ISG Provider Lens™ Engineering - Service Partners - Global 2019-20 - Aerospace Manufacturing Engineering
Overall Engineering Services Trends
Traditional IT services companies are moving towards offering engineering research and development (ER&D) services to automotive and aerospace OEMs due to the emerging demand for software development and services in those industries. Providers are also involved in end-to-end technology development of software, mechanics and solutions for OEMs.
Overall, the engineering services market is moving towards managed services and outcome-based pricing models for services contracts, mainly to support both embedded and mechanical processes. The collaboration between OEMs and supplier companies is aimed at increasing innovation in the product development and manufacturing processes.
Digital thread is currently being considered as a starting point for developing digital twins in a manufacturing plant. OEMs also are focused on additive manufacturing, augmented reality (AR) and virtual reality (VR) to gain a competitive advantage. Network virtualization, software-defined networking and 5G developments are becoming critical for OEMs to develop connected vehicles.
The engineering services ecosystem is increasingly inclined toward software development to enable faster product rollouts and innovation. As the demand for IoT platforms and applications is growing, the need for vehicle and site diagnostics, mobility services, predictive maintenance, operational technology (OT), data analytics and digital supply chain is undergoing a heavy transformation. IT-OT integration is becoming increasingly important for better business and technology synergies.
Automotive Product Engineering
- Outsourcing engagements are moving towards being more partnership based because labor arbitrage is becoming more elusive for businesses. Traditional OEM clients are moving towards outcome-based and managed services business models with Tier 1 and Tier 2 suppliers. There was also higher growth in per-car contracts during 2018-19.
- Technology suppliers are enhancing their capabilities to deliver end-to-end solutions and services to support various OEM needs and to generate demand in the market. They are focusing on foundation technologies such as software-defined networks (SDN) and 5G to support the future demand for connected mobility.
- Automotive OEMs are increasing their R&D budgets on V2X, including V2G and G2V, to drive the future of connected mobility. ISG has also observed that embedded engineering is moving away slowly, and the entire industry is shifting towards model-based deployment.
- OEMs are increasing their budgets to develop electric infrastructure. However, a large portion of these developments are currently at the proof-of-concept (POC) stage.
- The U.S. is the leading geographic market for automotive product engineering services and the deal volume is increasing in the region. German OEMs were pushing for more contracts in 2018-19 as they were growing by developing captives across geographies.
- German-based automotive suppliers and OEMs are mostly running their service contracts on outcome-based models and per-car pricing. This is expected to be an emerging trend in Europe.
- Advanced driver assistance systems (ADAS) is considered to be a more immediate market opportunity for vehicle OEMs than electric and hybrid mobility. To capitalize on these opportunities, OEMs are pursuing partnerships with long-time suppliers to focus on innovation.
Automotive Manufacturing Engineering
- Around 60 to 70 percent of the demand for outsourcing manufacturing technologies is driven by demand from energy management. Vehicle OEMs are struggling to reduce the noise levels in their vehicles and are using outsourcing to help develop solutions.
- Vehicle OEMs are focusing on IT/OT convergence and 3D printing technologies to achieve optimum technology utilization in plant manufacturing processes.
- IoT platforms and digital threads are gaining more traction in the manufacturing space, driven by the need to develop error-free vehicles.
- OEMs are leveraging product lifecycle management (PLM) for predictive manufacturing, which is expected to reduce unnecessary manufacturing costs.
- Due to the emergence of digital services, automotive OEMs and suppliers are seeking to monetizing their resources and find ways to generate revenue from vehicle services.
- Tier 1 suppliers are enhancing their hardware design capabilities to help OEMs with manufacturing design solutions. This helps OEMs to go to manufacturing directly.
Aerospace Product Engineering
- The level of outsourcing of aircraft component design is sometimes a concern for OEM or PMA companies due to the concomitant IP, and because the outsourcing partner often serves multiple competing OEMs.
