2017 Edition

Value Creation
in the Digital
Aerospace and
Defense
Network
Inspire and Shape
a Digital World That
Reinvents A&D Products,
Services, and Core
Processes

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Value Creation in the Digital Aerospace and Defense Network
TORSTEN’S POINT OF VIEW

Dear Aerospace and Defense Community,

The impact of our industry is impressive. In 2016 alone, the aerospace and defense (A&D)
industry provided the infrastructure to transport over 3.7 billion passengers,1 delivered over
1,800 new commercial aircraft,2 and launched 85 orbital space missions.3 Many innovations
today depend on technology out of the A&D world – for example, imagine smartphones without
GPS capabilities.

To be successful, strong engineering and collaboration with customers is a must. Customers,

however, expect more for less in terms of cost and time. How do you balance customer
requirements of shortened time and lower costs with high quality, safety, and innovation? Very
often, A&D companies are excellent at finding individual solutions. But as Aristotle once said,
“The whole is greater than the sum of it’s parts.”

Unfortunately, A&D companies are like living organisms that constantly change, thus creating
“We envision the digital more information. A holistic system approach requires a different technology that will allow
aerospace and defense information to be gathered automatically based on existing business principles. In parallel, this
network to help achieve technology will determine the optimal solution for the organization and customer based on any
near-zero unplanned planned or unplanned event – a digital core within a living business.
downtime for commercial
In working with leading A&D companies across the globe, we see investments and energy in the
travel and missions, allow following strategic priorities:
aircraft production at the
highest rates and lowest • Customer centricity
cost, and provide a • Digital business networks
superior end-customer
• Innovation
experience.”
• Agile manufacturing
Torsten Welte
Global Vice President • New business models
Aerospace and Defense
Business Solutions To enable A&D companies to build a live operation, they require infrastructure to connect all
SAP SE elements of manufacturing and the supply chain. To build more agile manufacturing environment
technologies – like the Internet of Things (IoT), machine-to-machine communication, artificial
intelligence, machine learning, and business networks – utility and business value are absolutes.
All these tools require a digital foundation with a common set of business definitions and rules
that must be supported by security. The result is a platform to support the “whole,” not only the
parts. Enabling A&D companies to gain insights for optimization based on customer needs will
drive innovations.

Our goal at SAP is to help the A&D industry successfully master the digital transformation and
evolve into a Live Business.

Torsten Welte

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Value Creation in the Digital Aerospace and Defense Network
TABLE OF CONTENTS

The Digital Economy 4

Big Picture 4
The Future 5

Reimagining 6
Reimagine Business Models 7
Reimagine Business Processes 8
Reimagine Work 9

SAP Digital Transformation Framework 10

The Digital Core 11
SAP Solutions and SAP Digital Transformation Framework 12
The Digital Platform from SAP Enables Critical Business Capabilities 13
How Does It All Come Together? 14

From Your Current State to Digital 15

The Keys to Success 16
SAP Digital Business Services 17
A Comprehensive Ecosystem 18

Why SAP? 19
SAP Is Committed to Innovation 20

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Value Creation in the Digital Aerospace and Defense Network
The Digital Economy
Big Picture: The Digital Economy Continues to Transform A&D

While technology trends change everything, the digitalization of aerospace and defense Access more information
(A&D) products is nothing new. Supporting functions and processes are now being on the latest technology
digitalized. Technologies such as in-memory computing, cloud, 3D printing, and enterprise trends here:
mobility have already started to make an impact in A&D companies. Many A&D companies
have extensive experience in these areas. Other technologies provide new and exciting
opportunities critical to the success of A&D companies, including:

• The Internet of Things (IoT)

• Cybersecurity and blockchain
• Artificial intelligence (AI) and machine learning (ML)
• Augmented reality
Digital business
Leading A&D companies are fully embracing digital technologies as a strategic priority.
They have started to evaluate the impact these trends have on their business, which will
models are disruptive.
ultimately transform them into “live” enterprises. At the center of this idea stands a fully The rules have changed.
connected digital architecture to help drive operational excellence, reimagine business
processes and business models to power growth, and delight customers. • Airbus DS Optronics GmbH is
using SAP S/4HANA® as a digital
core – a major milestone within
A Digital Core Is Needed the company’s digitalization
A&D companies have always been at the leading edge of technology innovation.
initiative to increase the efficiency
Consequently, ideas like “smart“ aircraft or factories are nothing new to the industry.
of financial and controlling
However, the success of a digital transformation and the value of new technologies are
processes, moving toward a fully
based on a business process platform – the digital core. The alignment of customer and
digital financial process.4
strategic company priorities is critical.

Here are a few examples of where a digital core can create business value in the A&D • The Boeing Company believes
industry today: the future of the aviation industry
lies in “the digital airline” –
• Enhance existing core processes with real-time insights by embedding IoT systems and connecting information from
enabling machine intelligence and data science for Big Data. Make core processes airplanes through technology for
responsive and insightful. Turn them into a competitive business differentiator. Lower smarter airline operations.5,6
costs by reducing – not adding – technical complexity to the IT landscape.
• Spirit AeroSystems Inc.
• Capitalize on the massive amount of data generated by modern machines and digitalized accelerates production with real-
products to enable smarter factories and differentiated service offerings. Harness IoT time shop floor dashboards,
data from customer equipment in the highly competitive aftermarket. expecting benefits such as 25%
reduction in flow times.7
• Extend digitalization to supply chain and logistics to enable better-connected, dynamic
multitier production and sustainment networks that foster cross-domain and partner • Lockheed Martin’s digital vision
collaboration. Support secured data exchange with technologies like blockchain. is an end-to-end initiative using
Synchronize and collaborate within the digital ecosystem to optimize products over the explosion of digital
their entire lifecycle, improving the customer experience. transformation in manufacturing
(model-based design, additive
• Offer opportunities to create new revenue streams and business models with manufacturing, advanced
“information as a product” using data collected and consolidated from different materials) as a key enabler to
systems and exchanged on digital commerce platforms. Provide opportunities for shrink cycle times and drive costs
nontraditional players with a strong technology background to enter the market and down. Its “digital tapestry”
profoundly change the playing field. approach connects everything
from concept to realization.8, 9
Early Adopters Are Winning
Research shows that companies that embrace the digital world and execute on their digital
strategy are growing shareholder and stakeholder value faster than their peers.

