Blue Water Mac Armstrong

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Blue Water Solutions, Inc.: 

Blue Water Solutions, Inc. Industry Trends: Implications for Aviation MRO Software Leadership Malcolm B. “Mac” Armstrong, Lieutenant General / USAF (retired) Chief Executive Officer Star Symposium 9-11 October, 2005 Phoenix, AZ


Outline Introduction Industry Trends Emerging Business Models Technology Leadership Summary

Aviation Needs Statement: 

Aviation Needs Statement In order to be successful, every airplane operator (government or commercial) must continually assure themselves, their customers and their regulators that they are safe, compliant and reliable. Achieving such assurances over the life cycle of an airplane or major aircraft component requires these capabilities: Skillful execution of all work to a set of high standards Precise documentation of actions taken and materials used Exact knowledge of the performance, reliability, costs and benefits in every element of myriad complex MRO processes Efficient provisioning of repair parts and materials Rigorous maintenance programming, planning and scheduling

Business Model - Complexity: 

Logistic Co Wrench Co Airlines Pax/Cargo Military OEM & Parts Suppliers Financing & Leasing Co Tech Co Regulators Business Model - Complexity

Product & Service Lifecycle Management : 

Product & Service Lifecycle Management

Costs to Business Complexity: 

Costs to Business Complexity

Technology Market Assessment: 

Technology Market Assessment The number and diversity of suppliers offering maintenance and supply chain technology solutions for both commercial and defense aviation has increased dramatically over the past decade. The opportunities for solution providers seem immense: Most airlines and defense organizations are using solutions that are decades old and past any reasonable estimate of their true economic life Alliances (e.g. Sky Team & Joint Strike Fighter) are creating platforms which will require shared solutions and infrastructures Aircraft and engine manufactures are the bundling of AMRO technology solutions into life of asset support services Yet there have been few buyers because: The limited availability of investment capital The transformation demands on critical mission processes The sheer magnitude and complexity of the effort

Aviation Industry Trends: 

Aviation Industry Trends AMRO/SCM outsourcing will grow1 over the next decade The choice airlines must make is either to shed work or become profit centers leveraging: Specialized core competencies with economies of scale Capital intensive tooling and facilities Increasing AMRO outsourcing will drive the need for information technology collaboration and standardization Regulatory Compliance will continue to drive cost increases JAR 145 NPA 12 (Human Factors) FAR Part 21 ICA (Instructions for Continued Airworthiness) ATOS transitions & SEP inspections Alliance standardization & cooperation STAR Alliance IT standardization on WebLogic, AirLiance SCM coordination and CRS standardization Sky Team cross-sourcing MRO between Delta-Air France, KLM-Air France merger and centers of excellence coordination between Alitalia and Czech CSA 1Line maintenance is considered mission critical therefore unlikely to be outsourced beyond the current arrangements..

Defense Aviation Trends : 

Defense Aviation Trends Global military MRO (~$60B) is projected to grow over the next ten years Budget constraints and increasing spend on the wars in southwest Asia is preventing new acquisitions and re-capitalization Older fleets have less efficient maintenance programs Condition Based Maintenance Plus (Predictive Maintenance) requires infrastructure transformation Next generation platforms are being procured with higher order contracts – “Buying Performance versus Parts” Performance Based Logistics Depot Maintenance Partnering Performance Finance Initiatives US Air Force MRO spend > USN, USMC, USA and UK MOD combined US DOD + UK MOD > rest of the world Military Acquisition & Sustainment cooperation Commercial / Military “Cross Fertilization”

Aviation Manufacturer Trends: 

Aviation Manufacturer Trends Airframe OEMs will continue to pursue aftermarket services and expand profit centers Moving to a design, systems integrate and sustain business model outsourcing fabrication and sub-assembly manufacturing Airbus MRO Network is about closing the SLM and PLM information cycle Boeing Goldcare is poised to bundle all aftermarket services Boeing IDS is merging DAP’s Enterprise One and Automated Maintenance Environment (AME) for NAVAIR Lockheed Martin Aeronautics – Autonomic Logistics Operations (ALO) CONOPS & Autonomic Logistics Information System (ALIS) Aversion by airlines to consolidating leasing and MRO services will continue to slow OEMs emergence as dominant MRO players. Higher Order Contracts - supply chain integration will continue to evolve Performance Based Logistics Performance Finance Initiative Airline based 3rd Party MROs that can bundle airframe and engine work, in-service monitoring with “Performance Based” contracts could steal market share

