Aerospace manufacturing is a tale of two markets: the rapidly expanding commercial aviation segment and the budget-conscious defense sector.
Both sides offer opportunities for the channel, particularly in enterprise resource planning (ERP) systems. In the commercial area, the latest generation of popular commercial airliners -- such as Boeing's 737 -- and the increasing demand for private aircraft contribute to a surge in aircraft production. Companies in the aerospace supply chain are buying ERP software solutions to boost their time-to-market. In the defense space, U.S. military budget cutbacks place pressure on manufacturers to keep costs in check, while maintaining high levels of quality. Here, ERP systems are seen as a way to remain competitive in a tight market.
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Resellers and integrators are picking up consulting and implementation work in the aerospace supply chain. ERP software vendors face difficulty keeping pace with the need for installation support, so they are turning to the channel for assistance.
Ed Talerico, aerospace and defense director at Infor, a business application software vendor based in New York, noted that demand has grown faster than the company has been able to grow its consulting services.
"We have a set of integrators we work with that know our solution very well and have experience in the industry, so they can assist us from a professional services perspective," Talerico said.
The company works with partners such as Infosys, a global consulting and integration firm with headquarters in Bangalore, India, and Business & Decision, an international consulting and systems integration company.
Commercial taking off
Commercial aviation hit a revenue milestone in 2012 and has continued its growth surge from there. Deloitte's Global Aerospace and Defense Industry Outlook predicted another record this year.
"The global commercial aerospace sector is expected to sustain its significant revenue and earnings growth in 2014, underlined by record-setting production levels, both at the platform and supplier base," the report noted.
That growth shows no signs of abating. Deloitte anticipates annual production levels for commercial aircraft will expand 25% over the next decade.
Columbus cited the refresh of the 737 model and the rise of midrange, economically driven jets as contributors to the uptick in production. Boeing, for example, has generated about 1,800 aircraft orders for its next-generation 737 MAX; deliveries are expected to begin in 2017.
Deloitte anticipates annual production levels for commercial aircraft will expand 25% over the next decade.
The production story is similar at the opposite end of the market.
"Demand for private aircraft continues to increase," said Talerico, who listed Piper Aircraft among Infor's customers.
Talerico said demand is such that people with the means and desire to purchase a private jet are queuing up to do so. The wait, in some cases, can run up to two-and-a-half years.
Amid that level of demand, the commercial aircraft segment is focusing on speed and the ability to deliver into a growing market, Talerico said.
Kathie Poindexter, a product marketing manager who handles the aerospace vertical at Epicor Software Corp., an ERP vendor based in Austin, Texas, said time-to-market pressure and monumental production levels have sparked new ERP implementations.
In January, Aero Stanrew Ltd., a manufacturer of electromagnetic components and electronic systems for aerospace and defense and other customers, selected Epicor's ERP system. The company, with offices in the U.K. and Tunisia, has seen 60% growth in the last two years. Airbus and Boeing flight platforms use the company's products. Dot Net IT, an Epicor channel partner based in the U.K., will provide implementation support.
"Over the past year, it is fair to say we have seen an increase in activity over other verticals for new ERP implementations and upgrades," said Stephen Edginton, solutions and technical director at Dot Net IT.
The deployments aim to provide greater flexibility, support lean manufacturing initiatives, and improve collaboration throughout the supply chain and up to the tier-one aircraft manufacturers, Poindexter said.
"They need to support the growth in orders," she said.
an ERP project management consulting firm based in Toronto, said his company's clients "are under pressure from their customers -- often aircraft and engine OEMs and their tier-one suppliers -- to cut costs and shorten lead times."
Shorter time-to-market requirements compel clients to "increase the velocity of products through their supply chains -- from design engineering to fulfillment," Gross noted. "Generally, this means tighter integration and control among engineering, purchasing, manufacturing and quality functions. In part, our clients achieve these efficiencies by integrating ERP, PLM [product lifecycle management] and quality systems, and by automating workflows where practical."
Pemeco's customers include companies with significant exposure to commercial markets, as well as defense-oriented companies diversifying into commercial aerospace and non-aerospace industrial segments.
Defense: Budget considerations
The outlook is considerably different in the defense segment, where global revenue is expected to drop 2.5% this year, according to Deloitte.
"Certainly, the defense industry has been contracting in many ways," Poindexter said.
That trend appears likely to continue. In February, for instance, U.S. Secretary of Defense Chuck Hagel proposed reducing the Army to pre-World War II levels, eliminating A-10 attack aircraft and shelving Kiowa helicopters, among other cost-cutting measures.
In light of the financial constraints, aerospace manufacturers in the defense sector are looking into cloud-based ERP software solutions. The cloud subscription model makes it easier for companies to adopt ERP, since they can avoid upfront software licensing costs.
"Reducing the cost of IT as a means to remain competitive and to be able to maintain a greater portion of their workforce is something they are all looking into right now," Talerico said.
Infor plans to release a series of industry-specific cloud software suites. Talerico said the company will provide a number of cloud products for aerospace and defense companies, including ERP; time, attendance and labor; project management; data collection; and reporting.
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"By going with a cloud solution, they can avoid the whole Capex gauntlet they have to go through to select an ERP solution," Talerico said.
"Our client base is showing an increasing appetite for [Software as a Service] SaaS-based ERP solutions," Gross said, adding that one of Pemeco's primary practice areas relates to ERP software evaluation and selection.
But Gross noted that SaaS ERP adoption rates in the aerospace and defense market appear to be lower when compared with adoption rates in other verticals. Gross said that hesitancy can be attributed, in part, to onerous export control compliance obligations that restrict where data can be stored and by whom it can be accessed.
"Also, newer SaaS vendors have to play catch-up to develop functionality that rivals the capabilities of established systems that have had a 20- to 30-year head start on development," Gross said.
Companies pursuing the aerospace and defense vertical see much of their business in the middle market.
Plex, for instance, doesn't target prime contractors such as Boeing. Instead, the company pursues business in the aerospace supply chain among companies operating underneath the primes. Secondary and tertiary manufacturers and suppliers, typically below $100 million in sales, are taking "baby steps, getting away from manually doing supplier management and being able to capture quality data," according to Columbus.
He said many smaller aerospace suppliers currently manage quality via spreadsheets or on paper.
Poindexter said Epicor sees much of its aerospace and defense activity among midmarket and lower-midmarket companies. She said the company also works with the larger tier-one companies, installing ERP software solutions in those clients' smaller divisions.
Gross said Pemeco's aerospace clients range in annual revenue from $35 million to $2 billion.
"When we work with larger clients, we typically lead projects for their subsidiaries or divisions," Gross said.
In one example, Pemeco has managed ERP implementation projects over the past dozen years at 10 Curtiss-Wright Corp. subsidiaries in the U.S. and Canada. Curtiss-Wright, a company that traces its origins to companies founded by aviation pioneers Glenn Curtiss and the Wright brothers, continues to pursue commercial aerospace and defense markets.