- CrossTalk, November–December 2013
As the U.S. military shifts its focus from metal and mechanics to developing and integrating control systems, delivering advanced software-enabled systems affordably will become a vital success factor in weaponry.More
GCC countries rank among the world's leaders in defense spending, offering a vast economic-development opportunity. Offset programs can unlock that opportunity.
The Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—together spend nearly $80 billion a year on defense, ranking the region third among the world’s biggest defense spenders, behind the United States and China. At more than $48 billion a year, Saudi Arabia leads the GCC countries in defense spending.
The real significance of these expenditures goes beyond their massive totals: They signal a unique growth opportunity for the region’s manufacturing and knowledge sectors. Consider this: Between 2013 and 2025, GCC countries will have spent about $1 trillion on defense and roughly 30 percent of this is dedicated to capital expenditures. If a 35 percent offset requirement is enforced, this means a whopping $105 billion could be either reinvested or sourced domestically, creating more than 280,000 advanced jobs—84,000 in Saudi Arabia alone—and an opportunity to build sustainable value chains in the region’s nascent aerospace, automotive, and marine sectors. Because these opportunities have gone largely untapped, defense offset programs are essential to tapping them.
This paper offers, among other things, four practical actions for GCC countries to realize a once-in-a-lifetime opportunity.Close
- Defense News, 19 September 2013
Businesses using big data to improve their competitive advantage have overcome four primary challenges—the DoD can learn from these successes and adapt them to drive better decision-making.
As the U.S. aerospace and defense industry grapples with another round of budget cuts, structural changes will figure heavily in the industry's future.
The trends emerging today will have a profound effect on the aerospace and defense (A&D) industry tomorrow and there is no one-size-fits-all strategy for dealing with the inevitable changes. The companies that survive and thrive will be those flexible enough to initiate their own changes. The new realities will create three classes of A&D firms: victors, victims, and survivors. Survivors will ultimately move up to become victors or down to become victims. Only quick action will prevent the survivors from becoming victims, and only those with the clearest vision will become victors.
Our analysis suggests four possible scenarios are likely to play out: consolidation by aggregation or reconfiguration; complementary knowledge-based consolidation; exit of weaker players; and merger of knowledge-based and infrastructure companies. To explain the restructuring rationale, the paper identifies eight value-add attributes inherent in the arms sector, each one of which, if integrated or augmented within a company's strategy, will allow for additional value creation.
Firms that move swiftly, armed with the right strategy, will become competitive, innovative leaders in helping ensure our security in an increasingly unstable world, which, at the end of the day, is what the A&D industry is all about.Close
- Defense News, 4 August 2013
As the A&D industry approaches another Last Supper, structural changes in the supply chain will weigh heavily on emerging trends such as defense cuts, next generation assets, poor planning, and companies that sit on cash.
- Defense AT&L, July–August 2013
The Department of Defense (DoD) needs to take a step back to structurally address how it designs support concepts for all weapon systems by looking to Principle Driven Sustainment Models and Portfolio Management concepts from the commercial world to realize true stepchange improvement and meet today’s budget realities.
Government-industry collaboration can improve weapon system performance.
Many large sustainment programs use performance-based logistics (PBL) strategies to buy a level of maintenance performance rather than specific parts or components, and the arrangements have brought great benefits and savings to defense programs. Yet when funding is cut, programs can struggle to find solutions to maintain system performance at required levels, because so much of the day-to-day management responsibility has been outsourced.
However, the tools for strong sustainment results are there, even in a time of austerity. By ensuring that they are shooting for the same goals and have a solid view of program performance, the government and its partners can build a culture of trust and collaboration that brings long-term success for all parties.
For large military programs to succeed over the long term, the government and its contractors have two priorities: understand each other’s definition of success, and maintain a reliable view on program performance. These fundamentals lead to better collaboration and greater trust between the government and its suppliers and result in more informed and effective sustainment.
While the benefits will not come overnight, they do not require an organizational restructuring. Rather, the government and industry can pilot a small number of focused efforts quickly to make an immediate impact:
- Define the data required, not just what is provided.
- Take advantage of existing data sources.
- Bring change to operations.
- Employ the right business intelligence.
Noncompliance can ruin corporate reputations, shatter financial performance, and destroy careers, families, and lives. With so much to lose, doesn't compliance deserve our undivided attention?
Corporate compliance—or, more accurately, the risk of noncompliance—has become a major concern over the past decade, especially for global manufacturers with operations in many different countries and jurisdictions. When a practice commonly accepted in one country could be a serious criminal or civil offense in another, companies had better know about it.
Many firms understand that compliance can lead to competitive advantage and are making their suppliers commit to compliance standards that go far beyond those required by law.
To understand how companies reduce the risks of noncompliance, A.T. Kearney surveyed execu¬tives at leading manufacturers, conducting in-depth interviews with compliance executives at nearly 40 top companies worldwide. While most studies approach compliance from a legal perspective, we focus our attention on compliance management.
Five major findings emerged from our examination of compliance management in these areas:
- Most companies expect to expand their compliance systems.
