Wipro Report on Aerospace Manufacturing

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Aerospace Manufacturing Transfer Systems
Wipro Thought Leadership

WIPRO TECHNOLOGIES

Table of Contents
01 Aerospace Industry 03 Aerospace Manufacturing Outsourcing

06 Aerospace Manufacturing Transfers Process

10 Transition Management Platform

12 Appendix

Aerospace Manufacturing Transfer Systems

1000 900 800 6.17%

USD Billion

700 600 500 400 300 200 100 0 2008 2009E 2010E 2011E 2012E 2013E Aerospace Market1 Defence Market1

Projected Global Market

1.0 Aerospace Industry
Global Aerospace and Defence Market has reached a value of USD 674.6 Billion in 2008 and reports forecast that this figure would go up to USD 910 billion in 2013 based on a year on year increase of 6.17%. Within the aerospace and defence market the defence market accounts for almost 70% of the market value. Aerospace is a highly globalized industry since customers are geographically dispersed (airlines, governments) and have similar product needs and are able to look globally for suppliers who can meet their needs.

manufacturers are outsourcing more and more of the subsystem value chain since they want to shorten development time by increased focus on higher value added portion. Buyers have a great deal of bargaining power and airlines or even countries can combine orders and ask for concession from the prime contractors. Since the switching cost for the buyer of airplanes is low the buyer power in the market place is increased. Interestingly, sub component manufacturers who have carved a niche for themselves have the best margins in the value chain.

1.2 Product Life cycle
The lead times in aircraft manufacturing are typically very long. According to Boeing, building a commercial jet aircraft takes about a year on an average. Since aerospace industry is very design intensive, on an average an OEM takes about five years to design a completely new model. The tooling requirements are very critical and can be almost one third to two thirds of the total development costs. The recurring cost thereafter for the aerospace companies comprises of maintenance costs including tool replacement. The life cycle of a typical commercial aircraft spans about 30 years.

1. 1 Industry Structure
Within the aerospace industry players broadly include airframe manufacturers, engine manufacturers, system manufacturers (avionics, air management systems, control systems etc), components manufacturers (castings, harnesses, transformers, machined parts etc.) The global commercial aerospace market has few prime contractors who manufacture aircrafts and engines. There are numerous small and medium sized firms who supply components and subsystems. Typically the aerospace value chain is characterized by engine manufacturers and system suppliers firms who are in exclusive supplier contracts with aircraft manufacturers. Earlier these life contracts were not provided to component manufacturers as the prime contractors would want to retain the opportunity to reduce costs later. However with increasing globalization the risk sharing ability and supply chain capabilities have increased as a result the system

1.3 Key Trends in Aerospace Industry
Trend #1: Globalization of Aerospace Manufacturing: It is estimated that the amount of manufacturing outsourcing in the aerospace industry is close to about 80% of the airplane. EADS sourced aircraft components worth USD 43 Billion from various parts of the globe. They use European suppliers and do the final assembly in France. Bombardier uses North American suppliers and does the final assembly in Montreal.

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Aerospace Manufacturing Transfer Systems

Value chain of Aerospace Industry and Competitive position of value chain partners (Source: Zinnov Analysis)

Component Manufacturers
Capacity Demand Control

Subsystem Manufacturers

Engine manufacturers

Airframe Manufacturers
Competition/Market Absorption

Airlines

Competition/Market Absorption

Survival...
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