Lead Time Reduction in BAE SYSTEMS’ Defence Market

Introduction

This report concentrates on the way BAE SYSTEMS (formally British Aerospace after its recent acquisition of GEC Marconi) deals with the inherently long lead times that occur between contract with customer to the actual commercial production and provision of the product/solution.

This report will describe the overall operational situation faced by BAE SYSTEMS, and then concentrate on the more challenging military market. A brief description of a typical classic aircraft design cycle will be provided, followed by a discussion as to why this is unsuitable for most current and future projects due to the unique situation that defence systems companies face. Finally, an appraisal on current practices and a look into the future concludes the report.

General Issues

With long time scales averaging around ten years inherent in aircraft design, many potential problems can occur that must be considered in a top level manner, as they will effect the entire operation over the design cycle.

Such problems include the obsolescence of technology and manufacturing techniques leading to spare part problems and lack of technical knowledge for day-to-day maintenance once the aircraft is in service.

Conversely, the introduction of new technology or new manufacturing techniques during the mature stages of a design project can prove to be beneficial if used, but typically, will be incompatible with what will seem to be archaic and inflexible designs.

These are, arguably, the most critical issues that the company must face and overcome if it is to survive and prosper in the market.

Focus of Report

Although the above issues are as applicable in civil aircraft design as they are for the military side, the civil market is more predictable, with the main target being the reduction of aircraft purchase cost, and more significantly, the cost per aircraft passenger mile. Other targets include comfort, facilities etc. as part of market differentiation, but these are extras that the carrier requests. Furthermore, extrapolating market demands and future trends in the civil market is relatively straightforward, lessening the risk of undertaking long projects.

This report will therefore concentrate on the military market, where meeting the customer’s role requirements and performance specifications are the main drivers, with cost being a very close second. Furthermore, the need to meet affordable, yet potentially unexplored requirements necessitates novel and research intensive approaches, increasing the lead-time significantly, typically to values of around fifteen years.

This increase in the lead-time is further problematic. In an ideal situation, the customer’s requirements, once agreed with the manufacturer, should remain constant. This, however, is not the case. Changing socio-economic issues and geo-political situations vary greatly during such a long development life cycle, and may require modifications and additions in the aircraft’s role and specification after the original requirements have been defined.

Although the solution to the latter problem may seem primarily contractual, it must be stated that restricting the customer’s ability to alter requirements during the design cycle not only causes tension, it also effects which company the customer turns to; promise flexibility with little cost penalty to the customer during the competitive bid process, and you have a better chance of receiving the contract.

Now that the problem has been underlined, it is apt to look at the way BAE SYSTEMS previously worked on aircraft projects, before looking at current practices and the shifting change in emphasis.

The Past

This section concentrates on one high profile and large military aircraft project that BAE has undertaken, namely Tornado and looks at the emphasis, project management and design aspects of things.

The Tornado aircraft produced around the early 1970’s was a solution for the MOD’s requirement of a multi-role aircraft capable of all weather, all terrain performance as both a bomber and a fighter.

The way the aircraft was designed was based on old methodologies. Starting with pilot’s eye point and some basic requirements, the aircraft’s shape was determined.

Typical with the times, the physical shape of the aircraft determined the performance, which was why the Tornado had sweeping wings to change its flight performance at low and high speeds.

This design approach meant that the project planning and design processes that were carried out were very iterative, technically known as “Waterfall Design”, illustrated in figure 1.
Figure 2 - A generic illustration of the “Waterfall Design??? method

Figure 2 – A generic illustration of the Waterfall Design method

Each design group was separate and would concentrate on one small section, passing on the completed design and its ramifications to the next small design group.

Quite simply, it meant that the next stage of the design was dependant on the previous one being completed. The problem with that was the very long design time and that if a change were made half way through, the process would have to begin again.

This, though, was in some ways was a product of the political climate and technical abilities of the time. The overall process known as the “Downey” Cycle, laid out in 1962 and illustrated in figure 2, aimed to control risk by a series of project stages with formal decision points between them. During the Cold War there was pressure for projects to be pushed forward into full development and production quickly so as to meet a specific Soviet threat, even though much risk remained, meaning that some projects ran into technical problems, which caused delays.
Figure 2 - The Downey Cycle, traditionally used to reduce risks in large military projects

Figure 2 – The Downey Cycle, traditionally used to reduce risks in large military projects

Whilst there was difficulty using the Downey Cycle in terms of adaptability, projects relied less on complex high technology and more on well understood physical designs such as airframe structures, meaning that alterations in requirements took less time.

However, unlike in the beginning of the aerospace industry where aerodynamics was the challenge, or during the Tornado era where airframe structures and advanced material properties were beginning to be understood, we are now in a new systems/avionics age, which, due to its overwhelming complexity requires a complete redefinition as to how projects are carried out.

