The Aerospace Business

Management and Technology

Wesley Spreen

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780367280581
• eBook ISBN: 9781000708455
• Topic: Technology & Engineering
• Subtopic: Business General
• Index: Technology & Engineering

This textbook provides a detailed overview of industry-specific business management and technology management practices in aerospace for relevant bachelors and MBA programs.

The Aerospace Business: Management and Technology sequentially addresses familiar management disciplines such as production management, labor relations, program management, business law, quality assurance, engineering management, supply-chain management, marketing, and finance, among others. In this context it analyzes and discusses the distinctive perspective and requirements of the aerospace industry. The book also includes subjects of special interest such as government intervention in the sector and strategies to deal with the environmental impact of aircraft. As each chapter deals with a separate management discipline, the material reviews the historical background, technical peculiarities, and financial factors that led the aerospace industry to evolve its own distinct practices and tradition. Theoretical bases of the practices are explained, and the chapters provide actual examples from the industry to illustrate application of the theories. The material is compiled, organized, and analyzed in ways that often provide original perspectives of the subject matter.

University students, particularly in programs oriented towards aviation and aerospace management, will find the book to be directly applicable to their studies. It is also extremely appropriate for aerospace MBA and executive MBA programs, and would suit specialized corporate or government training programs related to aerospace.

1 Introduction

It put a man on the moon. The aerospace industry is exceptional in many respects. It is a technological crown jewel that synthesizes much of the most advanced scientific and engineering knowledge of modern civilizations. It produces products that, even to technologically jaded citizens of the twenty-first century, are breathtaking in their appearance and capabilities.

Figure 1.1 The beginning of a new industry.

The structure and characteristics of the industry are described in detail in Chapter 2, but a few summary statistics published by the Aerospace Industries Association (AIA) provide insight into the economic importance of the industry in the USA:

• The US Aerospace & Defense (A&D) industry supports 2.4 million jobs in the USA in 2016, representing approximately 2% of the nation’s total employment base and 13% of the nation’s manufacturing workforce.
• End-use manufacturers of A&D systems accounted for 35% (845,000) of the industry’s total jobs, while the supply chain accounted for the remaining 65%, or 1.6 million jobs.
• In 2016, the US Aerospace & Defense industry generated $872 billion in sales revenue.
• End-use manufacturers of A&D systems accounted for 52% of total sales, while the industry’s supply chain accounted for the remaining 48% of sales.
• A&D generated $307 billion in value-added products and services, which accounted for 1.8% of US Gross Domestic Product.
• A&D is the nation’s leading net exporting industry and generated a record trade balance of $90 billion in 2016.
• A&D accounts for 10% of total US exports in goods, and is the nation’s second-largest exporting industry.

The Aerospace and Defence Industries Association of Europe (ASD), the European equivalent of AIA, publishes some similar data:

• Total turnover for the A&D industry in Europe for 2016 was €220.2 billion.
• Total employment in 2016 was 843,400.
• The industry generated €20 billion in research & development (R&D) in 2016.
• European A&D exports in 2016 were €123 billion.

Distinguishing characteristics of the aerospace industry

This book will look in detail at some of the fundamental ways in which the aerospace industry is managed differently from other industries. Before proceeding to that detailed study, it is worthwhile to consider a few of the ­intangible characteristics that differentiate aerospace from its industrial peers:

• Aircraft and space vehicles are perhaps the ultimate technological icons of our civilization. The industry represents a single-point confluence of many of the most advanced technical achievements of our species.
• Aircraft and rockets are big, visible, noisy, and in the aesthetic of some observers, awesome to behold.
• They are extremely expensive to acquire and to operate.
• The complexity of aerospace design and manufacture is probably unmatched by any other industry.
• Since its advent, the industry has been a symbol of national prestige and military hegemony.
• The industry is intrinsically international in outlook and structure. In many ways it represents the most sophisticated manifestation of large-scale technological cooperation among nations.
• The industry and its products are inherently exposed to risk of large-scale catastrophic occurrences, resulting in application of rigorous international and national safety standards and regulations.
• The products of the industry are characterized by a dichotomy of civil or military applications. The two segments often overlap, eliciting the attention and direct involvement of governments and international organizations.
• The increasing volume of air transportation combined with public concern about rising emissions seem to be leading to an environmental dilemma that will eventually have to be resolved by government involvement, technological improvements, and societal change.

The structure of this volume

In many respects, the aerospace industry is managed in the same ways as other manufacturing industries. In other ways, aerospace management methods have evolved in ways that are distinctly different. The objective of this book is to identify the distinct management methods of the industry, to understand how they came to evolve, and to study how they are applied.