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Value Creation in the Digital Aerospace and Defense Network
The Digital Economy
The Future: Strategic Priorities for A&D Companies

Where opportunity is enormous but new market entrants threaten traditional A&D companies, it is essential to focus on the right
strategic priorities to drive digitalization across business. In working with leading companies across the globe, we see that
investments and energy are being focused on five strategic priorities.

1. Customer centricity
Putting the customers‘ point of view at the center of every decision is vital for success in the digital age.
This does not stop with business development or product design, but also applies to how products are
built and what services are offered. Digital services must provide tailored benefits, improve product
performance, and support outcome-oriented service models to reduce cost and risk.

2. Digital business networks

Many A&D stakeholders agree there is substantial potential in expanding business views across the
enterprise. Designing network value streams, which enable collaboration, benefits all business partners,
while leveraging the knowledge of the best breed of partners. Scalable and secure, many-to-many
networks can distribute critical business information across the network, automate real-time network-
level analytics, and enable secure, streamlined collaboration across departments and companies.

3. Innovation
Continuous innovation is impacting A&D products and processes alike. With even more technology
embedded, OEMs aim to make products smarter, more reliable, and affordable for customers. Process
automation benefits from greater IoT integration, while 3D printing is further adopted across the
industry.

4. Agile manufacturing
Smart, connected factories with advanced automation and integration of shop floor processes deliver
granular data for optimizing products and processes and proving compliance. Production and supply
chain processes gain flexibility and accelerate reactions to change in demand, supply, and resources,
driving optimization in virtual capacity and operational efficiency.

5. New business models (revenue diversification, data-driven)

New business models are disrupting traditional business models and forcing them to evolve. They create
new markets and generate new revenue streams by delivering outcomes. They utilize data as a product,
for example, for new aftersales services. OEMs invest to access new levels of innovation, for example, by
strategic acquisitions, to extend cybersecurity or 3D printing functions to upgrade products quickly for
their customers and enter new business domains.

A&D companies need to redefine their core competencies and rebuild the business strategies around them. Successfully embracing
the opportunities from new technologies and addressing these strategic priorities will be the foundation of successful digitalization
and staying ahead of the innovation curve.

Reimagining
How do you act on these strategic priorities? The starting point of the digital journey is the ability to reimagine your business together
with customers. That means reimagining your business models, your business processes, and your work.

10% $6.2 trillion $1 trillion

Of the data in the digital Estimated global worth of IoT Estimated size of the machine-
universe will be coming from technology by 202511 to-machine market by 202012
embedded systems by 202010

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Value Creation in the Digital Aerospace and Defense Network
 REIMAGINING
THE DIGITAL ECONOMY OFFERS
INFINITE OPPORTUNITIES
In a connected world, where every company is a technology
company, smart products and services refocus commerce on
outcomes, blurring industry lines.

