South Africa | December 2020 – June 2021 | Case Study
The Opportunity
Africa’s skies are opening up
The future of aviation in Africa is soaring towards new possibilities. The continent’s air transport sector is one of the fastest growing in the world, projected to contribute over $400 billion to Africa’s GDP by 2040, with passenger traffic expected to grow by 4.5% annually. This, of course, bodes well for manufacturers of aerospace equipment, an industry currently valued at over $10 billion and expected to reach $15 billion by 2026.
However, challenges for manufacturers persist. Infrastructure deficiencies disrupt facilities, logistics, and supply chain networks. There is a lack of a skilled workforce, and a strict regulatory environment makes it difficult for manufacturers to navigate and comply with various regulations. Technological advancements require significant investment in research and development, and there is limited access to global supply chains and crucial components. In an environment this complex, with all contributing to high operational costs, firefighting, and chasing parts, confidence among OEMs on achieving cost-efficient production is shaky.
Our client, a leading South African manufacturer of aerospace equipment, sought the support of Stepchange Africa in identifying and understanding the drivers of the initial product’s design related manufacturing and delivery costs. The goal was to identify cost-reduction opportunities and drive design-to-cost workshops to uncover exactly which procurement or design changes will produce the greatest savings.
The Solution
Building a single view of spend data
Embarking on a journey necessitates reliable equipment, just as organizations require specific tools to glean insights for informed decision-making. For our client, this journey commenced with Stepchange Africa constructing a database, serving as a unified access point to all data sources, benefiting engineering, procurement and manufacturing leads. This is particularly significant for clients aiming to break down data silos, yet confronted with a vast, complex, and dispersed data landscape.
In essence, this database involved exploding every single BOM of an aircraft, organizing structured components into clusters based on technical specifications and product group requirements. Additional inputs included purchasing prices and production costs per component, as well as potential component substitutes, to later identify cost-saving initiatives under the premise that cost-based trade-offs do not compromise quality and safety regulations. As procurement became increasingly complex, lead times, component availability, and price trends were incorporated to manage supply risks, such as inflation and deflation factors.
Fully integrated, the database would provide a comprehensive 360-degree view of our client’s product design and its implications on procurement and manufacturing performance. Initially implemented at a specific site, similar database initiatives were subsequently rolled out at additional sites, enhancing spend transparency across sourcing and manufacturing. This facilitated design-to-cost workshops, supplier negotiations, and manufacturing design efforts to help reduce costs.
The Impact
Optimizing cost reduction and performance increase decisions
By providing extensive transparency on the costs associated with procured materials and the manufacturing of several complex product groups, the database enabled the identification of pain points across engineering, supply and manufacturing. This transparency highlighted the comprehensive changes necessary and uncovered actionable spend and production insights.
The extension of the database blueprint across other manufacturing sites facilitated more effective collaboration across sites and site-specific business units. This was followed by Design-to-Cost workshops, which reconsidered decisions made during the general assembly drawing. These workshops resulted in technical changes, for example by replacing complex screw systems with clips and cleats, or substituting expensive, lead-time-sensitive components with less expensive but equally effective alternatives. These changes led to immediate cost savings of USD 1.2 million, while mitigating identified supply risks.
By setting up the database as a searchable source of truth that unites engineering, with procurement, supply and manufacturing data, it transcended classic spend reporting. It evolved into a platform that facilitates supplier collaboration and decision-making, supporting both change management and cost-saving initiatives.
