COVID’s global pandemic created crises for society and business, afflicting most industries. Aerospace faces workforces depleted by illness and departures, healthy staff sent from workplaces to remote sites, disrupted supply chains, and depression-level low demand for the services of aircraft operators and their suppliers.
But those crises also created opportunities. Daily pressure to meet production, flight, maintenance and servicing schedules shrunk. Leaders, managers and workers suddenly had time to consider questions that always had been important but rarely had risen to the level of urgent: Are we well positioned to achieve future business, customer and social goals? Are our people, processes and tools well suited and best employed to prevail and succeed?
“The world after COVID is going to be different,” Nick Ward, vice president for digital systems in civil aerospace at Rolls-Royce, told a March 2021 Aerospace Tech Review webinar. “People have gotten used to not flying and working virtually. So, if the industry wants to come back, we’ve got to earn the right to do that.”
Companies in other industries — electronics, automotive, medical — have led manufacturing in tackling such issues as operational excellence and resilience. They have explored and embraced interconnected electronic devices, advanced analytics, artificial intelligence and robotics. “Digital transformation” initiatives like theirs often are labeled Industry 4.0.
Some aerospace companies have followed suit. Rolls-Royce three years ago launched its Blue Data Thread to establish two-way movement of data throughout its processes, from design to product support and beyond, into its supplier networks. When Boeing and Saab in 2018 won a $9.2 billion U.S. Air Force contract for new jet trainers, they used a digital design, manufacturing and flight testing approach that enabled the T-7A to go from initial design to first flight in 36 months.
Smaller firms also embrace this. Colorado-based Bye Aerospace is using Siemens digital tools to design and build the two-seat, all-electric eFlyer, in part to enable quick morphing of that design to a four-seat model. Zipline International, based in the San Francisco area, uses those tools to design more reliable, maintainable robotic drones — “the world’s largest automated on-demand delivery service.” Since its 2016 launch, Zipline has delivered more than 225,000 shipments containing 5 million-plus units of blood, vaccines and medical products in Africa, the Philippines, and the U.S.
Generally, aerospace companies have lagged in embracing digital transformation and adjusting their strategies accordingly. Now many are correcting that. The leader of Deloitte Consulting LLP’s global aerospace and defense sector, John Coykendall, is among the digital proponents who noted this shift.
“Prior to the pandemic, most aerospace companies were running so hard trying to catch up with ever-increasing production volumes that there was very little time to think a few years out,” said Coykendall, who also leads Deloitte’s U.S. A&D sector. If companies did explore digital changes, they typically launched ad hoc or targeted activities aimed at very specific problems, he said, such as some capacity constraint.
Air travel plunged amid COVID. Total passenger traffic in November 2021 still was down 47% from the same month in 2019. Global air travel demand is not expected to recover to 2019 (pre-pandemic) levels until next year or later, Deloitte noted in December. Coykendall said that drop, combined with decreases in aircraft production and related declines in demand for engines, components, and services like maintenance, repair, and overhaul (MRO), “gave companies a bit of breathing room to step back and think a little more strategically” about how and where they’re going to get the most value out of digital capabilities.
Ramco Systems, the Chennai, India-based global enterprise software company, is seeing similar reactions among aftermarket service providers. With time and resources available during COVID’s slowdown, companies are reviewing business strategies, said Saravanan Rajarajan, Ramco’s director of aerospace & defense solution consulting and presales. They are assessing whether to launch new strategic business lines and whether to retain, dismantle or expand existing ones. “We thought that with the pandemic our business would go down, because there would be less investment and discretionary spending,” he said. Instead, “we are seeing a lot of interest in exploring digital technologies. We are working with some of the large-scale, global MROs as far as their digital transformation strategies.”
Ramco has invested heavily in recent years in making its enterprise resource planning product available through mobile devices. It is working with customers on applying machine learning and augmented/virtual reality to their digital capabilities. It also is among the industry partners working with SITA in an MRO blockchain alliance to develop digital capabilities to track an aerospace part from the manufacturer until it is scrapped.
The defense sector also is embracing digital transformation, proponents noted. “Largely, and it’s fortunate and unfortunate, defense forces have come on board with this,” said Matt Medley, industry director for defense manufacturing at IFS, the London-based provider of cloud enterprise software. An unfortunate driver is the daily barrage of cyberattacks on military services and defense contractors, he said, which have fostered greater appreciation for secure, cloud-based stores of data. Fortunate drivers include capabilities like additive manufacturing, augmented/virtual reality and complex, large-scale simulations. These factors “have driven militaries to start steering their ships in the direction” of Industry 4.0.
IFS’ A&D customers include Rolls-Royce and its Blue Data Thread, which includes the IntelligentEngine initiative to improve support for the OEM’s customers by building digital twins, or computer-based copies, of engines on wing to track their performance and head off disruptive problems.
Industry 4.0 is one way of referring to the fourth Industrial Revolution. The Industrial Revolution “used water and steam power to mechanize production,” Klaus Schwab, founder and executive chair of the World Economic Forum (WEF), explained in 2016. “The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third.” This fourth, born in the mid-20th century, “is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.”
Industry 4.0 was introduced at the 2011 Hannover Messe trade fair in Germany. That nation put the label on a strategic initiative, which its National Academy of Science and Engineering described in its 2012 annual report as addressing “the fundamental transformation of the way that we manufacture goods” and showing “how information technology can be deployed in traditional industries to simultaneously create value and ensure sustainability.”