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ValueDigital
SAP Creation
Aerospace
in the Digital
and Defense
Aerospace
Whitepaper
and Defense Network
REIMAGINE EVERYTHING
REIMAGINE BUSINESS MODELS
The volume and variety of data accessible during the A&D product lifecycle give A&D firms new ways
to innovate and grow in new markets.
Customer Centricity
Customers across all industries demand not only production
innovation, but increased focus on outcomes. They want
streamlined, contextual customer engagement end to end.
• OEMs continue to invest in advanced capabilities to plan,
execute, and measure outcome-based contracts in order to
meet customer service–level profitably.
• Business-to-business (B2B) spare parts portals that provide
omnichannel, consumer-grade, e-commerce experience are
becoming the norm.
• A&D OEMs optimize digital customer interaction across all
engagement steps, providing 360-degree holistic customer
insight.
• Customer interaction during the phases of innovation,
contract definition, and business capture will be more
collaborative. Customers will exchange ideas and terms
digitally with OEMs early on. Examples include new
performance-based logistics (PBL) programs and joint work
on future aircraft connectivity solutions.
Driving Innovation
A&D OEMs embed more and more software and partner
technologies into their product architecture, enabling a next
generation of smarter product models. This creates greater
volumes of operational data to fuel new business models.
Increasing numbers of viable applications and availability of
entry technology at lower prices affect OEMs as well as many
new players in the unmanned aerial vehicle (UAV) and space
segment. Production volumes increase as does the investment
in capacity and know-how.
A&D OEMs invest in disruptive technologies for their core
processes as well as for their products. Leading OEMs look at
smarter robots, wearables, additive manufacturing, virtual
reality, and AI to shape future assembly lines and entire plants.
The digital economy increases competitiveness within the
market. Companies must reduce their engineer-to-market
timeline and react faster to market changes.
85%
Of service parts suppliers will
incorporate 3D printing into their
business in the next five years13
Value Creation in the Digital Aerospace and Defense Network
Digital Business Network
As A&D OEMs enhance their global presence to access
additional markets and extend production capacities,
distributed product development and collaboration across the
product lifecycle are becoming the norm. New technologies will
enable better coordination of complex value networks and
provide agile integration, global visibility, network intelligence,
and secure collaboration from design to service.
• Broad coverage of digital collaboration with suppliers allows
OEMs to increase volume and sophistication of outsourcing
and supplier quality assurance. It gives OEMs the flexibility
needed to model their preferred global capacity mix.
• Information-driven, multitier networks with cross-enterprise
intelligence and advanced analytics help OEMs drive process
compliance and manage risk and vendors smarter.
• Distributed manufacturing enables cloud-based integration
of 3D printing service providers.
Enable New Business Models (Data-Driven)
Harnessing massive amounts of IoT data across the product
lifecycle, managing Big Data economically, hosting digital
services, and investing more in software innovations like
microservices allow OEMs to diversify their portfolio.
• OEMs can access technology platforms to process IoT,
cybersecurity, and Big Data with data science to gain revenue
in adjacent markets, for example, in situational awareness.
• OEMs can increase focus on revenue from aftermarket
engineering, for example, for life extension or health
monitoring services.
• Digital aviation platforms can be enabled to collect, enrich,
and host asset data, for example, to help customers optimize
flight operations or extend reach to crews and passengers.
$109 billion $150 million per year
Size of aircraft service lifecycle Potential savings for an airline that
management industry14 manages to increase airtime for a fleet
of 70 aircraft by 70 hours a week14
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REIMAGINE EVERYTHING
REIMAGINE BUSINESS PROCESSES
The use of digital technologies in A&D extends beyond the products to all core elements of the value chain –
engineering, manufacturing, supply chain, and MRO.
Design and Build: Driving Innovation
Visualization technologies provide a better understanding of
product design throughout a company. Google-like searches
and searches based on geometries increase reuse of part
design and decrease the number of design variants. IoT will
provide more data from the manufacturing process as well as
in-service usage in order to improve future design.
A compliant design for a global product is no longer possible
without intelligent support to identify relevant regulations (for
example, the EU regulation REACH) and automated generation
of compliance reports.
Design and Build: Agile Manufacturing
Pressure to reduce costs and align with demand has created
the need to improve production processes and quality on an
ongoing basis. Advanced automation and integration of shop
floor processes (IoT, Industry 4.0) deliver the data that is the
basis for optimizing products and processes and proving
compliance. This provides substantial potential to improve
throughput in order to address record backlogs. Real-time
production dashboards with simulations, recommendations,
and predictions for supervisors revolutionize how companies
run their shop floor operations, providing quality, scope, and
granularity of information that never existed before.
Predictive and root-cause analysis allow OEMs to understand
sources of nonconformance and machine failures earlier and
more accurately. These new analytical tools help companies
make adjustments to products and process definitions early to
avoid waste, reduce production cost, and stabilize the
production flow.
90%
Of CEOs believe the digital economy
will impact their industry, but less
than 15% have a digital strategy15
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Value Creation in the Digital Aerospace and Defense Network
Responsive Supply Networks: Digital Business
Control towers with early-warning systems using real-time
alerts for material flow deviations reduce supplier risks,
impacting production master plans. Digital B2B collaboration
natively integrated with core supply chain planning allows for
closer integration of critical suppliers and, for example, better
coordination of changes.
Embedded network intelligence and machine learning analyze
diverse structured and unstructured supplier data points to
assess the health of the entire network and predict future risks
to avoid expensive firefighting.
Blockchain technology can provide a new layer of trust,
traceability, and integrity. It can secure provenance of
transactions and product genealogy in a distributed network.
Aftermarket Services: Customer Centricity
Big Data coming from equipment sensors and advanced
analytics to combine a multitude of structured and
unstructured data points will become an integral part of MRO.
For example, Big Data can help evolve maintenance resource
planning from preventive to predictive and help customers
increase uptimes.
Field service effectiveness can be dramatically improved by
equipping technicians who use mobile solutions and wearables
with 3D product visualization, real-time context data, and
virtual collaboration. This can enrich their work environment to
help them solve customer problems better than ever before.
“The digital factory is a must for us to be able to in increase
our production capacity.”16
Jens Graffs, Vice President of Assembly and Installation, Airbus
REIMAGINE EVERYTHING

REIMAGINE WORK

The introduction of technologies – smart glasses, 3D printers, geospatial technologies – impact the A&D
world, changing what people do and how they learn.

Every substantial business transformation automates manual
tasks, enriches jobs, and creates more valuable work.
Automation with digital technologies replaces manual
transaction work in procurement, inventory management,
invoicing, and payment processing. Digital processes have
access to real-time analytics to support rule-based decision
making.
The right information is delivered at the right time on the right
device. Shop floor, logistics, and service processes are
supported by 3D asset visualization, virtual coaching, voice
control, and wearable devices. Big Data and unstructured data
sources, such as equipment sensors and text documents,
become natively integrated into business processes. Systems
automatically distinguish the signals that matter from the noise.
Interactive technologies reflect the transition of people’s roles
from transaction workers to exception workers who engage
when the digital rulebook needs human creativity and ingenuity.
Collaborative knowledge workspaces increase the efficiency of
problem solving, empowering employees and linking experts
and context to create “collective intelligence.”
A single source of the truth results from the transformation to
a digital A&D ecosystem, which creates a substantial need to
orchestrate across teams and company interactions. Real-time
digital information is critical. It enables flexible decision making
on the boardroom level based on a unified, up-to-date view of
the entire ecosystem. It also creates closed-loop information
systems.

Predictive and self-learning systems interact with machines

and business processes, accelerating the delegation of
decisions from people to machines. People who need the
knowledge have digital access on demand and in real time –
regardless of whether they are part of the core or the extended
workforce.

Digital learning is revolutionized by 3D

visualization.

Technicians, mechanics, and supervisors, whether
on-site or remote, can now use SAP® Mobile Platform
to access and complete work orders, review technical
documentation and production progress, and raise
nonconformance issues – all directly on a mobile device.17
Northrop Grumman: “Where SAP 3D Visual
Enterprise applications are used, our delivery times
have been reduced by 15% to 20% due to less
rework and more efficient operations.” 18

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Value Creation in the Digital Aerospace and Defense Network
 DIGITAL BUSINESS
FRAMEWORK
PROVEN APPROACH TO
VALUE CREATION
All companies across all industries require a simple digital
approach to building a pragmatic and executable vision of
their digital strategies.

