Cost reduction is always a prime concern within the aerospace and defense (A&D) industry, from contracting companies to manufacturers. For many organizations, the solution is more simplistic than one might imagine. To lower the long-term cost within the supply chain, organizations can simply update IT systems that manage their everyday activities. By swapping out antiquated legacy systems with an efficient, integrated enterprise resource planning (ERP) system, a company will be better prepared for future growth and new business.
For A&D-specific organizations, the implementation of an ERP solution can prove valuable for the automation of activities. Some organizations use an IT migration as an opportunity to re-examine business processes as a whole and to collect data that can be valuable for winning contracts. In some cases, the data analysis associated with such an upgrade can produce insights that will enhance the output of the day-to-day business processes. For many businesses in this industry, management of supply chain costs is where organizations take advantage of collected data, enabled by the automated procurement practices associated with ERP. It should come as no surprise that analysis of historical information can lead to exact supply chain costs -- as long as the data is available to be mined in such a manner.
The problem that must be addressed is twofold. First, you must have a repository to capture all of the supply chain information. Next, you must be able to analyze and extract information easily to make informed decisions. It is not unusual that many enterprises are lacking in both of these areas. Many contractors are managing procurement activities manually and, therefore, do not have a consolidated repository to use for reporting. This lack of integration makes it almost impossible to report accurately on historical data to make decisions for future supply chain activities or identifying where to focus cost reduction initiatives.
In order to reduce cost, it is critical to find the right technology partner. Ideally, this is one that can offer a complete enterprise solution to manage all customer interactions, supply chain planning, and execution activities -- as well as managing after-market service requirements and providing complete financial management and program costing. Most industry contractors depend on all of these disciplines to perform an estimate or bid and establish the proposal activities necessary to win or extend contracts. As the availability of competitive contracts decreases, it is imperative that A&D contractors invest in IT projects that will increase the operational velocity of the enterprise. Implementing modern information system technology not only reduces supply chains costs through planning and amalgamation but also offers the basis for real cost-reduction programs. The majority of A&D customers also find that the upgraded information technology will decrease the overhead to operate the enterprise, increasing return on investment.
It is time that A&D companies put the same level of automation into their operation business through technology as they do in the delivery of the products to their customers. The A&D industry has a long history of delivering some of the greatest advances in technology with their solutions, and that technology is what will make them competitive in the future. Automating business processes that are being performed manually today is critical to this success.
Edward Talerico is aerospace and defense industry strategy director for Infor.