By John Schmidt,

Throughout the aerospace and defense industry, executives are capitalizing on a wide range of digital business and technology opportunities. Their aim is to become across-the-board, digitally enabled extended enterprises.

To reach this goal, use of digital technologies is extended far beyond engineering, the traditional focus, to manufacturing, assembly, maintenance, and customer service. For instance, digital tools such as smart glasses, advanced analytics and 3D printing are accelerating and reducing costs of manufacturing, service, and support.

But while digital is soaring, capitalizing on its benefits is flying at a lower altitude – by a wide margin. Standing between this vibrant industry and the digital coming of age are complex processes, legacy operating models, data security and certification.

Until the aerospace and defense industry defines the vision and blueprint of capabilities and services that generate external value for its “digital customers,” -- such as airlines and passengers -- and internal value to their “digital enterprises,” the benefits that going digital offers will not be fully realized. The true value of digital will not crystallize until companies define and adopt capabilities and services that generate more value for their customers and extended enterprises.

These are important findings and insights from a new Accenture survey of globally-dispersed aerospace and defense industry executives titled Digital Supply Network Survey 2015. The research was undertaken to better understand the industry’s supply chain strategies and related digital investments.

Further Strides Needed

The survey provides several examples of the disparity between the respondents’ predominant belief that digital offers benefits and current progress in attaining them. For example:

· while 83 percent of respondents say forecasting could benefit from digital technology investments, only 40 percent say they do this “at a high level”;

· 83 percent say digital investments can benefit integration with engineering, yet only 43 percent say they integrate “at a high level”; and

· 80 percent say supplier collaboration is a desirable arena for delivering digital investment benefits, but only 33 percent claim to do this “at a high level.”

Outsourcing On the Rise

Along with the growing focus on digital, the survey reveals that outsourcing is on the rise:

· over half (59 percent) plan to increase their manufacturing outsourcing during the next two years; the rise stems from limited in-house capacity (40 percent) and a desire to reduce costs (24 percent); and

· more than half (55 percent) expect to increase their share of overseas sourcing during the next two years to satisfy end-market industrial participation requirements (64 percent);

Analytics, Mobility and 3D Printing

Analytics

Respondents say that for supporting supply chain functions, they now use analytics, or plan to, over the next three years in supply chain execution (77 percent), supply chain planning (67 percent) and forecasting (67 percent).

By increasing use of mobility tools such as tablets, wearables and personal and electronic devices, supply chain functions will improve. Nearly half (47 percent) use mobility in logistics and supply chain execution.

3D printing is making steady progress towards delivering on its promise of moving beyond prototyping into certified production. This technology is making possible consolidation of bills of material and fabrication of parts on demand. The survey finds that:

· for in-house 3D printing, primary applications in use, or planned, are components/mechanical sub-assemblies (37 percent), mechanical systems (33 percent) and aero structures (26 percent); and

· the most daunting challenge to implement 3D printing, cited by 40 percent, is certification of processes and parts.

Recommendations

To help achieve the transition smoothly to an all-digital supply chain, these companies might consider three steps:

First, envision the power of the network

Digital transformation begins with defining a vision for the digital supply network, business outcomes it will deliver, and services companies can offer to deliver them. For example, mounting pressure to support increased production rates, especially for commercial single-aisle aircraft, will require the digital supply network to support on-time delivery at predictable costs while reducing risks of production disruptions. The emerging digital vision needs to encompass new demands and services that airlines, operators and defense agencies require now and 10-to-15 years out.

Second, forget functional excellence

Companies need to consider shifting from a function-centric approach to one that identifies value-creating activities core to the digital supply chain network. This will help accelerate product deliveries and shorten product maintenance and overhaul cycles.

Third, map your digital journey

With their visions defined and core activities revealed, companies might create a digital blueprint that establishes milestones for the transformational journey. The blueprint should offer a guide and set of priorities to follow for increasing production rates.

Comprehensive in scope, the blueprint should encompass various aspects of transformation such as people, processes, technology, regulations and governance. For each company this blueprint will look different depending on which digital capabilities help drive value for customers and their extended enterprise. The blueprint should evolve over time. Some companies will focus on building their supply chain network visibility into multiple tiers of suppliers. Others may create a digital infrastructure to deploy 3D printing to their in-service network.

To help achieve broader and deeper supply and demand visibility, it’s worth considering vendor management powered by analytics. Using digital and analytics together can surface issues sooner and avert costly surprises. Digital supplier collaboration, analytics and product simulation are likely to have the greatest positive impact in managing suppliers when products are developed and tested.

Final thoughts

Digital technologies such as analytics, wearables, 3D printing aim to fine-tune supply chains and improve profitability and visibility into potential problems. The technologies are starting to demonstrate their power to transform traditional supply chains into more dynamic, agile and intelligent supply networks.

Aerospace and defense companies are proving the value of digital technologies more than ever by leveraging supply chain control towers and analytics, and using smart parts tracking to collaborate across the extended supply network. The biggest challenge going forward is not digital technologies themselves; it is their integration with existing systems and processes.

John Schmidt is a managing director for the North American practice of Accenture’s Aerospace and Defense industry. He can be reached at john.h.schmidt@accenture.com.