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ValueDigital
SAP Creation
Aerospace
in the Digital
and Defense
Aerospace
Whitepaper
and Defense Network
SAP® DIGITAL TRANSFORMATION FRAMEWORK
Every company needs to think about digitalization across five key pillars.

We looked at the five strategic priorities that A&D companies are pursuing. We discussed how they need to reimagine their business
models, products, processes, and work to act on those priorities.

Let’s now look at how SAP can further enable them with the following architecture.

As companies reimagine their entire business, they need an IT
architecture that provides stability and long-term reliability for
the core enterprise processes. At the same time, the
architecture must allow for flexibility in areas where changes
are being constantly applied.
This concept, often referred to as “bimodal IT” 22, is brought to
life through the SAP® Digital Transformation Framework
methodology (see Figure 1).
1. The digital core is the foundation for the core enterprise
processes. It must run consistently without interruption. It
provides real-time business transactions and intelligent
insights, facilitates work with Big Data, and provides
connectivity to the four other pillars of the framework.
2. By harnessing the Internet of Things to connect your assets,
supply chain, and the digital products that you provide to
your customers, your digital core supports real-time
insights.
3. Your customers require flexibility in the way they interact
with you through multiple channels. Deeper customer
collaboration supports outcome-based business models.
4. Flexibility and adaptability when working with suppliers and
partners are key in order to onboard new suppliers quickly
and shift supply to alternates. Business networks provide
intelligence and collaboration across multitier supply
chains.
5. A great deal of flexibility is required when building and
maintaining an agile workforce.
The value of SAP is in the integration we deliver across every
part of the digital transformation framework. SAP is the only
industry partner that can help customers digitalize every
aspect of their business value chain.

Figure 1: SAP Digital Transformation Framework

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Value Creation in the Digital Aerospace and Defense Network
SAP SOLUTIONS AND SAP DIGITAL TRANSFORMATION FRAMEWORK
SAP has innovated its portfolio to provide for a stable digital core as well as flexible
line-of-business (LoB) extensions.

We cover the digital transformation framework with SAP S/4HANA® as the digital core. The other pillars are covered through additional
products that are closely coupled with SAP S/4HANA and provide extended functions across the various lines of business. Together with
the digital core, they form the SAP S/4HANA suite. The suite allows us to interconnect the entire A&D value chain to drive live business
outcomes. SAP Cloud Platform is an open “platform as a service” that provides unique in-memory database and application services.
It is the proven cloud platform that enables you to develop new applications rapidly and extend existing ones.

Digital core: Core solution
capabilities delivered as part of
SAP S/4HANA Enterprise
Management
Digital Core: Solution capabilities that
are also part of SAP S/4HANA
Enterprise Management, but
added/purchased as needed.
Extensions: Cloud-based (LoB)
solution extensions that are fully
integrated with SAP S/4HANA
Enterprise Management,
but added/purchased as needed.
Leonardo: Solution capabilities that are
powered by a Leonardo technology and
included in the Leonardo suite and how
to add/purchase is not shown on this
diagram.

Learn more about SAP solutions today

and discover planned innovations for
aerospace and defense businesses
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Value Creation in the Digital Aerospace and Defense Network
 They pursue five key
initiatives that require
Aerospace and defense (A&D) companies need to transform their business and process models now to pave the way for a sustainable future through:
new business 1. Digitally enabled core processes 2. Generation of new business by offering new, innovative, data-driven services
capabilities along the
value chain.
Design and Build
Business Capture Design Build Responsive
Aftermarket Service Procurement Finance Human Resources
Program Delivery Supply Chain
• Streamlined customer experience • Design for product lifecycle sustainability • Agile and responsive manufacturing network • Demand-driven collaborative networks • Mobilized and empowered teams • Collaboration with external service-parts • Strategic customer portfolio management • Attract and secure top talent and identify
• Mobilized and empowered program and operating costs • Configurable product to shorten delivery time • Improved supply chain predictability and • Customer data flow across channels suppliers for rapid, high-quality delivery • Instant analysis of profitability across succession needs
Customer manager • Collaborative requirements engineering and • Customer visibility of build progress delivery reliability • Personalized service process • Flexible procurement contracts aligned multiple dimensions • Support flexible customer contracts
• Understanding of program cost versus equipment definition • New manufacturing capabilities, such as 3D • Visibility into preferred supplier network • Access to service knowledge database with end customer • Support for on-demand soft close and • Support social collaboration among teams
budget • R&D prioritization through enhanced market printing, to simplify design and reduce weight based on project or proposal • Predictive analytics to anticipate demand billing compliance • Train and certify workforce
centricity • Customer-focused, contextual engagement analysis and simulation • Early warning systems and real-time alerts and preposition services • Capture and package the knowledge of
from sales to service • Streamlined handover process using network-level intelligence • Pay- for-performance contracts retiring employees

• Visibility into program-specific business • Collaborative project and resource planning • Maintenance of production machines by • Multitier supply chain risk, performance and • Coordination and provision of third-party • Management of a strategic and agile • Management of increased financial risks • Onboard and train employees quickly and
Digital partners with partners specialized partners capability analysis repair services and spare parts global supplier network accociated with new partrnerships seamlessly
• Precise production forecast and flow-down • Secured collaborative-engineering platform • Extension of the supply chain to additive • Flexible integration of (alternate) suppliers • Online presence to support service and • Flexible onboarding of (alternative) • Instant analysis of profitability across • Empower employees to make decisions in
business of contract deliverables • Scalable platform, adapting to A&D manufacturing and local logistics providers support and spare parts store front suppliers multiple dimensions across network real time
• Collaborative planning across program development resource requirements • Contingent workforce network • Data security and integrity for distributed • Market exposure
networks ecosystem • Distributed manufacturing logistics and track and trace • Global track and trace for components

