In the decade to 2020, the Australian government has earmarked more than $150 billion in spending on new defence capabilities. Around 80 per cent of the country’s warfighting assets are being replaced or upgraded, creating major opportunities for the local defence industry, with the rate of spending only forecast to increase.
Looking beyond the sticker price of these new assets, however, how will this budget be spent? Will Australia follow the procurement and sustainment models of the past, or will we see a transformation to embrace innovation using best-of-breed technologies that are proving globally competitive?
The Australian public will be watching with great interest to see that taxpayers get value for money. And that will depend less on the advertised price of the assets and more on how they are procured and managed over their entire life cycle, with the potential for the whole-life cost, availability and longevity of assets to vary enormously.
The Australian Defence Force and the defence organisations that support it are currently undergoing digital transformation to provide increased capability, flexibility and innovation. Given current spending on defence assets, how quickly transformation occurs is crucial to achieving return on investment, operational effectiveness and lasting industry development. Equally important are the enterprise systems that support the assets with efficient and effective procurement and sustainment processes.
New technologies like artificial intelligence (AI), digital twins, drones and predictive maintenance – and new contracting arrangements such as performance-based logistics (PBL) – are also causing defence organisations to rethink their enterprise resource planning (ERP) investments. This appetite for digital business initiatives is fuelling what Gartner calls a “postmodern ERP strategy” (Gartner, August 2017) that provides more flexibility for business capabilities.
C-level executives are well aware of the pitfalls of excessive standardisation on common enterprise software suites with any number of well documented failures of “one-size-fits-all” megasuite ERP solutions. In response, suppliers are now enabling and clients embracing a more versatile two-platform ERP strategy that provides local autonomy while still integrating with corporate processes.
Data-driven decision making
While the importance of digital transformation cannot be overestimated, its difficulty can be overstated. Most of the time, digital transformation simply means moving away from paper-based and other manual, laborious processes to digital ways of running operations. With digital transformation, outdated enterprise systems patched over with hundreds of spreadsheets and paper forms and white boards will be retired. In their place, modern digital systems will support data-driven decisions delivered to a workforce via whatever digital devices are appropriate.
This digitisation process involves much more than replacing or replicating existing manual processes on digital platforms. It is also about leveraging data to co-ordinate and optimise processes in ways that were not achievable before.
When all of the information about a warplane is available digitally within the one system, for example, parts required for maintenance can be automatically ordered based on complex configurations, compliance rules and operational histories and delivered to the mechanics working on the plane just before they actually need it. Easily translating all the data required from a set of spreadsheets – let alone paper documents – would be an almost impossible task.
Asset management is critical
Not all enterprise systems tasked with asset management support the same level of detail. Nor do they all support the same level of process optimisation, particularly when it comes to complex asset maintenance. This makes the choice of asset management systems critical to the operating cost of assets and the value they deliver over their lives.
Through optimised planning, for example, best-of-breed asset management systems have reduced maintenance costs by as much as 15 per cent. They can also significantly reduce visit times, which translates to increased availability in the field. IFS customers with systems supporting predictive or reliability-centred maintenance strategies have also seen service intervals extended by 30 per cent, effectively increasing asset availability by almost as much.
Procurement performance can also be improved by ERP solutions with advanced project management capabilities focused on sophisticated assets. Digital transformation can also be accelerated if the ERP incorporates advanced asset management capabilities. Asset information captured during procurement can then be leveraged for their sustainment.
These are just some of the performance improvements defence organisations around the world are delivering using modern off-the-shelf software. This is not even taking into account future improvements that will be achieved with new technologies such as AI, digital twins and augmented or virtual reality. Often, this has been achieved with a two-platform strategy combining a centralised ERP backbone with software that drives key business processes.
Innovate via contractors
The ADF does not have to do all the heavy lifting when it comes to digital transformation. Much of the innovation will come via defence contractors under sophisticated contracting arrangements such as performance-based logistics (PBL). In fact, IFS technology is already enabling PBL-based availability contracts managing aircraft, engines and spare parts with global defence OEMs including BAE, Lockheed, GE Aviation and Saab.
With PBL, the government will contract a defence OEM to provide fleet management, as well as maintenance for the assets. The contractor’s profit depends on how well the assets perform. The government benefits from services provided under a highly efficient operating model. With strong engineering capabilities and a focus on continuous improvement, the contractor can also improve its profit margins.
In this scenario, the ADF does not have to replace its existing enterprise systems. While it has promoted the standardisation of ERP systems for many processes, such as finance and HR, in recent years, this should not be a barrier to achieving asset management excellence by employing a two-platform ERP strategy.
Improve contractor performance
Contracts based around PBL provide a powerful incentive for companies to improve the performance of assets. They will be looking for the best enterprise technology platform to deliver better availability of assets at lower costs while meeting the contracted requirements.