The Present

Looking predominantly at the Eurofighter initiated contractually in 1988, this section looks at the transition from the Downey Cycle into the “Smart Procurement??? strategy defined in 1995 by McKinsey and the effects on the design and operations process.

In the eighties, with the advances in computer technology and the overwhelming improvements in microprocessor technology and software capabilities, the fact that systems technology would be everything but stagnant caused projects to be seen in a new light.

It was now guaranteed that a design fifteen years down the line would not only be archaic in a systems sense, it would also be superseded by inevitably new and better technologies, a fact illustrated elegantly by Moore’s Law in figure 3.
Figure 3 - Moore’s Law states that the number of transistors in a processor would double every 18-24 months. This has the greatest impact in the aerospace industry, as illustrated above using Eurofighter start and flight

Figure 3 – Moore’s Law states that the number of transistors in a processor would double every 18-24 months. This has the greatest impact in the aerospace industry, as illustrated above using Eurofighter start and flight

It became clear that the systems side of a project would become the critical path, and that the design process should focus on it.

Furthermore, the changing political climate at the end of he Cold War signalled a huge shift from a predictable and constant threat to more sporadic and random threats in a multitude of environmental conditions. This meant that the long development life cycle would be prone to even more “Requirement Creep???; the changing requirements implemented to deal with new global threats or changing rules of engagement. Adaptability in design became ever more critical, with the key word in BAE being “Transparency???; the ability to add, remove or alter any item, pre and post design.

Before looking at how this is done in terms of project management, one must consider the constraints and dimensions that effect the management due to the actual aircraft itself. Metaphorically, likening the aircraft to the human body sheds some light, as is illustrated in table 1.

Human Body
Aircraft
Physical constraints
Skeleton
Airframe
Life support
Homeostasis
Hydraulics
Higher functions
Brain
Avionics

It is easiest to cater for inadequacies in one of these dimensions by adding flexibility and functionality in another. In fact, now in the 21st centaury, understanding of the airframe and hydraulics has reached maturity and can be enhanced by using advanced avionics (e.g. fly-by-wire is computer controlled flight that allows the pilot to safely push the aircraft to its limits).

Furthermore, looking at the structural aspects, it is straightforward to add transparency to a design; for example, if you have a display that may be upgraded once the aircraft is in service, it is unwise to incorporate the software graphics process to the display, as that would have to be discarded every time the display is changed.

With the identification of systems as the critical design path, BAE had to restructure and focus on the processes in which the design was carried out.

As mentioned above, in the changed strategic environment a different approach had to be adopted. Now, more time can be taken for early concept and assessment phases, exploring options and reducing risk by testing technology (typically up to 15% of costs). This approach is known as the “Up Front??? or “Left Shift??? approach, as a significant time is spent initially determining the risks and requirements of the project; if the company understands the requirements correctly, the customer gets what he wants.

Therefore, those projects that are chosen for full investment in subsequent demonstration and manufacturing phases will be better defined and involve lower risk and are thus more likely to run to planned time and cost.

In order for the requirements to be determined early on, participation between all the design and logistical teams is critical. By combining various people of multi-disciplinary skills and focuses in Integrated Product Teams or IPT, the bigger picture can be considered early on. This approach was introduced company-wide by BAE in the mid nineties, and is based on the general ideas behind IPT.

IPT members should have complementary skills and be committed to a common purpose, performance objectives and approach for which they hold themselves mutually accountable. Members of an IPT represent technical, manufacturing, business and support functions and organisations that are critical to developing, procuring and supporting the product.

Having these functions represented concurrently permits teams to consider more and broader alternatives quickly, and in a broader context, enables faster and better decisions. Once on a team, the role of an IPT member changes from that of a member of a particular functional organisation, who focuses on a given discipline, to that of a team member, who focuses on a product and its associated processes.

Critical to the formation of a successful IPT are:

  1. All functional disciplines influencing the product throughout its lifetime should be represented on the team;
  2. A clear understanding of the team’s goals, responsibilities and authority should be established among the business unit manager, program and functional managers, as well as the IPT;
  3. Identification of resource requirements such as staffing, funding, and facilities.

With the shift in criticality of systems and requirements, the Downey Cycle was no longer appropriate, so BAE introduced, along with IPT, Smart Procurement – a process defined by McKinsey in 1995. The project process is illustrated in figure 4, as a comparison to the Downey Cycle. Note the early start-up of the IPT and the increase of the life cycle to include disposal.
Figure 4 - The smart procurement method, adopted after a report by McKinsey to combat high risk and requirement creep, prominent factors in today’s geo-political situation

Figure 4 – The smart procurement method, adopted after a report by McKinsey to combat high risk and requirement creep, prominent factors in today’s geo-political situation

Looking at the figure above, a seamless flow of responsibility is achieved from start to finish of the acquisition process. The IPT is answerable to a Capability Manager, representing the customer (the Ministry of Defence), who will control the project from cradle to grave. Furthermore, for IPT and Smart Procurement to be truly effective, the customer must also have an IPT that is in constant contact with BAE’s IPT.