- Lower management has a much less favorable perception of compliance systems than top management, indicating a strong need for administrative efforts to generate acceptance at all levels.
- Most companies do not have an independent compliance department that reports directly to the executive board.
- External resources are especially useful for setting up a compliance system.
- The most effective compliance systems integrate compliance and process management.
Three Ways the U.S. Department of Defense Can Achieve Its Sustainment Objectives in Challenging Times
A three-pronged approach focuses on what matters—structure and acquisitions.
For more than a decade, the DoD has embraced performance-based logistics (PBL) as its preferred means for reducing sustainment costs. While effective in some cases, PBLs are generally thinly implemented, mostly contract-focused, and executed at the commodity level.
Our recently commissioned A.T. Kearney study reveals that PBLs alone will not be sufficient for the DoD to meet both its sustainment needs and performance requirements during the coming period of significant budget reductions. The study also examines the forces of change inside and outside the DoD, highlighting how they will play out within the context of U.S. national security and the ways in which they will shape the DoD's future sustainment strategy and activities.
Our findings suggest that the DoD can meet its sustainment objectives—despite a declining budget—by looking more broadly at the defense industrial structure and the acquisition process. Indeed, it is possible to substantially improve sustainment performance while also meeting the long-term goals of national security and taxpayer stewardship.
This can be accomplished by aggressively pursuing and implementing three strategies: adopt a menu of principle-driven sustainment models, develop a portfolio mindset, and make better acquisition decisions. This paper outlines each one in more detail.Close
By improving acquisition cycle times, the U.S. Department of Defense can cut costs, increase flexibility, and reduce delays.
A disjointed approval process, the use of unproven technologies, ever-changing requirements, and a massive, complex regulatory burden mean wasted time and wasted money for the U.S. Department of Defense (DoD). Such an outcome is unacceptable for leaders of commercial projects—and should be for the military as well. The consequences are serious: delays in delivering necessary capabilities to warfighters, excessive costs, an inflexible supply chain, increased supply base uncertainty, stymied program workers, and increased government personnel costs for low-value-added activities.
The DoD and Congress must work together to limit the costly oversight and reduce product development time. To do this, they must look to the commercial sector’s product development best practices to streamline acquisition cycle time.
Unlike in the commercial sector—where product development decisions are made with all important parties “at the table” for the purpose of reaching a singular, common objective of maximizing shareholder value—in the military, a raft of decision-making authorities split the various tasks regarding setting requirements and managing program risks, from Program Executive Offices and Services Acquisition Executives to the DoD and Capitol Hill. Acquisition cycle times for the DoD aircarft programs are more than 30 months longer, on aveage, then similar commercial projects. A comparison of DoD and commercial satellite programs yields similar results—almost four years difference, more than double the time.
The DoD faces four main obstacles in its acquisition process that the commercial sector seldom sees.
- The use of immature and high-risk technology
- Changing requirements
- Regulatory burden
- Multiple, disjointed decision support systems
The DoD can improve results by applying commercial best practices.
Establish the technology maturity threshold. To achieve shorter production cycle times, the DoD must apply spiral development more broadly, separating technology development from weapon system development and aggressively pursuing new technologies outside the realm of the broader program. Doing so will enable the DoD to move ahead more quickly with development using mature technologies or incorporating incremental technology advancement throughout the weapon system development.
Freeze requirements at a decision point. Performance requirements need to be frozen much sooner in development if the DoD is to curb cost growth and schedule delays and prevent changes to major performance requirements after development.
Establish milestones and rewards. To improve acquisition decision making, the DoD must recognize that time is directly associated with increasing costs. The current decision-support disconnects are contributing to weapon system cost overruns and schedule delays. It must re-examine with a “lean” mindset the approval authorities and timing along the Major Defense Acquisition Programs (MDAP) process.
These changes would make an immediate impact—lower costs and faster time to completion—and a growing advantage for our warfighters as they succeed on the battlefield.Close
A combination of factors in India’s airline industry could result in a new generation of smaller, faster, more fuel-efficient passenger aircraft.
India’s airline industry has enjoyed tremendous growth in recent years, with its revenue passenger kilometers boasting a compound annual growth rate of more than 20 percent from 2004 to 2011. More importantly, India is poised for significant growth in air traffic. If India’s airlines are to make the most of this growing demand, they will need to expand their fleets. And while fleet growth is likely to occur across all aircraft categories, we believe aircraft designed for regional service (60–120 seats) will grow fastest.
Five key factors will drive the demand for regional aircraft in India over the next 15 years:
- There will be Increased demand for travel between regional hubs and tier 2 and 3 towns.
- There is limited aircraft handling capability at smaller airports.
- Demand for “long-thin” routes will increase.
- New short-haul aircraft will emerge.
- Favorable regulations continue to reign in India.
The combination of these factors leaves little doubt that the concept of regional routes flown by a new generation of short-haul regional aircraft is poised to take off in India.Close
- The Hill, 9 April 2012
The defense industry must pursue an affordability path with a vengeance.
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