Australia’s small to medium-sized business (SMB) manufacturing sector has been given a significant boost as a result of the record $200 billion worth of investment in Australia’s defence industry capabilities by the federal government. The defence sector is already an important part of the Australian economy today and a significant employer, offering almost 30,000 jobs, half of which work for SMBs.
Considering over 3,000 of the companies that supply to the defence sector are SMBs, to achieve the ambitious growth desired, more emphasis needs to be placed on helping them enhance their capabilities in order to become long-term strategic suppliers to Defence. So, how can these SMBs transform themselves into firms that are perceived to be ready to work with or even compete with the primary defence contractors or ‘primes’ to supply this sector?
What should the SMB suppliers do to win strategic defence contracts?
They key issue is that Defence equipment will often be used for over 30 years, which is why Defence wants to see a rock-solid supply chain that will still exist when the equipment is at the end of its life cycle. Therefore, the defence sector’s major suppliers must demonstrate that they have established the required growth strategy, systems and resources to enable their companies to transform into major strategic suppliers and still be thriving in 30 years.
It is a significant challenge for SMBs to win major defence contracts either direct with Defence or working with the primes as a key part of their supply chain due to not having a suitable management structure in place. They also lack the knowledge, skills and experience needed to develop their businesses to the next level required to even be considered.
While government grants have assisted somewhat with enhancing technical capabilities, the issue is that if the most advanced defence equipment available was developed by a relatively small Australian start-up, they would need to prove that they are positioned for long-term growth and have the strategy, systems and resources in place to build the company sustainably, and this requires funding and investment.
The digital maturity challenge
To reach the level required to win Defence contracts, Australian defence providers not only need to get their strategy, management structure and capabilities right; they also need to work out where they are on the digital maturity scale. This will help them to identify if there are ways that they can optimise their manufacturing operations by creating flow, increasing efficiency, connecting their machines and reducing downtime.
The first step on this digital transformation journey for defence suppliers is to understand how the convergence of digitised machine parts, improved connectivity and emerging ‘Industry 4.0’ technologies, such as IIoT and AI, will help them to improve the productive time of their employees and equipment, as well as aiming to eliminate paper from the production environment.
Having real-time production data to hand 24/7 will allow defence suppliers to give defence customers realistic delivery dates, improve on-time deliveries, provide live job statuses and accuracy of job costing, minimise changeover time, measure performance and increase productivity by visualising loss.
IIoT and AI technologies embraced by Defence
The defence sector has been a forerunner in the use of IIoT technologies to improve process and product efficiencies. The defence industry was among the first to realise the utility of sensors in areas such as aircraft maintenance and health monitoring, real-time identification of quality issues, rapid delivery of software updates and optimised tracking and traceability.
As a result, military aircraft are currently generating terabytes of digital data every day. So far, only a tiny fraction of that potentially invaluable information is being leveraged. This presents an opportunity; the vast ocean of data will eventually yield profitable secrets, such as the identification of new manufacturing and service opportunities.
By harnessing AI, defence manufacturers provide their enterprise resource planning (ERP) systems with the ability to mine and analyse immense amounts of data, along with the power to respond to surfaced insights with specific, automated tasks. For users across the business, AI can deliver real-time information with direct relevance to decision-making processes, encouraging the creation of agile, increasingly competitive cultures within defence sector SMBs.
A Single Source of Truth
In order to become a major defence supplier and remain competitive, a digitally advanced factory environment needs to be implemented with what we call a ‘Single Source of Truth’ (SSoT). This is a fully integrated approach to ERP that ensures error and redundancy free data. Combined with manufacturing operations management (MOM) software, an SSoT provides AI with accurate, real-time data from across the entire enterprise and, optimally, along its associated value chain.
Faced with intense, globalised competition, changing attitudes to acquisition and sustainment, shifting economies and geopolitical instability, our SMB defence manufacturers need to become more agile and forward-thinking than they’ve ever been before. Strategically utilised AI will be one of the keys to future success, helping these fledgling companies allocate capital and build differentiating capabilities. The result of this journey will be more opportunities for long-term Defence contracts here and globally, and ultimately increased profits and more jobs for Australians.
About the author
Rob Stummer is the chief executive of SYSPRO’s Asia Pacific (APAC) region.