- Several OEMs and primes have focused on creating processes as a part of product engineering. It is not exactly the design by definition but a process where once the design model is completed, manufacturing engineers turn the model into a market vision model and process model. This bridges the gap between design and manufacturing.
- Most of the aerospace primes are seeking a consultative direction towards product R&D, i.e. the feasibility of conducting it in-house vs. working with a supplier. Prototyping and validation of a product, all the way from product introduction and delivering assurance that the manufacturing facilities are aligned with, along with a competent supply chain can ramp up the volume of development and production hardware.
- Most of the OEMs in a particular segment are fundamentally in a similar space, and they should create a value proposition through continuous improvement or process excellence. Thus, once the production environment is improving, service providers would need to develop ways to create value, reduce waste and optimize cost.
Aerospace Manufacturing Engineering
- OEMs usually try to avoid genuine technology development within the main body of a new engine program because they want to fast-forward the concept-tocommercialization phase, i.e. get the engine to production as fast as possible. New technology development and implementation tends to increase the cost and time required by multiple factors.
- Most of the disruptive innovations (3D printing, product technologies such as composite fan blades, gearboxes, electrification techniques, etc.) are being looked at centrally within the company. The foundational work in these is sometimes carried out by several university technology centers and manufacturing technology centers, which may be leveraged through a government contract.
- While several OEMs and primes are moving away from PMAs, engine MRO PMAs tend to be available on the older engines. However, the situation varies from program to program. For big volume programs like CF6, there are PMAs that account for a significant market share. Consistently, when aircraft are retired, operators take parts off the engines and sell them.
- OEMs and primes have entered the MRO market by offering few manufacturing engineering support services. While there are significant levels of process planning, intensive inspection and assessment where the engineers need to accept what they find, operators are usually avoiding this. They prefer taking it to the OEM shop and replacing old and outdated components with new ones. This accelerated repair process is making MRO a fast, responsive and profitable business.
Oil & Gas (Digital Oil Field)
- Companies are leveraging economies of scale to drive digital transformation. Cost reductions for sensors, bandwidth and processing have led technology stakeholders to adopt IoT-¬specific services, which span from small sensors and chip sets to platforms and software systems. The evolution of IoT-enabled analytics has influenced exploration and production (E&P) stakeholders to drive performance with an effectual value chain. The major focus areas for R&D have consistently involved utilizing cloudbased storage and enabling effective data transmission and high-speed computing to improve financial viability and operational efficiency.
- E&P companies are becoming open to adapting disruptive innovations such as the full waveform inversion technology to align seismic simulations with existing seismic data for depicting subsurface images of considerable quality. This imaging technique is being employed to drill deeper wells with higher precision, resulting in the identification of additional resources.
- Automation is enhancing safety, as humans are being replaced by robots and drones to take up assignments in semi-permissive areas with higher safety standards such as for pipeline and flare stack inspections. An elevated cyber resilience armor will protect oil and gas companies against malware and phishing, which in the past were identified as the two most common cyberattacks against O&G companies and will protect against other vulnerabilities.
- In the initial days of the shale boom, shale rigs drove the overall oil production for the U.S., and the upstream E&P companies were firing all pistons to produce oil from challenging shale reservoirs in a financially viable way. However, recent bans on fracking in Europe (France, Germany, Denmark, Bulgaria and Romania) may restrict the shale economy.
- There is an industry-wide shift from preventative to predictive maintenance. The service provider fraternity has been trying to address exploration, production and HSEQ (health safety, environment and quality) shortcomings before they result in a failure that causes cost-intensive downtime for rigs. Thus, digital systems are being engaged to monitor production on a well-by-well basis and generate an alert when a well does not meet its expected production target. The service providers, in turn, are analyzing multiple points of data analysis on the volumes of information captured at the well head, and converting the analysis into actionable insights for surveillance, operational accounting and HSEQ compliance.