Podcast: What’s Disrupting Aerospace Programs—Inflation, Lead Times And Workplace Envy
Program managers are in the middle of the maelstrom. From historic inflation, to disrupted supply chains, to soothing bifurcated workforces where some employees get a choice of where and how they do their jobs, aerospace program managers are wrestling with issues many have never dealt with in their careers.
Not surprisingly, the profession of program management is going through another round of education, from program managers themselves to senior executives who choose and groom them. Aviation Week editors discuss what they heard at the 2022 Program Excellence Evaluation Team meeting in August.
Three Aviation Week editors attended the annual Program Excellence Evaluation Team meeting. This event brings together program management leaders from across the industry to agree on scores for nominees for the Aviation Week Program Excellence Awards, and to share insights with one another about the challenges and solutions they are developing to deal with those challenges. Their goal: to improve program execution across the aerospace and defense enterprise. The Program Excellence initiative was launched by industry, with Aviation Week as the facilitator, in 2005.
Welcome to the Check 6 Podcast. I’m Carole Hedden with Aviation Week, Executive Intelligence and Program Excellence. I’m joined today by Michael Bruno, senior business editor at Aviation Week, and Jen DiMascio, executive editor for defense and space. The three of us have just finished meeting with program executives from throughout the industry for the annual evaluation and scoring of Program Excellence nominees. We learned a lot during the meeting about the challenges and the issues facing the industry through the eyes of program leaders.
So, I just wanted to start with you, Michael, and get your take on what we heard and reflected on during this meeting.
Thanks, Carole, and thanks for putting it together this year. As always, another fantastic job with the [Evaluation Team]. I was fascinated by one of the points that somebody made during the meeting about how program management is sometimes considered a sleepy kind of backwater issue inside aerospace and defense. This group gets together, and we talk about little details of how to run programs. It’s not predictable, but it’s usually a pretty easy conversation every year.
This year, it was the old... the old Chinese curse or the old Chinese blessing, depending on how you look at it, “may you live in interesting times.” We had a veteran program manager get up and say this is probably the most interesting times that she has experienced in her program management career. There’s just so much going on in the world. There’s everything from the macro issues that are affecting workplaces everywhere, dealing with workforce issues, and not just retention and attraction but how do people actually work on a day-to-day basis and morale, and the differences between workforces that are either at home working remotely or in a manufacturing center or an office somewhere else, so all kinds of issues there to work out in regards to culture and behavior.
There was a lot of discussion talking about the education of program managers in a way that maybe people haven’t had to be educated for 20, 30 years, and I’m sure we’ll dive more into that.
And then there are the issues that you probably imagine were roiling program management, like everything else, high inflation, supply chain disruption. These, of course, are at the heart of running programs. And so they’re affecting programs in a way that probably hasn’t been felt in most people’s careers. So, again, the old Chinese blessing or Chinese curse, or however you want to look at it, it’s very, very interesting times.
Jen, what struck you most about the meeting? I mean, it was the first time that you’ve joined us for this particular program review? And what struck you most?
Well, really, the same types of things that Michael has talked about. I think one of the big issues, though, was really the impact of inflation that programs are starting to deal with. It’s obviously something that’s happening across the economy, but now program managers are having to grapple with cost per [product or unit] mutations on their programs that they haven’t seen since the 1980s. And because their workforces are so much younger, they’re not trained or equipped to deal with this on the fly, and so they’re having to go back and look.
It really makes me think, how is somebody like Frank Kendall [Secretary of the Air Force], who’s obviously seen these cycles in and out of the Pentagon in program acquisition and program management …. how does he adjust and train the workforce for economic price adjustments that are going to come down the pike. [And then there’s] getting Congress to go along with budgetary changes that this is going to necessitate and work through that program by program because it’s going to come and hit everybody this year, next year and the year after. Even if inflation lowers, we’re going to have to swallow what’s happened so far.
There were two things that really struck me. One was that program managers who are supposed to be the stabilizing force and bring a program into consistent performance are now being asked to be very stable disruptors, and that they are having to really pull things into being that never have been done before. And one of the most fascinating ones that I heard about was the issue of designing out long lead times. In fact, the lead time issue was huge. And, Michael, I know you resonated with that a great.