• Simplified contractual framework • Incorporation of value chain feedback and • Simulation capabilities for resource • On-demand additive manufacturing to reduce • Tailor-made service offerings • Procurement strategies for 3D- printed • Inclusion of payment models for digital • Train and certify workforce on new digital
• Digital collaboration on customer state-of-the-art technologies shortages inventory levels • Full transparency of product lifecycle service parts services into product calculation and technologies
Driving innovation • 3D printing and virtual or augmented reality • Automation with machines, robots, and • Integrated material management from shop information • Simplified sourcing of product and financial reporting • Work with universities and external entities
• Alignment of product configuration and to expedite prototype process artificial intelligence (AI) floor to warehouse with flexible, intelligent • Use of IoT for predictive maintenance, service innovation from nontraditional • Simulation and analysis to evaluate in a flexible way
innovation costing • Product architecture to embed even more • Network of machines by machine-to-machine replenishment maintenance cost forecast, and service suppliers financial implications of strategic business • Share knowledge and build communities
• Effective proposal development partner technology and software integration • Improved visiblity support choices
• IoT on production lines

• Efficient routing of contract changes to
production network
Agile • Alignment of customer communication,
supply chain, and sales planning
manufacturing
• Joined evaluation and introduction of
customer configuration changes
• Streamlined and fast introduction of
engineering changes
• Simultaneous and highly efficient
manufacturing engineering process
• Data collection and quality prediction
• Maintenance schedule based on product
quality and not on cycles
• Controlled resource consumption
• Localized 3D printing
• Digital multitier visibility and collaboration
• Agile planning and response cycles,
connecting demand signal to shop floor
• Integrated optimization
• Proactive anticipation and handling of supply
shortages and schedule delays
• Network for collaboration on equipment data
• Seamless as-built information handover to
aftermarket services
• 3D printing for service parts
• Agile, contractual enablement of global
supply chains with multitier supplier
management
• Automated and simplified integration of
material suppliers
• Optimization of working capital
• Management of increased financial risks
associated with highly flexible supply
chains and manufacturing operations
• Empower employees to make decisions in
real time
• Manage external contractors flexibly
• Build flexible and collaborative teams
• Ensure workforce compliance

• Software packaged for new offers versus
hardware only
New business • Selling of digital services
• Value selling and contract management
models (performance-based billing)
• Aftermarket engineering services as strong
revenue stream
• New revenue streams designed with
capabilities of Big Data and the (IoT)
• Estimating of performance-based logistics
contracts
• Availability of manufacturing parameters to
service processes
• Sale of free capacity with constraint -based
production planning
• Offering of more data about individual
products with track and trace
• Monetization of supply chain capabilities sold
as services
• Optimization of parts inventory with 3D
printing, availability-based service level
• Alignment of supply network design, financial
and business planning
• Delivery of performance-based service and
products as a service
• Remote condition and performance
monitoring leveraging IoT
• Predictive services
• Digital value-add services
• Efficient integration of contingent labor to
augment own workforce
• Buying power as new procurement
service-based revenue stream
• Talent with unique noncore skills to drive
new business ideas
• Real-time financial controlling of
performance-based service contracts
• Effective managment of revenue streams
• Digital payment services
• Management and compliance with digital
rights
• Procure and manage contingent labor and
services for optimized service delivery
across regions
• Identify, forecast , and address skill gaps
• Train and certify workforce on new digital
technologies

Internet of Things Machine Learning Analytics Blockchain Big Data

Digital Innovation SAP Cloud Platform Analytics Services UX Services Mobile Services Security Services Collaboration Services
SAP Leonardo
Business Capture Program Delivery Design Build Responsive Supply Chain Aftermarket Services Procurement Finance Human Resources

▪ Product lifecycle costing ▪ Product lifecycle costing ▪ Manufacturing execution ▪ Global track and trace ▪ Predictive maintenance and service ▪ Invoice matching ▪ Resume matching
▪ Distributed manufacturing ▪ Manufacturing integration and ▪ Asset intelligence network ▪ Job matching
intelligence, plant connectivity
▪ Predictive maintenance and service
▪ Asset intelligence network
▪ Distributed manufacturing
▪ Innovation management ▪ Product stewardship network ▪ Quality issue management ▪ Integrated business planning ▪ Cloud for service ▪ Supplier collaboration ▪ Business planning and consolidation ▪ Core human resources and payroll
▪ Enterprise project connection ▪ Strategic sourcing ▪ Supply network collaboration ▪ Collaborative supply chain ▪ Marketing, commerce ▪ Collaborative sourcing ▪ Digital boardroom ▪ Talent management suite
▪ Cloud for sales ▪ Innovation management ▪ Transportation management ▪ Billing, charging ▪ Spend analysis ▪ Governance, risk, and compliance ▪ Time and attendance management
▪ Commerce, marketing ▪ Engineering control center ▪ Extended warehouse management ▪ Service parts management ▪ Buying and invoicing for finance ▪ Human capital analytics
Extensions ▪
▪
Jam
Supplier management, sourcing
▪ Global trade services ▪ Analytics cloud for predictive analytics ▪
▪
Collaborative finance
External workforce management
▪
▪
Shared service framework
Collaborative finance
▪ Integrated business planning for sales
and operations