To accomplish this, we will proceed by sequentially focusing on the traditional disciplines familiar to any student of management.

In Chapter 2 we will examine the general structure of the aerospace industry, starting by studying its historical evolution. We will survey the many specialized products and industry sectors that make up its horizontal segmentation, and will pay special attention to the military–civil dichotomy that divides the industry into halves of roughly equivalent size. We will see how the industry is distributed geographically within Europe, the USA, and elsewhere, and will discuss the industry’s vertical stratification and its value chain, beginning with raw material suppliers and proceeding to the giant integrated aircraft manufacturers at the top of the pyramid.

Chapter 3 deals with the aerospace workforce and labor relations. It analyzes the geographical distribution of the workforce in North America, Europe, and Asia, and looks at government initiatives to foster its growth. It follows the history of organized labor in the industry, and considers political controversies caused by redistribution of aerospace jobs as a result of international collaborative ventures.

Chapter 4, on aerospace law, international accords, and contracting procedures, is a summary of the context and application of laws and international agreements applying to the aerospace industry, including government airworthiness regulations and agencies, civil liabilities and tort law governing civil and military aircraft, export control licensing, and international limitations on government subsidies. A section on aerospace contracting methods is also included.

Chapter 5 addresses government financial support of aerospace. It reviews the history of government nationalization and subsequent privatization of aerospace industries, international agreements intended to curtail market distortions caused by government loans and subsidies, and an overview of the long-term Euro–American dispute involving perceived unfair subsidies to Boeing, Airbus, Bombardier, and Embraer.

Chapter 6 covers the unique history of international cooperation in aerospace, including joint ventures, teaming, and industrial offsets. It analyzes the motivation for international cooperation and the structural arrangements that aerospace firms use to work together internationally, and includes a study of economic benefits and political controversy surrounding industrial offsets.

Chapter 7 explores aerospace accounting and financial management, and contains explanation and analysis of unconventional financial methods and accounting treatments used in the industry. These practices are often a result of inordinately large capital investments and extended time intervals between program launch and breakeven. The chapter studies financing strategies used in the industry, including arrangements with risk-sharing partners. Financial practices in both the civil and military sectors are discussed and accounting concepts used by Airbus and Boeing are compared and contrasted.

Chapter 8 is a treatment of aerospace systems engineering and technology management. It is a detailed review of how the aerospace industry developed the concept of systems engineering, what the concept accomplishes, and how the discipline has been defined and applied to control technology during the phases of design, production, and post-delivery. Procedures used for change management and configuration control are described in detail.

Chapter 9 describes practices the industry has developed for management of aerospace programs. Beginning with a definition of an aerospace program, the chapter recounts the early history of the need for a management system to control the growing design and production complexity in the industry. Basic tenets of the program management concept are explored, and standard aerospace program management practices are explained. Illustrative examples are provided, including management structures of major joint international programs.

Chapter 10 addresses aerospace production management, and traces the evolution of aerospace production methods, including innovative technologies originally developed specifically for aerospace applications. Recent aggressive initiatives to improve efficiencies by introducing lean manufacturing methods are described. Concepts for scheduling and control are discussed, including the use of work breakdown structures. The flow of planning, control, and implementation in the factory are traced in detail.

Chapter 11, on the subject of management of aerospace quality assurance, includes a discussion of the concept of cost of quality in the aerospace industry, and follows the historical development of international aerospace quality standards. A detailed explanation is provided of AS/EN 9100, the principal quality standard that currently defines industry requirements. Procedures for managing the disposition of non-conforming material are defined.

Chapter 12 studies aerospace supply chain management, and looks at the aerospace supplier network that accounts for the majority of the value of new aircraft. Alternative methods for organizing the supply chain are analyzed and compared. Historical experiences by Boeing and Airbus are descr...

Table of contents

• Cover
• Half-Title
• Title
• Copyright
• Dedication
• Full disclosure
• Contents
• Abbreviations and acronyms
• 1 Introduction
• 2 Structure of the aerospace industry
• 3 The aerospace workforce and labor relations
• 4 Aerospace law, international accords, and contracting procedures
• 5 Government economic support of the aerospace industry
• 6 International cooperation, joint ventures, teaming, and industrial offsets
• 7 Aerospace accounting and financial management
• 8 Aerospace systems engineering and technology management
• 9 Management of aerospace programs
• 10 Aerospace production management
• 11 Management of aerospace quality assurance
• 12 Management of the aerospace supply chain
• 13 Aerospace marketing
• 14 Aerospace maintenance, repair, and overhaul
• 15 Environmental challenges and the aerospace industry
• Index