Yeah. So it’s very interesting that we’ve known that lead times have been elongating for more than a year now. We’ve heard commentary at last year’s [Evaluation Team] meeting, where it was just taking longer to get supplies in from subcontractors. What is really, really interesting is that more than a year into dealing with it, I would say a lot of the large contractors are reporting even worse lead time experiences, that long lead items are now taking three to four times. Maybe I wouldn’t say on average, but many people said three to four, but occasionally depending on the widget, it could be 10 times. It could be much, much longer to get your supplies in. And obviously, if you’re running a program and you’re waiting for one particular part to come in, everything stops or you do out of scope work, and that just drives up the cost and the complexity on of everything and everybody involved.
And so these long lead times have become a real focus about something that needs to be narrowed, and that sounds easier than it really is, because obviously all of these contractors are dealing with subs who are dealing with their own subs, and some of the issues go all the way back to the other topics we raised —inflation, the cost of raw materials, etcetera.
The difficulty in getting things lined up on a long-term basis now is a lot more unreliable, and that’s shaking all the way up through these programs. So they want to design all of these programs, want to try to reduce long lead times. Obviously, they’re doing little bits and things.
I think we heard at the meeting some things that were surprising in the sense that you would never have thought program leaders would have to do this before. One of the big ones I heard was strategic inventory build up, maybe not so surprising, but when you’re talking about the cost of capital and having to cover the cost of carrying inventory, that’s very much antithetical to what programs have been wanting to do for a long time.
Nobody wants to have inventory that just sits around and you have to pay for and then maybe use, and if you don’t use, you wind up having to try to resell later on. Now, they’re deciding that particularly with important things, they’re going to build up inventory, have those parts in a warehouse or something like that, to be able to keep the program running. So that, to me, is just fascinating that they’re willing to accept those costs now as part of the necessary part of keeping programs going.
I thought it was also interesting how they were learning from each other in this discussion overall— “This is how we do it,” and really sharing tips with each other on how to design better, [deal with] long lead parts or better get a handle on that.
When we were discussing best practices during the meeting and program management best practices, some companies will say we have 118 best practices, and it’s like, “Oh, my God.”
But basically one of the items that we did here that is disruptive and, at the same ti
me, so symbolic of this digital age that we’re in was the concurrent design and build. So, at some points, programs are using surrogate materials or components until what they need becomes available and then building it in. So I thought that was interesting and also the notion of building as much as you can and putting it aside until the parts that are delayed can get in. So I think that was really interesting.
I want to turn just a moment to the entries [for the awards] themselves and some of the things we learned. Supply chain management, for instance, is a totally different game today than it was even a year ago. And the amount of expertise that is being put into supply chain management. For either of you, did that resonate with what you’ve heard as well?
Yeah, absolutely. The need to focus better on it. We heard about organizations within companies where they used to be a little bit more stovepiped between maybe planning and buying, and they’re bringing them together to try to get better coordination out of that. And that seemed to be a common theme —to break down internal stove pipes that may have been useful once upon a time because you needed people to do these jobs separately. And now, you’re really trying to coordinate them better just to eliminate any kind of time factor on your own end.
So, supply chain management, always important, even more important now, and probably will be for the foreseeable future simply because nobody sees a lot of these underlying issues going away.
But also workforce issues will remain.
Inflation, even though it may be coming down this summer, it’s not going to disappear. It’s certainly going to be an issue for a while. Raw material costs, supply chain disruption, nobody expects any kind of relief there in the near future. Even though, I will say, on a positive note, you hear these large companies saying, “We’re managing this. We’re dealing with this,” and at our [Evaluation Team] meeting, I think you heard a lot of action being taken. Nobody may be satisfied, but they do believe that they’re working through these things, and nobody’s predicting that defense programs are going to fall apart, or commercial aircraft aren’t going to get delivered simply because of these perturbations in the system.
One of the other things we heard about a lot was culture, and Michael alluded to this, but the differentiation in employee work environments today on programs versus what they’ve been in the past. In the past, working in a skiff on a classified program was an elevated status, and now, these are the people that have to go into the office every day. The notion of creating fairness between those who work in the office on a constant basis versus those who have hybrid or remote positions, I thought that was a very interesting conversation that brought to light the need to introduce new types of benefits or incentives.
And it brings to mind, we did an office reorganization a few years back, before COVID, but where people sit in an office is always a fraught decision. People have needs and opinions about where they spend their day. COVID just threw all of that out the window and created people who work at home, and particularly in the defense industry, people who work in the office in these skiffs and come in every day. And then, they’re looking over their shoulder at all the people who are with a bookshelf behind them in their comfy cozy pajamas, and that stuff is beginning to eat away at morale, or it’s something that now program managers have to think about and have to manage through.
