Aerospace and defence firms to ramp up R&D investment

Companies also looking to form partnerships to make the most of their money, finds survey

Aerospace and defence companies are set to increase their investment in R&D, while also looking to create partnerships with suppliers and customers to make the most of their capital, according to a new report.

Three-quarters of respondents to KPMG’s 2014 Global Aerospace & Defence Outlook said they will spend between 2% and 3% of revenues on R&D over the next two years, while 16% said they will spend between 4% to 5%.

With the UK aerospace market estimated to be worth £24 billion last year, this represents a stark increase in investment given that more than half admitted to spending just 1% or less of revenues on R&D over the past two years.

Glynn Bellamy, KPMG’s UK head of aerospace and defence, said: “With budgets for aerospace and defence spending coming under increasing pressure, many organisations are looking for opportunities to enhance their revenues, either by targeting new markets and customers or increasing market share of high growth programmes.”

The report also found that 90% of respondents expect to achieve much of their future innovation through partnerships and collaboration rather than in-house efforts. Three-quarters of aerospace and defence respondents also said that they would be primarily focused on enhancing their existing product lines rather than investing in breakthrough technologies.

“As this report clearly illustrates, aerospace and defence businesses are more focused than ever on entering into partnerships and creating more collaborative business models to help them achieve these objectives,” added Bellamy.

Supply chain visibility once again emerged as a challenge, with almost half of all respondents citing this as one of their biggest supply chain challenges. It found that 51% of respondents said that they had only ‘some visibility’ into their Tier 1 suppliers and no visibility into their Tier 2 suppliers; more than a third claimed ‘enhanced visibility’ reaching only as far as their Tier 2 suppliers.

Aerospace and defence executives suggest that technology is creating barriers to achieving greater supply chain visibility. The report found that 29% of respondents said that their IT systems were inadequate for their supply chain visibility, planning and implementation needs; 43% said that a lack of mature technology was creating obstacles to communicating data across the supply chain.

A total of 460 senior manufacturing executives participated in the survey.