▪ Enterprise portfolio and project ▪ Enterprise portfolio and project ▪ Manufacturing engineering ▪ Extended warehouse management ▪ Multiresource scheduling ▪ Financial planning and analysis
management management ▪ Constraint-based production planning ▪ Advanced ATP ▪ Billing and revenue innovation ▪ Accounting and financial close
▪ Billing and revenue innovation ▪ Enterprise product engineering ▪ Production scheduling ▪ Constraint-based production planning management ▪ Treasury management
management ▪ Environment, health, and safety ▪ Asset operations and maintenance ▪ Receivables management.
▪ Advanced available to promise (ATP) ▪ Environment, health, and safety ▪ Invoice management & accounts
Digital Core ▪ Digital manufacturing insights payable

SAP S/4HANA ▪ Project financial and logistics control
▪ Order and contract management
▪ Invoice management
▪ Product development foundation ▪ Production orchestration and execution ▪ Inventory and basic warehouse ▪ Maintenance execution ▪ Operational purchasing ▪ Accounting and closing operations ▪ Time recording
▪ Quality management ▪ Quality and maintenance management management ▪ Service agreement/warranty ▪ Invoice and payables management ▪ Accounting
▪ Inventory management and material ▪ Production planning (MRP on SAP ▪ Maintenance planning and scheduling ▪ Supplier management ▪ Cost management
valuation HANA) ▪ Order and contract management ▪ Procurement analytics ▪ Profitability analysis
▪ Production planning ▪ Basic ATP

Studio SAP | 51467enUS (17/05) © 2017 SAP SE or an SAP affiliate company. All rights reserved. * Benefits are based on early adopters of SAP S/4HANA or conservative outside-in benefits due to moving from a traditional ERP to enhanced SAP S/4HANA and LOB/cloud capabilities.
HOW DOES IT ALL COME TOGETHER? – EXAMPLE

Many processes in today’s operations are optimized within their silos and deliver individual business value. But next-
generation business processes will span multiple pillars to drive efficiency internally or across the business network,
connect to devices, and enhance the omnichannel customer experience.

Imagine as an A&D OEM you had access to an architecture like the one described above. You could digitally
collaborate across the A&D value stream (see Figure 2). You could connect different data sources, such as
equipment telemetry or supply chain data, to achieve highly efficient maintenance processes to optimize service
contract execution and product reliability.

Figure 2: Digital Collaboration Across the Aerospace and Defense Value Stream

Supplier collaboration
business networks

Workforce
engagement

Assets and the

Internet of Things

Digital core

Sensors on aircraft feed telemetry data (temperature, vibration,
pressure) and fault codes to a central system – the digital core.
The digital core enables visualization of this data and
automatically predicts impending failures based on algorithms
running in the background.
When impending failure is predicted, the digital core
automatically triggers maintenance notifications with
appropriate spares in the central system. Reliability engineers
can monitor key performance indicators (KPIs) on the fleet
level, investigate fault patterns, and drill down to perform
detailed root-cause analysis.
Labor and facility resources are optimized to ensure high-
priority requirements are given the appropriate attention and
maintenance costs are minimized.
Material demand for needed spares is automatically sourced
and fulfilled to ensure parts arrive at the point of demand when
they are required. A business network supports online
collaboration with suppliers to expedite shipments and allow
them to exchange logistics details in real time.
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Value Creation in the Digital Aerospace and Defense Network
3D visual images can be used to provide visual work
instructions on mobile devices, which speeds repair and
ensures that correct procedures are followed.
Work-order metrics (labor and material costs, time) are
automatically collected, as well as the actual time required to
perform repairs. The data is sent to contract managers, who
report aftermarket service profitability and ensure equipment
availability contract metrics are met.
Real-time equipment monitoring yields tangible benefits:
• Increased safety and availability of equipment
• Increased reliability and maintainability
• Reduced risk and increased profitability as executed against
outcome-based contracts
The digital A&D platform provides additional opportunities for
A&D OEMs to rethink maintenance processes and product
design. The platform supports more innovative, value-added
information services, helping airlines improve customer
satisfaction and lower operational cost.
Watch a video
illustrating the
scenario here
 FROM YOUR
CURRENT STATE
TO DIGITAL
THE JOURNEY TO DIGITAL
BUSINESS BEGINS WITH
PLANNING A DIGITAL
TRANSFORMATION ROAD MAP.

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ValueDigital
SAP Creation
Aerospace
in the Digital
and Defense
Aerospace
Whitepaper
and Defense Network
TRANSFORMING FROM YOUR CURRENT STATE TO DIGITAL
The Keys to Success

In the digital economy, simplification and business innovation matter more than ever. To address this, it’s important to cover the end-to-
end digital transformation journey. This includes planning a digital innovation road map and implementation plan using proven best
practices, running all deployment options, and optimizing for continuous innovation with a focus on outcomes.

The end-to-end digital transformation journey

Plan Build and launch Run Optimize

well to manage with proven best all deployment for continuous
expectations practices models innovation
Simplify and Standardize Run with one Optimize to
innovate and innovate global support realize value
• Reimagined business • Model company approach service • Continuous capture
models, business to accelerate adoption with • One consistent global and realization of
processes, and work model industry solutions experience benefits of digital
transformation
• Digital transformation • Design thinking and rapid • End-to-end support
framework as a guide for digital tangible prototypes – on premise, cloud,
transformation hybrid
• Co-engineered industry
• Value-based innovation innovations delivered with
road maps agility

To move forward with speed and agility, it helps to focus on live digital data instead of Big Data, and combine solution know-how and
industry-specific process expertise with data analytics to define and deliver the right digital reference architecture. In that context, we
believe that a model company approach is very relevant to helping you transition from your current state to digital. Model companies
represent the ideal form of standardization for a specific line of business or industry. They are built on existing SAP solutions using
best-practice content, rapid prototyping solution packages, and additional content from customer projects (see Figure 3). They provide
a comprehensive baseline for rapid, customer-specific prototypes, cloud demos, and quick-start implementations.