That led to a worldwide movement. But why was a revolution needed?
“Manufacturing has experienced a decade of productivity stagnation and demand fragmentation,” said a January 2019 WEF report developed with McKinsey & Co. Those factors, coupled with an aging workforce in the world’s major economies, mean one thing, the report said: “The time for innovation is long overdue.”
That Fourth Industrial Revolution report said organizations that have taken Industry 4.0 technologies beyond the pilot phase “have rapidly achieved a tremendous impact.” The WEF and McKinsey assessed more than 1,000 leading manufacturers. They identified 16 that had achieved significant impact, demonstrated successful integration of Industry 4.0 technologies, employed a scalable technology platform, and exhibited “strong performance on critical enablers.” They dubbed the 16 “lighthouse” factories, illuminating the course to successful Industry 4.0 implementation. (None of the 16 is in aerospace.)
A May 2021 McKinsey/Aerospace Industries Association (AIA) report backed the 2019 findings. It said the global A&D industry could generate $20 billion more in annual earnings if it achieves greater digital maturity in processes and operations, a 10% improvement over its 2018 earnings of $200 billion. The added value would come from OEMs and suppliers expanding revenue and reducing costs across engineering, procurement and supply chain, manufacturing, aftermarket services, and support functions.
Deloitte’s latest outlook expects the A&D industry to focus this year on “innovation to develop new technologies and solutions, create new markets, and expand growth opportunities,” adding that digital innovations “present a host of efficiency- and productivity-enhancing technologies that can accelerate time to market and reduce cycle times.”
That won’t be easy. “The reality is that A&D has a long way to go to leave behind paper-based processes, fragmented data systems, and stubbornly manual operations,” the McKinsey/AIA report noted.
Research points to one hurdle common to many manufacturers: “pilot purgatory.” A 2018 WEF/McKinsey report, based on surveying more than 700 digital manufacturing experts and business leaders, found more than 70% of manufacturers were stuck in this purgatory, “where technology is deployed experimentally at reduced scale for an extended period due to the inability or lack of conviction to roll it out at production-system scale.” Reasons for this include difficulty in aligning digital’s value with return on investment, uncertainty about digital’s value to performance, and the cost required to implement and scale.
Those challenges are familiar in aerospace. The McKinsey/AIA report, based on a survey of more than 40 private sector, public sector, and academic organizations, said, “Nearly every company in this study noted that digital engineering and model-based design is a priority for them.” But it found that only 36% said they were using digital technologies at scale in research and development and engineering. Another 41% said they were only in the early stages of adopting digital technologies in R&D and engineering. Five percent said they had not started such efforts in those areas, and 18% said they did not know if they had such initiatives, or the question was not applicable.
Manufacturing, procurement and supply chain, and aftermarket services all lag in digital transformation, the A&D report said. In the survey, 44% of companies said their manufacturing digital initiatives were in the early stages, 22% said such initiatives had not started, and 17% said they did not know or N/A. Only 17% said their initiatives were running at scale. For procurement and supply chain, 49% of companies said they had just started digital initiatives, 14% said they had not started yet, and 20% said they did not know or N/A. Only 16% of companies said their initiatives in that area were running at scale. In aftermarket services, 39% of companies said digital initiatives were at the early stage, 23% said they had not started, and 25% said they did not know or N/A. Only 13% had aftermarket services initiatives running at scale.
Support functions at A&D companies were second only to R&D/engineering in advancing digital initiatives, with 23% of companies saying they were operating at scale. Another 34% said their initiatives were in the early stages, 26% said they had not started, and 17% said they did not know or N/A.
“Fundamentally, you have to have digital transformation if you’re going to succeed in business transformation,” said Dale Tutt, vice president, aerospace and defense industry strategy and VP of overall industry strategy at Siemens Digital Industries Software. A 23-year veteran of the business jet industry, Tutt observed that customers of OEMs and support companies expect swift, highly reliable, 24/7 service. “Customers have invested a lot of money in our products. You can understand why a company would be reluctant to adopt new systems and run the risk of disrupting their production, spare parts or in the basic maintenance that they’re providing to their customers. Whether it’s a commercial customer or a military customer that must keep up their operational tempo, it’s something that companies are going to be careful about.”
The McKinsey/AIA report noted that A&D faces unique challenges in achieving digital transformation. These include demanding customer requirements; costly product development; long product life cycles; legacy incentive, funding, and customer procurement structures; legacy systems; and the imperative for safety and compliance. But A&D digital leaders have shown those challenges can be overcome and that the effort is worthwhile.
A lot of aerospace and defense’s challenges — and costs — stem from design changes, said Tom Hennessey, chief marketing officer at iBASEt. That California-based company serves manufacturing, quality and MRO operations globally with digital tools and services, including its cloud-native Solumina iSeries agile platform.
“What effect is that design change going to have up and down your production? Are you able to deal with that?” Hennessey asked. “Dealing with that on paper and manually, it’s going to take you a long time to chase all those affected parts and processes. If you are dealing with it digitally, it can be much quicker to turn that around. This whole move toward digitization, which Industry 4.0 is all about, is really about that connectivity, that ability to control the process and deal with change that much more effectively.”