How are A&D Manufacturers Faring? The Role of ERP Software

By Matt Medley

The dynamic global and geopolitical nature of the A&D industry demands that manufacturers be on their toes to shift business priorities, capitalize on new technology opportunities and react immediately to major market events or regulatory changes. These can be relatively opportunistic and planned, such as moving toward servitization to unlock aftermarket revenue or onboarding new technology like IoT and artificial intelligence to revolutionize factory operations. But they can also come from an external source at a moment’s notice.

Witness the market pressures from the COVID-19 crisis, which is decimating supply and demand, and spawning regulatory mandates such as the U.S. Government invoking the Defense Production Act. There are already some outstanding agile trend-setters in A&D manufacturing. For example, manufacturer CAE Inc. shifted its focus from manufacturing flight simulation systems to developing an easy-to-build ventilator in less than 11 days to help mass produce equipment to combat the COVID-19 crisis in Canada (featured photo).

But all too often, companies find opportunities hampered by their legacy software systems that have become a business progress bottleneck, or a software supplier who wants them to follow a particular development route.

In a recent Accenture survey of CIOs undertaken in the UK, 53% said that their current Enterprise Resource Planning (ERP) system was inflexible and that they wanted to extend it using intelligent technology.

A&D manufacturing business transformation checklist

This statistic is indeed an indictment of some ERP systems.

With this in mind, I outline here the four key ERP ‘stress tests’ A&D manufacturers should keep top of mind when transforming their business operations.

  1. Industry-specificity and configuration control is vital
  2. Enterprise software just cannot be all things to all people.
  3. The baseline ERP functionality delivered by large incumbent providers – who develop a single platform to appeal to as many industries as possible – may well be good for operations such as finance, HR and payroll.
  4. But running aerospace and defense manufacturing operations is not the same as managing the day-to-day processes of a retail business.

Far too regularly, A&D manufacturers set out on an implementation strategy and find that costly, complex and confusing customizations must be made to their software infrastructure to accommodate critical A&D manufacturing processes such as precision part engineering and intensive quality control. A&D manufacturers need to be confident their underlying systems infrastructure supports the specific business needs of their industry now and into the future—not have to dance to the tune of their software supplier.

Cloud just isn’t for everyone

This even applies to deployment model for enterprise software. Many ERP vendors are pushing their customers to the cloud as a prerequisite which, again, may seem like a sensible choice for industries with less heightened security requirements. But A&D manufacturers are involved in a sensitive supply chain, where they must prove compliance with strict military security requirements.

When researching the challenges of cloud adoption in aerospace and defense organizations, Tech-Clarity found that two-thirds of A&D companies highlighted security as a “significant risk”. When looking specifically at OEM respondents, that figure rises to almost three-quarters.

A&D manufacturers need to have full control over how they decide to deploy supporting enterprise software. Where business processes dictate, this could be a physically secure on-premise installation, a full SaaS-based deployment or a hybrid environment spanning both.

Connect operations – from the factory floor into the field

A&D manufacturers are behind some of their peers on the Industry 4.0 or smart manufacturing curve. During a recent webinar, which zeroed in on the impact of Industry 4.0 for A&D manufacturers, IFS asked 140 A&D decision makers to respond to a number of polling questions to gauge views on Industry 4.0 adoption.

Only 20% of participants were actively looking to leverage 4.0 technology, identifying it as an enterprise-wide priority. The majority – 68% – were still researching how these technology advances can help achieve their digital transformation goals.

Open architecture means A&D 4.0 is open for business

Small wonder. If you look under the hood of many ERP suites, you will find multiple software products are comprised of disparate applications, developed separately and lashed together with a common user interface.

No software can exchange data with every sensor, and those A&D manufacturing organizations with inflexible deployments will need to customize and add to their existing implementation in order to gather information from every available sensor.

