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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.


Aerospace manufacturing is a high technology and capital intensive industry. Its value chain is characterised by a long project life cycle spanning R&D, engineering design, manufacturing, assembly, maintenance, repair and overhaul. Intensive technology and safety requirements require significant investments in R&D and quality control.

 

Traditionally, most aerospace OEM value chain activities were conducted in the domestic market – engineering and R&D activities were almost exclusively done in the home market. Most manufacturing also took place in the home market with selected sourcing of complete components like aeroengines from foreign suppliers. Similarly, MRO and service parts distribution facilities were also established in home market, with some secondary international service centres.

 

Global supply chain


However, with the need to cut costs and deliver products faster, aerospace design, development and production globally continues to undergo significant change. Firms producing commercial aircraft have reduced development time drastically through computer-aided design and drafting (CADD), which allows firms to design and test an entire aircraft, including the individual parts, by computer; the specifications of these parts can be sent electronically to subcontractors around the world who use them to produce the parts. Increasingly, firms bring together teams composed of customers, engineers and production workers to pool ideas and make decisions concerning the aircraft at every phase of product development.

 

OEMs are increasingly making use of a global supply chain. There are various other reasons for this – lower trade barriers, falling communication and transport costs, the emergence of global service firms and talent shortage in home markets. Today, OEMs are not only farming out a big chunk of machined and sheet metal parts production, but also expecting vendors to supply large aircraft subassemblies and even design expertise.


When we look at India, we see most elements of the ‘ecosystem’ in place. Overthenext decades India undoubtedly has the potential to become a significant part of the global aerospace supply chain that India offers cost advantages of between 15 to 25 per cent in manufacturing, depending on the type of component. Indian industry today has the technological capabilities to undertake complex manufacturing required for the sector – indeed there has been a remarkable growth of this sector, as a large number of private players have entered the sector


While OEMs have been looking at leveraging manufacturing and service capabilities across various countries, some countries have made focused effort to scale up their capabilities in manufacturing and services.

 

Not every market is equally well-positioned to develop a robust aerospace industry. When we look specifically at ‘aerospace ecosystem’ – factors like the supply and quality of engineers, the supply and cost of blue collar workforce, the depth of the supply chain and the potential to reach critical mass is important. However, infrastructure and government support are critical inputs for success.

 

Different countries and governments have taken different approaches to develop their aerospace industry – some countries have begun to specialise more within a particular tier and potentially around particular systems of types of technology. That means that industry clusters may develop around a system or type of technology, like aerostructures, engines, interiors, avionics, control systems or landing gear and potentially also focusing on a particular platform type.


The JV Guidelines issued by the Ministry of Defence early this year has articulated a set of guidelines for establishing JV companies by the Defence Public Sector Undertakings (DPSUs) with companies in India and abroad. The major emphasis of the Guidelines is on institutionalising the outsourcing part of the existing orders of the DPSUs to the private sector or foreign companies, with the aim to ensure that contract execution becomes faster.  One hopes that the private industry will have a bigger role to play in aircraft projects in the years to come


On the other hand, some countries have adopted an integrated approach to the aerospace sector, encompassing comprehensive manufacturing to MRO services through collaboration agreements with global OEMs to leverage the expertise necessary for a high-tech, end-to-end technology and manufacturing base.

 

Private players


When we look at India, we see most elements of the ‘ecosystem’ in place. Over the next decades India undoubtedly has the potential to become a significant part of the global aerospace supply chain, that India offers cost advantages of between 15 to 25 per cent in manufacturing, depending on the type of component. Indian industry today has the technological capabilities to undertake complex manufacturing required for the sector – indeed there has been a remarkable growth of this sector, as a large number of private players have entered the sector. However, the SMEs face hurdles due to the high capital cost, low volumes and long gestation period of projects.


Aerospace manufacturing is a high technology and capital intensive industry. Its value chain is characterised by a long project life cycle spanning R&D, engineering design, manufacturing, assembly, maintenance, repair and overhaul. Intensive technology and safety requirements require significant investments in R&D and quality control


The success of the Republic of Korea and Taiwan in developing their technology shows the importance of technology transfer. In the early phase of their development, they acquired technology from overseas. Now, with their ability to master foreign technology, they are not only the most advanced among developing countries, but also major suppliers of high technology goods to the world. Technology can be transferred to Indian industry through various channels: production linkages in the form of subcontracting arrangements; technical licensing agreements; the import of intermediate and capital goods; training; technical consultancies by consulting firms; orsimply from the migration of workers.

 

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.


Everything that goes into making an aircraft, from the screws to the engine components, has to meet stringent quality controls for safety. Any compromise on quality, which in other industries may be inconvenient, can be fatal in aerospace


We need to establish an organisation at the central level that articulates our vision for aerospace manufacturing sector and then acts as facilitator for investments and coordinates various activities and initiatives towards that goal.

We can expand this further:

 

What should be India’s vision for this sector? The organisation should articulate whether India should take an integrated approach to aerospace manufacturing, or, should we look at our areas of strength and concentrate our efforts on certain systems or components?