With the onset of Smart Procurement, the design methodology has also changed. Unlike the top down Tornado approach, where the designers start with the pilot’s eye and “Waterfall??? down to the final design, the mixed experiences of an IPT allows designs to be considered top down, bottom up and sideways – a critical requirement due to the incredible trade offs that must be made nowadays between systems, structures, cost and performance.

Aside from Smart Procurement and IPT, BAE has also changed the way designs are the design tools are considered. There is now an emphasis on modularity in software, hardware and the very tools used to design them. This is akin to black box theory, illustrated in figure 5, where you simply define the input and output. There is a process (be it software or hardware) between them that facilitates the change, which can be changed as technology changes, without effecting the input and output.
Figure 5 - A metaphorical black box illustrating data flow through a black box or object. This allows future flexibility, simply by changing the contents of the box; as long as the inputs and outputs still correlate, it makes no difference as to the contents of the box

Figure 5 – A metaphorical black box illustrating data flow through a black box or object. This allows future flexibility, simply by changing the contents of the box; as long as the inputs and outputs still correlate, it makes no difference as to the contents of the box

However, it must be stressed that this approach will only work successfully if the requirements are defined correctly. If the inputs and outputs are incorrectly defined, the ability to change and update the “black box??? will not help in any way. In other words, it leads back to “Left Shift??? approaches and IPT involvement from the start in defining what the customer requires.

The nature of long design times on aircraft systems has further ramifications, due to it being the critical path in the process. The avionics system for Eurofighter took around eight years to design up to now (at the time of writing, even though Eurofighter is flying, it is still in the test stages, and the avionics systems are far from finalised), whereas the airframe took three years. This poses problems, as the design isn’t top down. This means that all the non-systems designs must be stagnated, so that they can coincide with the critical avionics systems path by means of predefined maturity points, as illustrated in figure 6. At maturity points, a reassessment is made as to what the next requirements are for the airframe, say, due to the current systems design and vice versa.
Figure 6 - All designs must be stagnated and broken up according to the critical path, namely systems design. At set maturity points, a reassessment is carried out to determine what needs to be done next due to systems design ramifications and vice versa.

Figure 6 – All designs must be stagnated and broken up according to the critical path, namely systems design. At set maturity points, a reassessment is carried out to determine what needs to be done next due to systems design ramifications and vice versa.

The question remains as to whether the Smart Procurement initiative has helped. The overwhelming employee opinion is that there has been a vast improvement over the last five years, with the reduction of bureaucracy and increase in productivity and turn around.

With the early emphasis on getting the requirements correctly defined by means of IPT, everyone can approach a project with confidence and the knowledge that designed-in contingencies exist for the inevitable requirement creep.

Unfortunately, however, annual examination by the National Audit Office (NAO) of the top 25 MOD defence programmes, including many run by BAE, led them to report that despite the changes, many major programmes suffer considerable time over-runs. Similarly, after some years of improving cost performance in the 1980s, recent NAO reports have recorded average overall cost over-runs of 7.5% – 8.5% above original estimates (excluding Trident and Eurofighter) as shown in figure 7.
Figure 7 - Total cost variance for the major project reports 1993 to 1997

Figure 7 – Total cost variance for the major project reports 1993 to 1997

The main causes of problems were cited as:

  • Slippage due to technical difficulties, budgetary constraints leading to the postponement of expenditure, the redefinition of requirements and difficulties over collaborative programmes;
  • Cost over-runs due to programme changes, changes in equipment specification, poor estimating and inflation of prices for defence equipment in excess of inflation in the economy as a whole.

It is clear from the above graphs that whilst Smart Procurement has gone a long way to minimise the impact of requirement creep and technical advancement, the changing pace of technology is faster than the ability of companies and their operational practices to adapt and cope.

In fact, the changes that are happening now are not merely effecting BAE’s aircraft production and lead times, the are actually changing the very nature of the business. Cooperation between other foreign companies is now the norm for large projects, and customers are now not simply giving the specifications for an aircraft; they are now stating a strategic requirement they would like to have. The solution may be an aircraft, an entire systems and logistics operation where aircraft are simply part of the equation or even something that doesn’t involve aircraft at all. This is partly the reason why BAE has changed its name to BAE SYSTEMS.

This is all leading back to the fact that as long as the solution meets the correct requirements, the customer will be satisfied, as well as how BAE intends to meet these ever changing requirements; in effect the company has to hit a moving target, with both threat and technology as the changing variables with time – how should the company extrapolate or accommodate these defining variables in the future?