Smart factories and intelligent assets deployed in the field will generate many terabytes of data. Simply extracting this data – let alone mining it to truly inform business decisions and better take advantage of aftermarket service revenue – is something A&D manufacturing is still trying to master.

Look out for RESTful APIs

This can be avoided though, by deploying industry-specific manufacturing ERP software built on API-driven architecture. To a certain extent, A&D manufacturers and services companies today are becoming software companies themselves. They may have developers who write software to do things such as introduce data from the IoT and enable other systems to interact with enterprise software.

RESTful APIs, which is a software architectural style for designing networked applications, make it that much easier for them to link valuable data steams into the core ERP system.

Intelligent decision making means no silos allowed

Once data is introduced into a supporting enterprise solution half the battle is won, but to ensure victory the next stage means analyzing that information to gain insights into operational and business performance. A&D Manufacturers are moving data analytics from a tool for observation to a tool for optimization, from proactive to predictive intelligence and to help meet the demands of rapid industry changes.

By actively monitoring the performance of assets and processes, A&D manufacturers can make faster and better-informed decisions, which would ultimately lead to productivity improvements, cost savings and added maintenance predictions. But this is moot if data exists in a heavily customized and fragmented enterprise software implementation. Siloed sources cannot be harnessed to paint a full 360-degree view of manufacturing operations and back-end business processes.

Smarter software delivers smarter business decisions

Intelligent enterprise software should bring together solutions that visualize information to support decision making at both strategic and tactical levels, providing insight and context when and where it is needed. This includes integration with other programs vital to A&D manufacturing, such as Manufacturing Execution Systems (MES) which drive execution of shop-floor operations, and Customer Relationship Management (CRM) to record customer-specific information.

By combining enterprise architecture, business activity monitoring, intelligent business process management, business intelligence and reporting capabilities, a unified platform is created that allows for an end-to-end picture to be built in line with the organization’s business objectives.

Security at a level most other businesses would not require

Being an A&D manufacturer means meeting more stringent security needs than any other industry sector. This security sophistication applies not only to the physical products A&D manufacturers deliver, but also their digital presence. Witness the security mandates required by defense operators, such as the International Traffic in Arms Regulations (ITAR) and the newly released U.S. DoD Cybersecurity Maturity Model Certification (CMMC) Version 1.0.

The U.S. Government explains that “the CMMC is intended to serve as a verification mechanism to ensure appropriate levels of cybersecurity practices and processes are in place to ensure basic cyber hygiene as well as protect controlled unclassified information (CUI) that resides on the Department’s industry partners’ networks.” Failing to adhere means A&D manufacturers are shut out of valuable military RFPs and bid situations.

Forewarned … but is your software forearmed?

Enterprise software plays a key role in meeting digital security requirements—and it’s here where ‘one-size-fits-all’ ERP systems do not contain the industry-specificity to keep A&D manufacturers compliant. Without a fully integrated application suite allowing data to flow seamlessly between different functions such as supply chain management, manufacturing, engineering and CRM, it is difficult to know which products, parts or transactions may put an A&D manufacturer in jeopardy.

It will become more and more important to ensure any ERP solution used for A&D manufacturing has functionality specifically designed for export control and cybersecurity regulations.

A business dealing in regulated materials or involved in sensitive military contracts must be able to quickly and efficiently marshal this information from within their ERP system and combine it with external regulatory data to ensure compliance as they process orders, share information and conduct other transactions. They also must be able to share it with overseas partner companies in a frictionless environment.

Enterprise software as a strategic enabler

We’re rowing in unchartered global waters in 2020, where opportunities for new business, the challenge of embracing new technologies and the sudden emergence of disruptive market forces are all happening at the same time.

Success today will depend on an A&D manufacturing organization’s ability to be agile in their operations and flex their business models—those who can’t adapt just won’t make the cut.

Ultimately, your choice of underlying enterprise software platform matters—it can either be your strategic enabler of change…or the Achilles heel.

Matt Medley, Senior Product Manager, IFS