How Aerospace and Defense can win with Aftermarket Services

January 23, 2023

Aftermarket services are an under appreciated part of the aerospace and defense industries. Studies show that over half of A&D executives are expecting growth in their respective industries over the next 12 to 18 months. However, only recently have these same executives begun to consider aftermarket services as a viable option to improve their top-line revenue outlooks. Primes, OEMs, and airlines all have the potential to benefit from aftermarket services. Primes and OEMs have the opportunity to extend the lifetime customer value by offering continued aftermarket services like maintenance, repair and overhaul services. Additionally, airlines and militaries can benefit from lowered costs and superior services offered by primes and OEMs creating a net benefit for all stakeholders. 

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Aftermarket Feasibility 

One of the most difficult parts of developing an aftermarket service option is defining the opportunity that exists and properly allocating development resources. The internal operations of many A&D enterprises are often extremely complex, siloed, and even bordering on fragmented. Therefore a robust, data-driven approach to aftermarket service development is often the first step to creating an aftermarket services product. Additionally, much of the focus is on manufacturing and selling new airships, avionics, and more. This focus often crowds out the obvious opportunity of aftermarket services which can be highly profitable for suppliers and OEMs. 

To evaluate the opportunity for aftermarket services, A&D companies must do three things: 

  • Collect reliable data 
  • Understand customer needs 
  • Determine penetrability across the installed base 

Data collection should be an obvious recommendation, however, useful data can stretch across decades of time and multiple sources. Frequently, this barrier alone is enough to dissuade companies from pursuing an aftermarket program. However, reliable data will help OEMs and suppliers determine what the installed base actually is. Because equipment has a useful life of several decades, analyzing all of this information can be a substantial task but is a necessary step for any feasibility studies. OEMs and suppliers must also understand the needs of the installed base. This can be done by simply asking the right questions to the right people. Airlines and militaries are interested in receiving superior service and are often too happy to help A&D manufacturers understand their needs. Finally, the best way to determine penetrability across the installed base is to look at order history and forecast the opportunity based on historical order frequency, quantity, and type.  

Aerospace and Defense Aftermarket Data 

The combination of these three efforts will provide suppliers and OEMs with enough information to determine the potential size of the aftermarket and its value. After analyzing the data with advanced algorithms, the leadership of OEMs and suppliers can decide on the best sales strategy, use of resources, and more. It’s crucial to understand that these data and their analysis are considered “permission to play” to enter the aftermarket.  

Beyond this, OEMs and suppliers must ensure that they are running as efficiently as possible with minimal to no gaps in the supply chain. In a post-COVID business climate, this can be a tall order for any business reliant on lower-tier suppliers who may, for a myriad of reasons, be unable to keep up with demand. Additionally, implementation may be one of the hardest parts of creating aftermarket services. One of the best ways to mitigate this issue is to bring on a specialized consultant like Seraph, who can identify inefficiencies, failures, and provide real solutions. Specialized consultants will work with suppliers and OEMs to minimize downtime, train the leadership, and fill any holes in management.  

Dedicated Talent

The first step to creating a robust aftermarket service is dedicating specific sales talent to the services division. Frequently, a sales representative’s attention may be divided between aftermarket services and a number of other sales initiatives. Creating a separate sales team with its own set of expectations is necessary to the success of any aftermarket services initiative. Absent a single product (or class of products) and measurable targets, sales representatives will return to what’s been working to the exclusion of all else–new equipment sales. 

Operations

In order to fulfill the demand of aftermarket parts, OEMs and suppliers must have supply chains and processes in place. If an OEM or supplier is unsure or has concerns about supply chains and processes, it’s crucial to hire a specialized consultant before creating the aftermarket service product. Specialized consultants like Seraph will be able to identify vulnerabilities and threats to aftermarket service initiatives. Companies like Seraph work with management teams to improve their operations, manufacturing processes, quality, and logistics ensuring smooth development and deployment of aftermarket products.  

Services

The specific aftermarket service products must come from an intimate understanding of the customer’s needs. These products often look different for different customers. This a la carte approach is another reason why dedicated and specialized talent is so crucial; employees must know the products they’re selling in addition to what services solve the customer’s problem. Once suppliers and OEMs understand what their customer base needs, they can group the customers into similar pools and develop similar strategies and supply chains for each. This homogenizes offerings, allows specialization of sales talent, and predictable product lead times. 

Sales Support and Technology

The sales software used by OEM and supplier sales reps is crucial in determining the most valuable deals in the pipeline and pursuing those deals. The most advanced tools use a combination of AI technology, machine learning, and human-generated sales data to help identify these high-value opportunities. A&D companies must do their due diligence when selecting the different sales technology used in their companies. The right sales support and technology may make a substantial difference in annual revenue. 

Relationships

Finally, the relationships between OEMs and suppliers are crucial to developing an aftermarket initiative. Building relationships and re-enforcing those relationships with partners can foster a spirit of collaboration and problem-solving, especially when the going gets tough. Recently, because of the COVID crisis, many suppliers and OEMs have started looking locally to avoid some of the pain felt most deeply by troubled international supply chains. This has helped minimize down time since products and raw materials are more immediately available. 

Conclusion 

Aftermarket services can lead to a dramatic increase in customer lifetime value as well as deeper relationships with the customers. However, creating a services program and entering the aftermarket requires a significant investment of effort and money. Seraph is a team of specialized operational consultants who can help you evaluate your aerospace and defense strategy and current performance. Our advisors are former management at many suppliers and OEMs and understand manufacturing inside and out. Contact us today to schedule a discovery call, or see our case studies for more information.

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