How the aerospace industry nailed servitisation
Author : Robert Russell, Chief Technology Officer, Senseye Limited
03 April 2018
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It can be hard to picture what an integrated product and service offering looks like, but really you just need to look up above you: it’s all there, flying overhead. Among the many disciplines it pioneered, the aerospace industry has been a trailblazer in embracing servitisation. By nurturing and developing servitisation concepts, it has enabled the world’s leading aerospace manufacturers to reach exceptional heights of productivity and efficiency.
The consequences have been profound. Today the adoption of servitisation concepts has brought advantages to many industries: it improves the way companies work with customers, opens new revenue streams and creates innovative working practices.
The most visible effects of servitisation are in the manufacturing sector. Dr Howard Lightfoot, manager of the Operations Excellence Institute at Cranfield University, describes it this way: “In recent years, more and more manufacturers are competing through a portfolio of integrated products and services. This is a conscious and explicit strategy for manufacturers, with the provision of product-centric services providing a main differentiating factor in the marketplace. And it’s this which has become known as the servitisation of manufacturing.”
And while the aerospace industry nailed servitisation more than two decades ago, manufacturers can still learn a lot from this innovative sector’s connected world.
Being brave
Recognising the frustration felt by customers at the high capital outlay, maintenance difficulties and uncertain ongoing costs of the post-war aviation boom, in 1962 Rolls Royce took an opportunity to move ahead of their competitors. In an extraordinary move, the company changed from selling engines to offering all-inclusive packages promising ‘outcome as a service’.
These packages bundled engine equipment, maintenance and management together. The outcome was that airlines signed up to lease-type agreements, effectively outsourcing the risk and responsibility of engine management. The succinct term they coined to describe this was ‘Power by the Hour’.
More remarkable was the outcome for engine manufacturers. In taking on complete engine responsibility, they needed to reassess their internal processes and remodel their business and supplier structure to support this new integrated leasing model.
Whoever pitched that idea to the board must have been very persuasive. The management team were clearly forward thinkers, but at that time it was a radical and risky move to adopt a new revenue model, support structure and a more customer-focused mindset.
Nowadays, this model isn’t just applied to engines. Almost every major component of a modern aircraft is supplied ‘as a service’, from the landing gear to the avionics.
Working collaboratively
This new integrated operational support model placed a lot of the risk on suppliers to deliver the contracted services and still make a profit in an unpredictable environment. The only way this could be done was through working closely with customers, collecting data to understand how the assets were used, and employing predictive maintenance. This helped determine opportunities for maintenance and life extension, effectively reducing exposure to risk.
More importantly, the entire value chain had to be focused on keeping planes in the air. With real-time monitoring in place, any faults could be identified early and an engineer despatched with the relevant components ready to go as soon as the plane landed – so the solution was ready and waiting for the problem to arrive.
Making this situation happen needed everyone involved to buy into it. From component manufacturers and staff to airports, airlines and analysts, it was a truly multidisciplinary team effort.
Collaborative working didn’t stop there. Alongside the day-to-day challenges of meeting expectations, competitors also worked together to invest in the technology and infrastructure required to shift the industry into a new era.
This collaboration soon extended beyond the consumer aircraft market. Seeing a trend, major defence buyers around the world – including the Department of Defence in the USA and the Ministry of Defence in the UK – decided that they would buy ‘flight hours’ instead of assets. Despite the stringent security requirements, ways were found of working together to deliver what the customers needed.
Continuous improvement
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As founder of FedEx, a company who took full advantage of innovating in the aerospace market to prosper, Fred Smith summed up the business situation perfectly: “You absolutely, positively have to innovate, if only to survive.”
The servitisation of the aerospace sector has been awe-inspiring, but the process is ongoing with capacity for continuous improvements. Greater prediction accuracy and looking further ahead are two key areas for improvement. Obtaining the best quality information to drive these will enable better calculations for the remaining useful life of equipment, slashing unplanned downtime and further optimising costs.
The processes involved in servitisation have similar capacity for additional investment and improvement, particularly in supporting the whole supply chain to buy into the servitisation model. This includes ‘just-in-time parts’ ordering - something the manufacturing industry is particularly good at – as well as improved stakeholder empowerment through training.
Lessons for other sectors
Manufacturers of physically large, high-value products – such as mining equipment or dockside cranes and other large-scale manufacturing sites – are currently investing in technology, as they give potential for big gains in productivity and cost efficiency. These investments also enable servitisation .
The challenges are huge, but so are the gains. The aerospace industry’s development was driven by cost and safety. Others may be focused on differentiation, environmental compliance or faster response times in a competitive marketplace.
Industry in general can learn a lot from the aerospace sector’s journey to a servitisation model. The landscape is different; the aerospace sector has a smaller number of key players, tighter supplier network and a cost and reliability-focused customer base, but the concept remains the same.
To engage successfully, collaboration is key to solving problems. Manufacturers must focus on more collaborative working, in particular availability and sharing of data and the integration of data sources. For example, connecting component performance characteristic data to a manufacturers’ predictive analytics solution provides a more complete picture of machinery health. By automatically forecasting machine failure, without the need for expert manual analysis, it helps manufacturers avoid downtime, and save costs.
The supply chain also needs to be optimised to enable the manufacturer to deliver the promised service level, while reducing the amount of stock and materials held.
This presents challenges for suppliers and manufacturers, which again could in part be helped by collaborative working with competitors (now termed ‘coopertition’) – for example having a shared pool of components.
The sky’s the limit
The aerospace servitisation model is now accepted as an industry standard in a high-stakes, increasingly busy and highly regulated sector. Pressure from airlines wanting lower costs and the suppliers’ pursuit of competitive advantage drove the industry to push the boundaries when it comes to streamlining processes, adopting advanced data analytics and pushing changes throughout the value chain to deliver a complete, turnkey solution rather than sell a single product.
It is a lesson those operating in other industries should and can learn from. As Peter Sondergaard of technology research firm Gartner rightly points out: “Every company is a technology company.”
For more information on how this applies to servitisation, visit senseye.io. The blogs: What is Servitisation and how does Predictive Maintenance help? and What does IoT mean for the smart factory? How much should my company invest into condition monitoring and prognostics? offer useful tips on getting started with machinery monitoring.
1. Quoted in Servitisation: The Changing Face of Manufacturing and Service, Nalina Athyantha, April 2017
2. Inc. Magazine, October 1986
3. Peter Sondergaard, Everyone is a technology company, https://blogs.gartner.com/peter-sondergaard/everyone-is-a-technology-company
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