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Defence Procurement

Aerospace Industry: Manufacturing Challenges

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Writer: Dr. Vivek Lall

There are a number of aeronautics organisations like HAL, NAL, DRDO laboratories, engineering colleges etc. in the country. Moreover, the sector is divided into defence and non-defence segments. With the entry of private companies, an institutional arrangement becomes necessary which could harness the knowledge residing in these various entities. Such an institution could map indigenous capabilities, identify knowledge gaps, direct resources efficiently to address critical technology gaps. The offset policy can become a significant contributor and catalyst to the development of the Indian aerospace sector. The successful implementation of offset policies of countries like Brazil and South Korea provides some encouragement of a similar success in India.

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Making Smart Procurement Decision

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Writer: Dr. Vivek Lall

Life Cycle Costing (LCC) is a tool which empowers the acquisition / procurement managers to make more informed decisions by enabling them to incorporate costs and benefits that occur over the lifetime of a product into their procurement decisions. To mitigate LCC evaluation challenges, the next step would be to move towards a Performance-Based Logistics (PBL) approach. The significance of PBL is that the OEM / supplier is compensated not on promise of performance nor on its cost: compensation is based on the actual performance of the product. PBL was introduced by the US Department of Defence (DoD) in 2001 for weapon system acquisition and logistics management. PBL was made mandatory the same year - its initial guidance was promulgated by the office of Secretary of Defence. The potential annual savings to the US DoD just from reduced inventory holding and transportation is estimated to range from US$ 2.8 - 3.7 billion annually.

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