Business is booming again in the aerospace industry. In 2006, Boeing booked orders for 1,044 new planes and Airbus nearly 800. With production slots for most of Boeing's models already largely filled for the next three years and a healthy backlog for several Airbus models, aerospace factories world-wide can expect higher production rates until at least 2010.
This is good news for an industry that has suffered in the last few years. And while the aerospace industry may be allowing itself to breathe a small sigh of relief for the moment, the lean years have taught the industry some valuable lessons. Suppliers have had to learn to adopt efficient manufacturing methods, for example, enabling them to become more productive. Every cloud has its silver lining, and such practices will help manufacturers to capitalize on the upswing in orders for commercial airliners that we are seeing today.
But the pressure hasn't lifted completely. With the continuing demand to cut the cost and carbon emissions of air travel, aircraft manufacturing companies are increasingly compelled to reduce development costs and improve the operating efficiency of their aircraft. To this end, the outsourcing of engineering services is playing an ever more important role, enabling manufacturers to maintain margins and lower costs without compromising quality. This article will chart the progress of outsourcing in the aviation industry to date, and investigate how the relationship between outsourcers and the major players in the industry is set to develop in the future.
First Steps Offshore
Outsourcing in the aviation industry has come a long way from the low-end projects undertaken in the early 1990s, which involved the basic use of computer-aided design (CAD)/computer-aided manufacturing (CAM) for the creation of drawings and modelling from 2D to 3D. By the turn of the millennium, the industry, taking a lead from the automotive sector, started to wake up to the fact that outsourcing projects in general, and outsourcing them to places like India in particular, held many advantages. Not only was there a large pool of highly-trained engineers to hand in India, but the time-zone and cost advantages were also highly attractive. In an industry that operates at low margins, any such advantage over competitors was a boon.
The increased maturity level of the IT services outsourcing industry also played a large role in bringing engineering outsourcers up the value chain, demonstrating the capability of various consulting firms that moved into the aerospace space to work alongside customers on ever-more complex core projects. As a result, aerospace original equipment manufacturers (OEMs) and tier-one suppliers are these days entrusting increasingly high-end and complicated projects into the hands of outsourcers. Correspondingly, the large IT services players have extended their offerings and core skills to enable them to bring high quality, high value and intelligent engineering services to market.
Aviation Outsourcing Today
The majority of OEMs and tier-one suppliers now outsource their work to some degree or another. IT in transport, aviation included, involves some of the most cutting-edge technologies, an increasing proportion of which are designed, tested or implemented by third parties. The development and introduction of radio frequency identification (RFID), for instance, could not have taken place without outsourcing part of the research and development (R&D) to third parties. Tata Consultancy Services' (TCS) aerospace engineers, for example, worked in partnership with Oracle in 2005 to pilot RFID with the Engineering arm of UK’s second largest long haul airliner. The trial used RFID to tag critical parts used in aircraft maintenance and repairs at Virgin's Heathrow Airport warehouse in the UK. This enabled the airliner to reduce costs and increase efficiency through improved visibility and accountability, and to gain better automated control of its engineering parts supply chain. The success of such trials have ensured that RFID technology is making waves in the aerospace industry: 14 percent of airports have already adopted RFID technology for employee tracking, with 9 percent using RFID tags for baggage tracking. And when Airbus introduced RFID for tagging tools loaned out to customers to maintain its aircraft, it saved EUR 100,000 in a single year.