Rich Lesser, CEO
It comes as no surprise that the commercial aerospace industry has taken a hammering over the last year. A 66 percent decline in passenger traffic in 2020 has shrunk the air transportation industry in terms of the number of airplanes flying, gainfully employed workers, and organizations in competition. According to the International Air Transport Association (IATA), passenger traffic in 2021 is expected to remain 40 percent below pre-pandemic levels. Deloitte’s recent study revealed that global commercial aircraft deliveries are estimated at 900 aircraft in 2021, a 44 percent decline from 2018. Dwindling orders and continuous cancellations will further deplete the production backlog. Aircraft manufacturers and component and systems providers have been forced to accept the harsh reality and alter their business approach.
The changes roiling the commercial aviation business will have ramifications for the global aerospace and defense industry for years to come. While the pace of change isn’t expected to abate in 2021, it provides an opportunity for increased attention to detail that will strengthen the commercial, defense, and space sectors in the long run. The defense sector, in contrast, has witnessed steady demand and even some new opportunities. While a new presidential administration and fiscal pressure from reduced tax receipts in the U.S. point toward a decreased defense budget from fiscal budget 2022 onward, it also presents an opportunity for restructuring and increasing integration of digital technologies, similar to the commercial sector.
For organizations that operate in both segments, the contest lies in growing their defense business, maintaining operations, and fortifying their financial position to offset the commercial enterprise’s declines. With its in-depth industry knowledge, global insights, and digital transformation expertise, Boston Consulting Group (BCG) is perfectly poised to help aerospace and defense companies weather the storm and come out stronger. The company’s global team operates across the aerospace and defense value chain to deliver a sustainable competitive advantage to clients, create value, improve operations, and adopt new technology.
“BCG’s purpose is to unlock the potential of those who advance the world. We work across boundaries to take on the hardest problems and to drive real value creation for businesses and for the world in which we live,” expresses Rich Lesser, CEO of BCG. Under Lesser’s leadership, BCG has continued its strong global growth across all regions and practices, driven by investments in new offices, digital and analytics, and capabilities to drive innovation and transformation. Lesser also serves as the chief advisor to the World Economic Forum’s Alliance of CEO Climate Leaders and is on the board of directors of the Business Roundtable where he leads the CEO COVID-19 recovery task force, and is a member of the World Economic Forum’s International Business Council.
Delivering Operational Efficiency
Maximizing operational efficiency and effectiveness is a challenging task for most aerospace and defense companies. Supply chain disruptions, trade instability, changes in customer expectations, and the rise of digital operations have upended services and manufacturing processes, making operations management even more daunting. BCG partners with clients at every level of their organization to drive transformational change in critical areas of operations management ranging from procurement, service operations, supply chain to manufacturing, capital project management, and end-to-end operational excellence. Mindful of the fact that excellence in operations is key to both competitive advantage and a sustainable future, BCG draws on the expertise of its consulting team to deliver tangible, enduring impact across its clients’ entire operations management value chain.
With 12 global operations centers, BCG helps companies transform operations to become leaner, move faster, and supercharge operational efficiency. The company’s operations consulting process enables swift action, and its solutions empower clients to overcome even the most grueling operational challenges. Having completed over 3,000 projects for clients in recent years, BCG’s operations team has achieved tremendous success through close partnerships with its clients. While working with an aerospace and defense organization to set up a groupwide shared-service center for indirect procurement spending, BCG implemented a model supported by optimized processes, governance, tools, and KPIs, which helped the organization save approximately $595 million.
Turning Supply Chain Management into a Competitive Advantage
As customer expectations become increasingly diverse, complex, and volatile, potential markets and optimum manufacturing locations are continually shifting. The increased interdependency at every level has made supply chain networks more vulnerable to costly natural and economic disruptions. BCG helps organizations focus on building resilience and sustainability into their supply chains to minimize disruptions and trade instability. However unprecedented the circumstance may be, BCG is adept at applying best practices and lessons learned from previous crises.
BCG’s supply chain engagement starts with the evaluation of a company’s site and market. The company assesses the performance of the current chain and identifies essential areas for improvement. After conducting a comprehensive diagnostic analysis covering everything from a company’s strategy, network, and processes to its organization, systems, and people, the company delivers and executes a detailed implementation plan. With various supply chain management solutions from innovation centers to hands-on diagnostic tools, BCG helps companies reach peak supply chain performance by improving the metrics critical to success, such as cost, speed, and delivery.
Boosting Effectiveness and Efficiency in Defense
Achieving more with fewer resources could not have been more challenging for defense and security agencies. These institutions must strive to raise the bar in an operating environment fraught with new hardships. BCG’s defense consulting teams can help them boost their effectiveness and efficiency by melding industry-leading best practices with an in-depth knowledge base and understanding of the defense and security sector.
Defense Organizations are faced with multiple challenges like managing budgets to sustain current operations and derive maximum value from future procurements, extract maximum value from innovative technologies like digitization without disrupting operations or compromising on security, and competing with the private sector to win talent and retain the best employees. In the wake of these challenges, defense and security institutions turn to BCG to surmount these barriers due to its extensive experience in both the private and public sectors. BCG’s reputation in tailoring private-sector practices for its defense and security clients is second to none. The company helps its clients achieve impressive outcomes, such as improved equipment reliability, vital operating-model innovation, and significant run-rate savings.
The aerospace and defense industry is in the midst of a significant expansion, but talent is a limiting factor. The current aerospace and defense workforce is aging, and many OEMs are struggling to fill key roles—a challenge that will only get harder as demand increases. “The most obvious sources of diversity, such as gender, ethnicity, and sexual orientation, are indeed important in driving innovation, but variety of work experience and educational background is also meaningful. Importantly, these factors are mostly additive, so companies that are diverse on multiple dimensions are even more innovative,” notes Lesser.