Defence support organisations will not stop with what they can deliver out of the box with best-of-breed asset management solutions. With digital transformation, they will be constantly asking, “How can I change how the organisation operates to make best use of technology?”
Advanced technologies like digital twins and predictive maintenance are already seeing applications in enterprise asset management. In the next few years, new technologies will become not only mainstream but necessary to remain competitive. When AI becomes commonplace and augmented reality technology is routinely used in maintenance, the ability to support processes digitally will be even more important.
Yesterday’s manual processes evolve to become today’s digital processes, and in turn will become AI-driven processes that continue to drive performance improvements. There will continue to be new ways to save money, improve the availability of assets and extend their useful life for longer than originally anticipated.
Many of the sustainment strategies that will be employed can already be seen at defence organisations achieving world’s best practice today. These include maintenance planning to improve turnaround time, maintenance optimisation using techniques such as reliability-centred maintenance, and the use of digital twins and augmented reality technology.
Increase operational availability
One leading global contractor using IFS for asset management, for example, is now delivering up to 30 per cent more operational availability between maintenance visits. The global contractor was previously working to a maintenance interval of 500 hours flying time between inspections. Using reliability-centred maintenance, by analysing which inspections didn’t make a finding of anything to do, and other metrics, they were able to extend the interval between visits for this strategic asset to 650 hours.
How was this achieved? On each maintenance visit, there are a hundreds of inspections engineers have to make. One of those inspections might be to check an actuator on a wing. This may have a recommended inspection interval of 100 hours of use. But if you have performed 60 inspections without finding a single actuator with any signs of wear, then you know you are over inspecting. If at 200 hours there are still no positive findings, then it may be safe to extend the inspection interval to 150 hours.
By performing this sort of analysis across all the inspections required, reliability engineers were able to optimise the maintenance to increase time in the field by 30 per cent. While these are common strategies in fleet maintenance, not all organisations have support systems that can track all the parts on each asset at the level of detail required to achieve this.
Leverage digital twin technology
The benefits of maintenance optimisation achieved above are possible using today’s most advanced asset management systems. Continuing the warplane example, it is possible to capture the exact configuration of every aircraft, their history and every flight hour, with every piece of data cross checked for accuracy.
This high quality information is made available to the system’s users in highly integrated workflows defined based on decades of best practice from operator and fleet management organisations. It also enables engineers to make the data-driven decisions to optimise maintenance policies.
While this approach is state of the art, further performance improvements are possible with digital twin technology. The virtual replication of physical airplane parts and the simulation of their performance over airframe life cycles, for example, holds significant promise. Boeing, for instance, has achieved up to a 40 per cent improvement in first-time quality of the parts and systems it uses to manufacture commercial and military airplanes.
Digital twin technology in conjunction with real-time/near real-time monitoring and predictive analytics can help detect a defect earlier, through prior insight into the component’s condition. It can also further reduce maintenance visits and costs associated with asset inspection and service schedules.
Augmented and virtual reality
In the defence industry, the demand for maintenance personnel is rapidly outpacing supply. As far back as 2014, the UK Military Aviation Authority (MAA) reported that the RAF was missing 411 tradesmen for aircraft maintenance – a 12 per cent shortfall in the number of trained engineers required. Since then, this shortfall has inexorably increased in many MODs and DODs. Assisted, augmented and virtual reality can help bridge this gap.
For example, IFS Labs has developed an integration between IFS Applications and Microsoft HoloLens that enables service engineers to see holographic IFS software data on the VR headset screen. This information is plotted – virtually – on to the asset they are servicing. By displaying information as a real-time overlay, engineers get immediate access to relevant asset-specific data such as service history, performance analysis and temperature levels.
Using assisted reality technology from TAE Aerospace, IFS Labs has also developed a proof-of-concept to allow one-to-many knowledge transfer to change the way that companies maintain complex assets. Purpose-built for complex industrial environments, the technology preserves the spatial awareness users need to work safely. Using a lightweight near-eye headset and wearable computer, technicians can perform complex maintenance with an expert using a touch screen expert station back at maintenance HQ looking over their shoulder – virtually.
Performance of assets is key
With spending on defence assets at historically high levels, the ADF must oversee the digital transformation of the Australian defence industry with a focus on improving the performance of assets to maximise defence capability and minimise costs.
The use of innovative contracting arrangements and best-of-breed systems with a two-platform ERP strategy can accelerate this transformation, leading to significant benefits in asset sustainment. Over the long term, this transformation will enable further benefits leveraging new technologies and innovation so that the performance of the ADF remains globally competitive.
About the author
Warren Zietsman is managing director for global enterprise applications company IFS in Australia and New Zealand. He is responsible for ensuring the delivery of modern enterprise systems that create value for IFS’s customers, developing the local business strategy, and expanding the company’s network of quality resellers.