The Defence Industry serves represents two main markets: Aerospace, which largely comprises the production, sale, and service of commercial aircraft. And Defence, which is dependent on the nation's need for military weapons and systems designed to operate on the land, sea, and in the air. Also included in this industry is the production of general aircraft (mostly for business use) and space vehicles, usually satellites, for both military and commercial use.
The defence industry finds itself in an increasingly challenging predicament. In recent years, military spending globally has been under immense pressure, governments around the world haven’t started many significant new weapons programs, and few are on the horizon. Moreover, for the past decade departments and ministries of defence have shifted some of their attention to vendors that aren’t part of the core defence industry, particularly technology firms that leaders believe can deliver products within shorter time frames with more agility than legacy Defence companies. In this way, defence departments are broadening their procurement activities away from pure-play defence contractors.
The combination of unexpected competitive pressures and a more frugal customer base is a one-two punch that the defence industry has never quite faced before. And it has prompted many companies to pull in their horns, conserving their capital and returning cash to shareholders in the form of dividends and buybacks — rather than pursuing aggressive innovation or embarking on improving internal capabilities to better navigate shifting industry conditions. These tactics have led to criticism from industry analysts and the Department of Defence itself, which has said that aerospace and defence companies should be ploughing more cash into R&D, not share repurchases.
MAJOR CHALLENGES FACED BY DEFENCE INDUSTRY
The Defence industry is one of the few industries where the business is governed not only by the laws of demand and supply but also by international arms regulations and technology export restrictions. And yet, companies must leverage global supply chains to achieve a cost advantage in an increasingly price-sensitive market.
- The civil aerospace industry is chasing price-sensitive and demanding customers as the world’s airlines struggle to break even in economically challenging times.
- The defence sector is waking up to the reality of fixed priced contracts as the government department’s move away from cost-plus pricing in defence procurement. And yet, products need to be on the cutting edge of technology and innovation.
The need for constant innovation, cutting edge technology and mission-critical quality can be satisfied only with highly skilled resources and reuse of knowledge. And yet, replacement is hard to find for an ageing workforce which threatens even the existing talent pool. Global supply chains need capable suppliers which need time to develop. Distributed product development introduces additional program management risks. Both of these threaten the time to market. And yet, customer governments mandate industrial participation, and customers demand contractual penalties for late deliveries.
As one of the leading consumers of biofuel, the industry is always in the centre of the environmental debate and constantly striving to introduce innovation to make its products “Green”. And yet, the typical product lifecycle is measured in decades, with World War II aircraft still in service today.
Major OEMs have backlogs running into several years of production and the industry is slated to grow at 5-6 % CAGR for the next 20 years. And yet, the major OEMs are planning to cut production two years down the line to keep costs under control.
HOW ARRELIC WILL HELP DEFENCE INDUSTRY
We help aerospace and defence companies achieve a competitive position in the global marketplace. We enable our clients to foster and unlock potential from their existing capabilities and help them create value for their customers in today’s fast-paced technological uncertainties.
Government budgets across the developed nations are in decline and military programs are under intense pressure to exercise cost-cutting measures. Moreover, the recent financial crises have had a big impact on military budgets and operational efficiencies are growing in importance as cost-cutting and risk mitigation activities apply.
We strive, through our knowledge insights, towards eco-friendly products for the industry. We position our value-added services across the value chain, in the quality excellence paradigm.
We enable our clients in the aerospace and defence industry to deliver growth strategies, innovation, and operational efficiencies. We help them tackle current industry issues such as:
- Operational Efficiencies – by understanding operational needs, streamlining processes, and resolving mismanaged bottlenecks through quantifiable integration controls.
- Globalisation – by leveraging relationships, deploying partnership engagement programs, and acting on consolidation initiatives.
- Green Effect – by understanding macro-economic trends, by acting on government regulations, and by understanding carbon footprint reduction implications so that we develop profitability and growth scenarios for our clients.
- Delivery Engagement – by resolving execution difficulties across all value-chain interfaces, by providing accountability on programme and stakeholder management.
We enable aerospace and defence clients to redesign their business models, achieve operational excellence, and capture growth in emerging markets.
The aerospace and defence industry, post 9/11, has seen a seismic shift in the way it protects societies, utilises its technology, and ensures public safety – the industry is an economic enabler to all societies.
We help aerospace and defence clients exploit new opportunities, devise strategies, and attain operational excellence. We collaborate and work with clients across the value chain including aerospace and defence companies, passenger and cargo carriers, OEM manufacturers, airports, and other service providers.
We provide integrated services for aerospace and defence company clients, including management consulting, IT consulting, and education.
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to know more about how Arrelic will help the defence industry.