That is also not something that’s going away because, as we’ve seen, a lot of people are just returning to a hybrid environment. There are lots of people for whom it doesn’t make sense to go back into the office. Offices, in some cases, downsized, so there aren’t as many desks to return to. It’s very interesting to see how they have to deal with all of the fairness issues that arise out of COVID.
I want to follow up on one thing that Jen was saying that is fascinating when you look at it from the high level of cost and earnings reports. Many of these large companies are counting on the new hybrid workplace system in order to save some money. They’ve been downsizing their footprint. Some large defense primes, for instance, have cut roughly 25% of their real estate footprint and are looking to permanently cash in on those savings.
You can’t do that unless you have hybrid and remote work as part of your workforce strategy in a significant way, and yet if you’re building that in as the long-term approach to having a workforce, how do you deal with these different workforces that some of them are going to be hybrid and working from wherever they want and others have to come into the manufacturing center?
These kind of decisions and policies weren’t drafted in time before the trend came along and disrupted the whole workforce. So these large companies are really piecing this together as they go along.
And nobody reported that they’ve got the answer. We can’t say who it was, but somebody, as part of our meeting, from a large defense prime, basically admitted that everything they’ve tried in the last two years hasn’t been THE answer, and all they’re doing is just making people madder, but it’s not because they intended to.. They’re actually trying to figure out solutions on how to deal with hybrid workforces. It’s just you can’t find a solution that pleases everybody.
They’re beginning to do a lot more with surveying the workforce to see how those changes are landing on people and to increase communication from executive leadership to employees to make people feel included.
Also, one thing I thought was interesting and gives a little bit of hope toward the way we’ve all had to adapt and become flexible as a result of COVID, was one of the managers said they’ve been trying to increase the number of interns, and those internsoften are coming back to them with a solution that rewrites the process and makes it much more simple. The younger people coming up, think about things in a different way, and they’re like, “Well, you told me to do it this way, but I thought it could be done much faster if we tried this and I rewrote this algorithm, and here you go, here’s a solution.” So what’s coming is also fast moving and is going to require a lot of adaptation. Maybe, we’ve all had a bit of a warm-up with COVID.
I think I want to get back to that point because what we were actually doing was trying to select the best of the best in program performance. I think the programs were quite impressive this year. We had commercial. We had small companies. We had large companies to look at and the performance of those programs, the scores were generally high, and not only were they high, they were close. We had a lot of really great programs that we were able to look at. In terms of program performance, I was knocked out by how far some of the programs have come in digitalization. The whole point of concurrent design and build would never have been possible before the tool sets that have been put out there came about, and I thought that was remarkable.
Well, yeah, and I thought a lot of that was driven by the circumstances we’ve been talking about. How do you get long lead items faster? Companies showed that they used digitalization to get around some of those problems, and then told us about it and demonstrated it in their nominations.
We saw one where the turnaround time on a sustainment or MRO contract, turnaround time had been cut from 1,100 days to 270 in one year. I mean, that kind of stuff is what makes this industry great. People are really continuing to push the envelope, and I love seeing that. Michael, was there anything that caught your eye in particular?
This is a theme that’s come up, I think, in many of the recent [Evaluation Team] meetings over the past years, but the growing need for partnership within the industry and, of course, between industry and the government. You’re really starting to see the benefits of much closer partnerships between perhaps the large prime customer and many of the large subcontractors. They’re just working closer, sooner in the process and working together on everything from not just actual production, but design and development and how that has benefits of cutting time and cutting cost and increasing morale and just the general esprit de corps of a program.
There’s caveat to that, though. We also heard in today’s disruption of trying to get late products in the door and long lead items becoming even longer lead. Sometimes, these partnerships that benefit from closer, sooner cooperation are strained at the exact same time because the person at that subcontractor you’re looking to work with is also somebody who’s very, very late in providing some material to you. And so we’ve heard about some of these conversations being a little bit more strained than they would’ve been probably traditionally. But assuming they can work through these long lead items, hopefully this closer partnership is a facet of industry that’s going to be a permanent trend here because, apparently, it’s benefiting everybody.
It’s really all we have time for today. Within the next week or two, we celebrate the finalist from this year’s Program Excellence evaluation team meeting. We hope that you will join us again next week for another episode of Check 6. Don’t miss it by subscribing to Check 6 in your podcast app. And one last request, if you’re listening to us in Apple Podcasts and want to support this podcast, please put a star rating or a review in place. We’ll see you next week.