Costing aircraft components A British Aerospace case study
Page 1: Introduction
When we think about the cost of an aircraft, we tend to think of the cost of buying the product rather than the costs of running it! British Aerospace’s service to the customer does not stop at the aircraft acquisition stage, when the aeroplane is sold to the customer. If anything, this is when the customer relationship begins.
This case study focuses upon the processes involved in costing aircraft components. Given the high specifications to which designers have to work, it is important to develop a price for customers which provides ‘Customer Satisfaction at Competitive Cost.’ British Aerospace is a major player in the world aviation industry. Its Military Aircraft Division aims ‘to remain number one in Europe and World Leader in the Military Aircraft Business.’
The design challenge
The challenge to design teams is to design an aircraft that achieves maximum mission effectiveness at minimum cost to the customer. Typically, a military aircraft has a service life of over 30 years. The total operation and support costs such as those involved in owning and operating an aircraft (spares, repairs and servicing) over this time, outweigh the initial cost of acquisition. Therefore, total Life Cycle Cost (LCC) must be minimised in the customer’s interest. The study of the cost of acquisition, operation and support and disposal is known as Life Cycle Cost analysis. To achieve the design challenge, British Aerospace use two main cost reduction techniques.
Re-Engineering to reduce the business cost base Since 70% of the final product consists of vendor/bought out equipment, British Aerospace’s suppliers’ performance is critical to enable British Aerospace to achieve improvement, obtain better customer satisfaction and win more business in this competitive environment. Within the Military Aircraft Division, British Aerospace has introduced a Preferred Supplier Process which is designed to improve the performance of the supplier base in meeting the wider aims of the business. There are three elements against which a supplier’s business is assessed:
Statistical process control;
Detailed business assessment;
Measurement of performance.
Multi-functional teams are examining the ways in which these companies operate to ensure that these compliment British Aerospace’s internal business process re-engineering (BPR) in the production of a ‘world class’ best practice.