Figure 3: Model Company Approach

End-to-end solution
Internet of
End-to-end business process People
Things
Innovation

Differentiation
Business
Devices
networks

Best practice SAP® products

Social Model company Big Data
networks

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Value Creation in the Digital Aerospace and Defense Network
SAP Digital Business Services
Enabling your success in digital transformation

SAP has a broad range of services to cover • 25,000 professionals in 70 countries

the end-to-end digital transformation journey.
They range from advising on a digital innovation
road map and implementation plan with proven
best practices to running all deployment options.
SAP can also optimize for continuous innovation. We
provide both choice and value within our service
offerings, allowing you to choose the best approach
based on your specific company expectations and
industry requirements.
• Customers served in 130 countries
• Outcomes delivered as one team in one contract
• Projects connected in real time to a global network of support
functions through SAP Mission Control Center
• The SAP MaxAttention™ offering and SAP ActiveEmbedded services
to safeguard investment
• Consistent experience – on premise, cloud, or hybrid
• Standardized adoption of processes and tools
• Streamlined onboarding and ramp-up of stakeholders

From delivering a comprehensive digitalization proposal to realizing and running it, SAP delivers on the digital transformation promise to
its customers, on time, on budget, and on value.

Value delivery from SAP relies on its unique differentiating assets.

Exhaustive SAP Model SAP Activate SAP Solution SAP Mission

service portfolio Company service methodology Manager Control Center

Expert Partner Industry Focus on

organization Global reach ecosystem expertise business Co-innovation
outcome
The SAP Digital Business Services organization delivers digital innovation with simplification and accelerated implementation,
which is key to adoption and value realization. Continuous improvement is supported through ongoing assessment of real-life
data insights and joint governance with customers.

Value delivery from SAP focuses on the following deliverables:

Digital business foundation Business insights Continuous improvement

Reimagine Design Transform
Business
Run better: Use better:
Business Digital Business
innovation dream zone model design
model Operate Harvest
implementation

Corporate
Digital Digital Enterprise Business
architecture Strategy
architecture strategy and road map transformation

Extend use: Build new:

Value Value
Value design
Value
Invest Innovate
generation proposition governance

• Digital business model • Digital boardroom • Joint value governance

• Flexible, scalable enterprise • Predictive customer insights • Sustainable engagement model
architecture
• Value realization dashboard • Innovation without disruption
• Platform for the digital future
• Agile decision making and • Simplification
• People and cultural transformation execution support
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Value Creation in the Digital Aerospace and Defense Network
A Comprehensive Ecosystem
Orchestrating the world to deliver faster value

Figure 4 shows how comprehensive our ecosystem for Our partner ecosystem includes, among others:
the A&D industry is. It offers:
• A wide range of business services (OEM suppliers,
banks, key vendors)
• Special technology services for A&D with a focus on
IT/OT convergence, geospatial integration, and aircraft
health management
• Open architecture with a choice of hardware and
software
• Complementary and innovative third-party solutions
• Reach that includes partners to serve your business of
any size anywhere in the world
• A forum for influence and knowledge
• A large pool of industry experts with broad and deep
skill sets

Figure 4: Driving Customer Value

Business network
Influence forums and education • 2 million suppliers
• 32 user groups across all regions, • 200 major travel partners (air, hotel, car)
including A&D-specific charters • 1.9 million contingent workers supported by SAP
within: Fieldglass® solutions
– Americas’ SAP Users’ Group
(ASUG) for Grouping, Pegging,
and Distribution (GPD) and for
the SAP@ Complex Assembly Implementation services
Manufacturing solution
• 3,200 service partners
– SAP Users’ Group for industry
experts, executives, and managers • A&D-specific solutions and services
of MRO in the A&D industry • A&D-tailored best practice offerings
(SUGAIR)
Driving Customer
• SAP Advisory Council for A&D, which
includes 9 out of the world’s top 10
Value
most admired A&D companies as
members
• SAP Community, with over 24 million
unique members Platform and infrastructure
• 2,400 SAP University Alliances
communities • 1,400 cloud partners
• >1,500 platform partners
Innovation
• 1,900+ OEM solution partners to
extend SAP solutions Channel partners and small
• 2,700 startups developing apps and midsize enterprises
based on the SAP HANA® platform • 4,800 channel partners

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Value Creation in the Digital Aerospace and Defense Network
 WHY SAP?
SAP OFFERS THE DIGITAL A&D
NETWORK A DIGITAL CORE,
SUPPORTING BUSINESS
NETWORKS, SUPPLY CHAINS, AND
THE INTERNET OF THINGS.

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ValueDigital
SAP Creation
Aerospace
in the Digital
and Defense
Aerospace
Whitepaper
and Defense Network
SAP IS COMMITTED TO INNOVATION

Vision Help the world run better and improve people’s lives

Mission Help our customers run at their best

Strategy Become the cloud company powered by the SAP

HANA® platform

Aerospace
Global Digital and defense
Industry and Innovation
presence and economy– enabled by
LOB focus leader
relevance ready SAP

• 85,000 employees • Solutions for 25
representing 120 industries and 11
nationalities lines of business
• 350,000 customers • 98% of top-valued
• Operations in brands running SAP
191 countries software
• 74% of the world’s
transactions
managed on SAP
software
• 95 million cloud • 2011 – SAP HANA
business users platform launched
• 2 million connected • 2012 – SAP® Cloud
businesses portfolio launched
• >US$740 billion in • 2014 – Business
business-to-business networks supported
commerce by SAP become world’s
• >99% of mobile largest marketplace • Over 1,000 A&D
devices connected • 2015 – SAP Cloud
with messaging from Platform launched
SAP® software
• 2015 – SAP S/4HANA®
launched as most
modern ERP software
• 2017 – SAP Leonardo
portfolio launched
• SAP solutions
supporting the entire
A&D value chain
• 95% of A&D
companies in the
Forbes Global 2000
running SAP software
companies in 51
countries innovating
with SAP solutions

