CASE HISTORY
Service part innovation enables first ever whole-aircraft availability contract
Innovative capability approach increases OEM revenues by £1.3 billion and identifies savings of £510 million for UK Ministry of Defence
Background
During 2001 to 2005, BAE Systems and the UK Ministry of Defence (MOD) worked together on a series of pilot maintenance programmes to encourage the MOD to transfer support and maintenance of its mission critical Tornado aircraft fleet to industry.
Supply chain and commercial obstacles obstruct progress
Throughout this period, several obstacles obstructed commercial progress. These included poor availability and management of aircraft spares; high cost of the required spares inventory and the inability to provide aircraft availability guarantees. BAE Systems were also struggling to identify sufficient supply chain cost savings to make the programme financially viable for the MOD.
Innovative capability approach delivers impactful savings.
The Tornado bid team recognised the need to bring in parts planning and parts logistics experts with in-service support experience. At this time, our lead consultant was developing a new supply chain capability model for use in measuring, capturing and sharing capability across BAE Systems’ global businesses.
Initial work with the bid team involved using the model to assess the supply chain capability strengths and weaknesses of BAE Systems, MOD customer and service partners. Our subsequent analysis identified £200 million of new potential savings from improving demand management and inventory management processes and system. With the spares management and commercial hurdles overcome, we were retained to help document the spares solution and prepare the supply chain aspects of the bid.
OEM wins first ever whole-aircraft availability contract
In December 2006, BAE Systems was awarded an initial £947 million contract known as ATTAC (Availability Transformation: Tornado Aircraft Contract) to deliver on- and off-aircraft maintenance, spares support, technical support and training for the next 10 years. Contract scope was extended in December 2007 to include avionics, general systems and engineering services bringing the overall value of the contract up to £1.3 billion.
Servitisation creates lucrative new service market for the OEM
After proving the new supply chain capability approach on Tornado ATTAC, we went on to help set up and support a strategic cross-domain transformation programme. Since 2007, BAE Systems has built on this foundational capability model to enjoy additional fast jet support contract revenues worth in excess of £5 billion. Ian King, Group Managing Director, BAE Systems, explained:
“We are already transferring the learning gained through the development of ATTAC to provide a support blueprint for new aircraft entering RAF service, such as Typhoon, Nimrod MRA4 and the F-35 Lightning II, and also for other large, complex through-life programmes in the UK and overseas.”
Dramatic improvements impress MOD customer
In July 2007, the National Audit Office (NAO) published its independent report “Transforming Logistics Support for Fast Jets” crediting ATTAC with enabling £510 million of savings over the next 10 years compared with previous MOD arrangements. The following operational benefits were also highlighted:
Repair Turnaround Time Decrease
Cost per Flying Hour Reduced
MOD Manpower Reduced
Aircraft Availability Increased To
Transformational Business Benefits for BAE Systems