 

This organisation can act as a facilitator to investors for obtaining requisite permissions and approvals like the Industrial License, FIPB approval for foreign partnership, export clearances etc.

 

Transfer of technology


We know the importance of technology and the need for ToT especially in developing our aerospace manufacturing capabilities. However, just transfer of technology is not adequate – we have to build the ability to innovate. For this we require a very strong technical manpower base. With its educational and research institutions India has an inherent advantage (over 380 universities, 11,200 colleges and 1,500 research institutions), India has the second largest pool of scientists and engineers in the world. Every year, over 2.5 million graduates are added to the workforce, including 3,00,000 engineers and 1,50,000 IT professionals. This human resource pool can give an advantage in this sector. However, the quality of graduates being qualified by these institutes remains a subject of concern. Several educational institutes are setting up aeronautical departments, but active involvement of the government, as well as the private sector is required to develop industry specific courses that are relevant and effective. This is where a central coordinating body can play an important role.

 

India so far has been restricted mainly to a Tier-3 supplier to the industry with a focus of low-tech design and engineering services. Also, currently India imports most the raw material for manufacturing. There is an urgent need for the industry to take a long-term strategic view and develop capabilities in new material technologies for the development of composites.

 

Getting certifications for processes and parts is a challenge for India-based suppliers. It is also a deterrent for OEMs to outsource some of their components to India, since approvals for parts / components made in India can sometimes take too long eroding cost efficiency. If the industry is to grow, the quality and robustness of the certification organisations – CEMILAC and DGCA – also need to be strengthened. The certification process is both complex and expensive and the government needs to step in with schemes to create awareness among SMEs and also part finance the process.

 

Quality assurance


Everything that goes into making an aircraft, from the screws to the engine components, has to meet stringent quality controls for safety. Any compromise on quality, which in other industries may be inconvenient, can be fatal in aerospace. As a result, constant and stringent quality assurance is another critical requirement of the aerospace industry. Manufacturers must meet strict quality standards to guarantee parts are of high quality material for safety and durability and made to precise specifications. Directorate General of Aeronautical Quality Assurance (DGAQA) performs this function for the defence sector; DGCA is responsible for the non-defence sector. While quality control in Indian manufacturing has improved significantly, a mature supplier base is still being developed in the country. Both organisations need to be strengthened and scaled up and to create awareness amongst SMEs, the government needs to support the industry by launching schemes.


What should be India’s vision for this sector? The organisation should articulate whether India should take an integrated approach to aerospace manufacturing, or, should we look at our areas of strength and concentrate our efforts on certain systems or components?


From quality assurance perspective too, creating clusters makes greater economic sense in this industry. Such enclaves or zones may be set up with the requisite infrastructure like airfields and traffic free air space. The opportunities for the domestic industry that offsets will bring in, can be efficiently utilised in such zones.

 

The aerospace manufacturing sector in India is fragmented. There are various organisations in public and private sector and often one organisation does not know what the others are doing, the capabilities and knowledge residing with them. There is information gap between the defence and non-defence sectors. DRDO and HAL are predominantly confined to the defence sector while NAL and other civilian aerospace companies remain insulated from the developments in the defence sector. If a mechanism is put in place that facilitates greater interaction among the two sectors, it will bring about synergies yielding benefits to all.


Similary, various aeronautics organisations like HAL, NAL, DRDO laboratories, engineering colleges etc. are divided into defence and non-defence segments. Private companies have also entered the arena in a significant way and an institutional arrangement becomes necessary which could harness the knowledge residing in these entities. Once there is active engagement of stakeholders, it could facilitate formulation of a national aeronautics policy to strengthen the aerospace industry.


OEMs are increasingly making use of a global supply chain. There are various other reasons for this - lower trade barriers, falling communication and transport costs, the emergence of global service firms and talent shortage in home markets. Today, OEMs are not only farming out a big chunk of machined and sheet metal parts production, but also expecting vendors to supply large aircraft subassemblies and even design expertise


 

JV guidelines


As most of the work in aerospace manufacturing has traditionally been done by government organisations, the PPP model by forming JVs should be encouraged in order to fully exploit their knowledge base coupled with entrepreneurship of the private sector. The JV Guidelines issued by the Ministry of Defence early this year has articulated a set of guidelines for establishing JV companies by the Defence Public Sector Undertakings (DPSUs) with companies in India and abroad. The major emphasis of the Guidelines is on institutionalising the outsourcing part of the existing orders of the DPSUs to the private sector or foreign companies, with the aim to ensure that contract execution becomes faster. One hopes that the private industry will have a bigger role to play in aircraft projects in the years to come. This will lead to an expansion of aeronautical industrial base in the country and help make the Indian aviation sector efficient..



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. The Defence Offset Guidelines issued this year provide clarity and have made offset obligation less onerous to the OEM through a number of provisions. Synergy between offsets in the defence and civil aviation sectors needs to be developed through effective mechanisms.


 


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