Faster reporting for better
decisions
Safran S.A. migrated its SAP Business
Warehouse application to the SAP HANA
platform and achieved substantially faster
reporting and data access. It now has more
data available for more users and can provide
more accurate, more granular production
reporting.19
More accurate lead times
Lockheed Martin Space Systems Company is
using SAP HANA, SAP Predictive Analytics
software, and the Data Science group to
improve lead-time accuracy with a new custom
application. It expects to improve material
lead-time accuracy by at least 25% and
reduce lead-time overhead for buyers by
80%.20
Reduced inventory
Spirit AeroSystems Inc. achieved significant
inventory reductions by optimizing its
manufacturing scheduling and work-in-
process inventory and increasing its
manufacturing responsiveness and visibility
with the SAP HANA platform.7

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Value Creation in the Digital Aerospace and Defense Network
ADDITIONAL RESOURCES

Outlined below is additional external research that was used as supporting material for this paper.

1. IATA Fact Sheets – Industry Economic 14. “Flying Blind,” by Wolfgang Ullwer, Phil Te Hau,
Performance: and Stephanie Overby; SAP 2013, pages 3 and 8:
http://www.iata.org/publications/economics https://d.dam.sap.com/a/XJXUnp
/Pages/industry-performance.aspx
15. “Embracing Digital Technology,” MIT Sloan and
2. Spaceflight101.com – 2016 Space Launch CapGemini Consulting, 2013:
Statistics: http://spaceflight101.com/2016-space http://sloanreview.mit.edu/projects/embracing
-launch-statistics/ -digital-technology/
3. Air Transportation World – More in Aircraft Orders 16. “Airbus: engineering the future of intelligent
& Delivery: factories,” Airbus, February 10, 2017:
http://atwonline.com/taxonomy/term/144121 https://internetofbusiness.com/airbus
/more -engineering-intelligent-factories/
4. “Airbus Defence & Space Optronics Goes Live with
17. “Boosting Productivity with Mobile 3-D Product
SAP S/4HANA As Its Digital Core,” SAP News
Visualization Technology,” Aviation Week/SAP 2012:
Center, January 21, 2016:
https://dam.sap.com/mac/preview/a/67/mJnA
http://global.sap.com/corporate-en/news.epx
ncmngJJAmyAAJ1wglnEDynnEmylSXAl2APmAlV
?category=ALL&articleID=25305&searchmode
XyHlAv/Northrop%20Grumman%20whitepaper
=C&page=1&pageSize=10
%20on%20Mobility%20&%203D%20VE.htm
5. Boeing Support and Services:
18. “Complex Products – Design and Build,”
http://www.boeing.com/commercial/boeing
SAP Solution Overview for A&D, page 23, 2013:
-edge/#/services/integrated-services/the-digital
http://www.sdn.sap.com/irj/scn/go/portal
-airline/
/prtroot/docs/library/uuid/402d2c6b-5769
6. “The Vision Thing: Developing a Transformative -3010-8b9f897348d43a5c?overridelayout
Digital Vision,” page 6, CapGemini Consulting, =true
2013:
19. “A Safer World with Sagem,” Christine Donato for
https://www.capgemini-consulting.com
Übertech, September 16, 2014:
/resource-file-access/resource/pdf/digital
http://www.zdnet.com/article/a-safer-world
_vision_05_junea_v3.pdf
-with-sagem/
7. “Spirit AeroSystems Uses SAP HANA to
20. “SAP HANA Helps Lockheed Martin Space
Accelerate Production,” SAP, 2014:
Systems Predict More Accurate Lead Times,”
https://ideas.sap.com/d16183
SAP HANA Innovation Award, April 6, 2015:
8. “Digital Tapestry,” Lockheed Martin: https://ideas.sap.com/D26110
http://www.lockheedmartin.com/us
Note: All sources sited as “SAP” or “SAP
/what-we-do/emerging/advanced
benchmarking” are based on our research with
-manufacturing/digital-tapestry.html
customers through our benchmarking program or
9. “Lockheed Martin’s Digital Vision,” ML Journal, other direct interactions with customers.
2014: http://www.mljournal-digital.com
Note: Some images used are under license from
/meleadershipjournal/201404?pg=16#pg16
Shutterstock.com.
10. “The Digital Universe of Opportunities: Rich Data
Note: Logos contained in this document are used with
and the Increasing Value of the Internet of Things,”
the permission of SAP partners.
EMC Digital Universe with Research & Analysis by
IDC, April 2014:
http://www.emc.com/leadership/digital-universe
/2014iview/internet-of-things.htm

11. “15 Mind-Blowing Stats About the Internet of

Things,” Giselle Abramovich, CMO.com, April 17,
2015: http://www.cmo.com/articles/2015/4/13
/mind-blowing-stats-internet-of-things-iot.html

12. “The Internet of Things – How the Next Evolution

of the Internet Is Changing Everything,”
by Dave Evans, Cisco, April 2011:
http://www.cisco.com/web/about/ac79/docs
/innov/IoT_IBSG_0411FINAL.pdf

13. Dr. Reinhard Geissbauer, “The future of spare

parts is 3D,” PwC, January 2017:
www.strategyand.pwc.com/reports/future
-spare-parts-3d

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Value Creation in the Digital Aerospace and Defense Network
COMMENTS AND NOTES

- 22 -
Value Creation in the Digital Aerospace and Defense Network
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mentioned therein. This document, or any related presentation, and SAP SE’s or its affiliated
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functionality are all subject to change and may be changed by SAP SE or its affiliated companies at
any time for any reason without notice. The information in this document is not a commitment,
promise, or legal obligation to deliver any material, code, or functionality. All forward-looking
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Value Creation in the Digital Aerospace and Defense Network