General Software Industry Trends: 

General Software Industry Trends Services Oriented Architecture (SOA) & Open Platforms like J2EE, .NET Standards – ATA SPEC 2000, AECMA S1000D, MIMOSA, OASIS Software Consolidation Manugistics acquired Talus, STG, WDS, and Compass Oracle acquired PeopleSoft, Retek, Siebel, G-Log, and PrfitLogic SAP acquired Lighthammer, A2i, TomorrowNow, PayNet, and iLytix Click Commerce acquired Optum and Xelus Software Business Evolution Software sale, implement, design, build & run (DBR) Application Services Providers Business Services Providers / Business Process Outsourcing Alternative pricing models – subscription, utilization & per-asset maintained Software as a Service (SaaS) and the advent of the networked business EAI overtakes ERP for Master Data Management and Business Synchronization

Business Model - Complexity: 

Logistic Co Wrench Co Airlines Pax/Cargo Military OEM & Parts Suppliers Financing & Leasing Co Tech Co Regulators Business Model - Complexity

Business Model - “keiretsu”: 

Logistic Co Wrench Co Aircraft Operators OEM & Parts Suppliers Financing & Leasing Co Consumers Pax, Cargo & Military Tech COs PLM Regulators Business Model - “keiretsu”

Business Model - Shared Infrastructure: 

Wrench Co Single Supply Provider (SSP) (Logistic Co) ALO / ALIS Autonomic Logistics Information Systems (Info BSP Co) Proposed Completed eLOG21 / ECSS Customers – JSF NALCOMIS NLAF IAF NAF RCAF RAAF RSAF Business Model - Shared Infrastructure

Business Model - “kieretsu” & Shared Infrastructure: 

Wrench Co Integrated Material Management (IMM) (Logistic Co) Enterprise One (Info Co) Proposed Completed Business Model - “kieretsu” & Shared Infrastructure

Aviation MRO Technology Leadership : 

Aviation MRO Technology Leadership We believe the emerging leaders will have the following capabilities: Precise documentation of actions taken and materials used An extant end-to-end transaction suite for complex-data collection An advanced information management capability. Technical Documentation that provides clear, current, and precise job guidance Exact knowledge of the performance, reliability, costs and benefits in every element of myriad complex MRO processes The infrastructure and decision support processes to evaluate and manage Aircraft Health Management  Diagnostics, Prognostics & I-IETM Remote Condition Monitoring  Performance Based Contracts Track components on and off the aircraft throughout their service life allowing the airline to analyze component failures, recover warranties and other reliability guarantees Efficient provisioning of repair parts and materials Spare parts planning and provisioning information to optimize readiness including collaboration with OEMs and other spares pools Precise scheduling of parts for each maintenance event Rigorous maintenance programming, planning and scheduling Work packages optimized for each aircraft visit to flow the work and the mechanics through the entire check efficiently and effectively. Each work package provides a set of high standards to assure compliance and quality of work through skillful execution.

Questions on “Accelerating the Future”: 

Questions on “Accelerating the Future”

Implications for Aviation MRO Software Leadership: 

Implications for Aviation MRO Software Leadership Leaders nail the basics from end-to-end at the transactional level Leaders have a clear strategy and plan for moving into higher level decision support capabilities Leader’s participate in compliance development with regulatory and standards organizations Leaders collaborate with airframe, engine and component manufacturers integrate PLM and SLM Leaders collaborate with airline Alliances to facilitate AMRO synchronization Leaders have a presence in both Military and Commercial AMRO enterprises Leaders have a clear strategy and plan to move away from pure software sales toward Providing Application Services and finally to Providing Business Services

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