ab c t

ti ctm r&D ct t dv ad

t dct ivati at ta v.

Hw Ds Yur Rl Alg wth Yur Futur

Busss Stratgy?

lk ad dw t cai. Y wi a aay

at w cac ad ad a div by

t wi va:

kwldg what th custmr wats.

Kw y t ctim i ati t

y cifc ctm ad t timat ctm.

I y ca ctiay bi a iq dct

vic t a ati, it ca baby tai

y bi it t t. Bt y mt b

vy d at it, ad y cat b atifd wit

t tat q.

Past dalgs r hstry th rlatshp.

I y cmay a b a iab mmb

t va cai, y ct ctid

bi a xct. Bt a wd cati:

I a ctm ak dct vic byd

y caabiiti qaity tadad, dt v-

xtd jadiz y t. say .

Prspcts wg utur pprtuts

by partrg. lt ctm kw w y a

i t makt ad t ctim. Ty mt

kw y caabiiti ad itti. I y wat

t tay ma, y wi d t dmtat w

y ca iqy ctibt t ivati,

cmtitiv ditiati ad i ct

mac t mak y t va cai at-

cc ad y cmay idiab.

I y wat t w, y av t cmmit t

ca. Y d t bi t c ta-

mi y va caiaii a taid

cmtitiv advata i t c.

Authrs

Randy Garberis a vice president in the San Francisco ofce, and can be reached at [email protected].

Charles Withrowis a manager in the San Francisco ofce, and can be reached at [email protected].


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