The Future

In order to cope with the clearly changing market place and practices, as well as cope with requirement creep and changing technology, BAE has started up three departments that will define all future operations of the company.

Firstly, there is the Operational Efficiency Improvement or OEI department, which looks at the current and short-term top-level issues that affect the company, and then there is the Generic Host, or GHost department, which looks at practical ways that lead time can be reduced in a technical capacity. Finally, there is Systems Pistons Infra Red Is Tops or SPIRIT, which looks at the potential impact of emerging technologies, with the aim of aiding long-term technical knowledge and extrapolation, although this is an area that won’t be expanded on further in this report, as it’s suffice to say that SPIRIT acts in close collaboration with GHost.

Operations Efficiency Improvement

The formation of OEI as a project stemmed from BAE’s Managing Director of Business Operations, Kevin Smith’s declaration in 1996 that “BAE’s business targets should be 100% schedule adherence, 50% reduction in lead times, and a 30% reduction in cost base???. To achieve these targets, OEI needed to achieve a step change in performance on current and new programmes, which would only be achieved by delivering effective and flexible processes using integrated business systems.

The scope of OEI embraces the Engineering, Supply Chain and Business Support areas by addressing the end-to-end processes that cut across existing boundaries. These processes will be enabled through the use of IT systems which will be off the shelf products, information being input once but used many times.

Approximately £240M has been invested so far, and tangible benefits of some £180M have been realised. By the end of the programme, OEI hopes to achieve benefits in the order of £1bn.

Generic Host

Whilst OEI will have a significant impact on the top-level operational efficiency of BAE, GHost will redefine the way the company views and implements a large project. This department, arguably, is the key factor in reducing aircraft lead-time and the effects of requirement creep in the very near future, and its work is critical to OEI.

GHost’s goals are to produce enhanced systems design processes, methods and tools to existing and future BAE projects. Furthermore, GHost aims to reduce costs and time scales, improving quality and opportunities for the reuse of designs.

GHost is a concept whereby each phase of a systems design, from initial ideas through to the final product is performed in a common IT environment. It is, in effect, an enhancement on IPT; the entire systems (of which the aircraft is a part of), is modelled using software. By including avionics people, structures people, maintenance and even training people during the initial requirements modelling, a clear picture of the system’s direction can be presented.

The use of a common IT environment is basically a means of animating a design document that doesn’t require any building or coding – this approach is also known as rapid prototyping. This gives the customer the ability to get involved with the design and requirements at an early stage.

Through the use of the Generic Host, the systems design cycle can be compressed from what it currently is to a process more parallel.
It is this ability that will significantly reduce lead-times and increase transparency and adaptability in design, as any concept can be tested in a common environment thus evaluating the knock on effects. When combined with an IPT that includes people that are involved throughout the entire project life cycle, problems that may occur further down the line can be spotted and amended.

Conclusions

Over the last two decades there has been a rapid change in emphasis in the Aerospace defence sector. Systems have now become the critical path in design due to the rapid changes and improvements in technology. This is a fact that will not change in the future and the organisation must place emphasis on the systems and technology side of things.

Through the use of IPT and Smart Procurement as well as a requirements biased design process, many potential problems can be overcome, as transparency can be built into the design accordingly.

However, with the move away from aircraft to complete systems solutions and fast reactions to changing political situations, the Smart Procurement approach is not enough. Any future company structure must be able to deal with the effect of long lead-times and changing practices with the following issues:

  • Industrial consolidation
  • Rapid technology
  • Skills shortage
  • Changes in geo-political climates
  • Multi-national partnerships

However, the ideal way of dealing with the long lead-times is not to cope with it, but to reduce it significantly. Through the GHost/SPIRIT initiative, backed by the OEI department, future project lead-times will be reduced through rapid prototyping, where all aspects of a systems life cycle can be modelled and thus considered from the start. At each project milestone, the current progress can be fed back to the initial requirements, giving a clear indication of potential problems and a quantitative measure of progress.

It is clear, therefore, that whilst Smart Procurement is a significant step away from the archaic Downey Cycle, it is but a means of coping with current technical and lead-time problems. However, through the GHost initiative, all future projects will embrace technological change by adapting the focus of the organisation towards rapid prototyping and generic design. With a requirement biased approach and an even broader IPT, the entire design cycle can confidently be compressed, increasing the transparency and adaptability of the design, as well as significantly reducing the critical aspect of lead-time.

References

With many thanks to: Mr R Fowler, BAE Systems – OEI Mr D Owen, BAE Systems – SPIRT Mr A Jackson, BAE Systems – GHost Mr T Wilson, BAE Systems – GHost Mr D Goodwin, BAE Systems.

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