Solving the aerospace and defense back-office paradigm

Transcription

1 Solving the aerospace and defense back-office paradigm

2 New back-office automation technologies are giving aerospace and defense (A&D) players an opportunity to achieve real and lasting costs savings KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS

3 As national defense budgets tightened over the last decade, most defense companies have faced increasing pressure to achieve significant cost reductions in their back-office operations. In some cases, the traditional response to these pressures has been to make across-the-board percentage cuts that essentially spread the pain evenly across back-office functions. Others have taken a more targeted approach by streamlining their processes, eliminating redundancies, and ruthlessly stamping out inefficiencies. Where possible, they have also consolidated back-office functions into centralized onshore shared services centers. And in some back-office areas such as information technology (IT), payroll, and benefits A&D companies have also outsourced to (mainly onshore) third-party providers to generate labor arbitrage savings. However, due to US government contracting regulatory restrictions, A&D companies have been fairly limited in their ability to offshore back-office processes to low-cost locations and have, therefore, not yet taken full advantage of the labor arbitrage potential. But no more. Today s robotics process automation (RPA) techniques have utterly disrupted the status quo. And that has given A&D organizations a tremendous opportunity to move to a very different cost paradigm for their back office KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS Solving the aerospace and defense back-office paradigm 1

4 A new lever for back-office cost reduction There are a number of reasons why A&D executives should be excited about RPA. The most obvious reason is the potential for massive labor reductions. Our work with large (US$20 billion plus) organizations suggests that RPA could deliver between 30 and 50 percent reductions in labor in key back-office areas such as accounts reconciliation, contract setup and fulfillment, and time reporting. And this translates into significant overhead reductions and sustainable cost outtake. The shift to RPA also provides significant productivity and performance improvements. Software robots work 24-7, 365 days a year; they do not take vacations, get sick, or suffer from work/life balance issues: and they perform tasks significantly faster and with greater accuracy than humans. Another big advantage of RPA for the A&D sector is that it provides unprecedented decision traceability, consistency, and documentation. Bots create software logs, basically a trail of every action the bot took and the corresponding and resulting outcomes, which can be quickly and easily audited and traced. And this is key to success when implementing new systems within the U.S. Government DCAA and DCMA guidelines.ew systems within the U.S. Government DCAA and DCMA elines. The other big benefit of RPA is that it greatly improves business scalability, which is particularly important in this time of heightened competitiveness in the A&D sector. When workloads fluctuate, software robots are able to scale instantaneously up and down at digital speeds. The widespread adoption of automation in the back office should dramatically transform the shared services environment as resources are moved to higher value tasks and repetitive transactional processes are taken over by bots. And this, in turn, should create new opportunities for the back office to focus on generating valuable insights to support business strategies. Why so timid? Given the benefits that RPA could bring the A&D sector, it is surprising that only a handful of leading A&D players are now actively implementing RPA in the back office. This runs counter to the spirit of the industry. Indeed, the A&D sector has a proven track record for blazing new trails and has traditionally been viewed as being on the leading edge of product innovation. Yet, when it comes to the introduction of RPA and intelligent automation in the back office, the A&D sector has been rather conservative in relation to other sectors. The financial services sector, in particular, has been rapidly implementing new RPA and intelligent automation approaches in its back office and has seen significant benefits. So, too, have telecoms companies and retailers KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS

5 The A&D sector, however, has allowed itself to lag. Some are taking a wait-and-see approach, concerned that possible US government system recertification requirements could slow adoption and limit the potential for cost savings. Others seem unsure of the technology or are unable to separate the hype from the reality. Whatever the reason, the reality is that only a few leading A&D organizations have implemented a back-office RPA project of any size or scope. Most are still playing with pilot projects and proof of concepts. To be sure, there will be difficult technology challenges to overcome. But our experience suggests that the more difficult problems will have less to do with technology and more to do with the people and the processes that it is meant to enable. Time for action We believe there is significant competitive advantage awaiting those bold enough and strategic enough to take action on RPA. The key to success is to create a robust and integrated roadmap that leverages automation to balance needs, capabilities, innovation, and costs in a way that achieves a new paradigm in back-office performance. For those just starting out on the road mapping process (or for those that are unhappy with their current automation progress), here are five suggestions to help ensure that your roadmap delivers real value. 1. Think at the enterprise level. While some of the greatest benefits of RPA may flow from the automation of finance processes, A&D executives must remember that RPA tools, capabilities, and technologies can create significant advantages across the back office. When developing your roadmap, think at the enterprise level, and look for opportunities to leverage advances across multiple aligned process flows. 2. Develop a holistic strategy and roadmap. RPA is not simply an IT issue, and any road map should therefore include key business considerations and requirements such as an opportunity assessment, a business case, various use cases, a governance center of excellence, an implementation road map, and a plan to rapidly achieve scale when needed. 3. Gain insight into the vendor landscape. Once the candidate processes have been identified and documented, organizations can start thinking about the right RPA solutions and vendors. This is about finding the right solutions to meet the organization s specific long-term goals and requirements rather than buying a solution and force fitting it into the organization. 4. Embed the regulatory requirements. When implementing new systems and technologies, A&D players must consider how their advances might impact their approved business system status with DCAA and DCMA. True, RPA offers significant benefits (such as improved auditability, improved quality, and consistency) for DCAA/DCMA, but A&D organizations will want to build in checkpoints along the road map to ensure alignment to government requirements. 5. Recognize the impacts to people. The introduction of RPA creates new ways of working and new operating models. And that means A&D players will need to create a change management strategy that ensures effective adoption of automation throughout business functions KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS Solving the aerospace and defense back-office paradigm 3

6 At KPMG, we believe that the time for pilot projects and proof of concepts has passed. The benefits of RPA are achievable, well documented, and amply demonstrated across other industry sectors. Now is the time for A&D organizations to take bold steps, using the introduction of automation as an opportunity to redefine how back-office performance can be taken to the next level to enable the business to compete and grow. The benefits of RPA for the A&D back office are clear. So, too, is the competitive advantage that could be achieved. The big question, therefore, is which A&D player will be the first to fully transform its back office and reap the rewards KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS

7 2017 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS

8 Contacts Doug Gates Global Sector Chair, Industrial Manufacturing and Global Head of Aerospace and Defense T: E: Fuad Abdelhadi Managing Director, Shared Services and Outsourcing T: E: David Neely Managing Director, Digital Enablement T: E: Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates. kpmg.com/socialmedia The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. NDPPS