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Changing the Dynamics of the Customer - Industry Partnership

Changing the Dynamics of the Customer - Industry Partnership. Jon Jones, Vice President, Raytheon Missile Systems Defense Acquisition University 21st Annual Acquisition Symposium June 8, 2004. The State of Change. World security, economic and social environment changing

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Changing the Dynamics of the Customer - Industry Partnership

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  1. Changing the Dynamics of the Customer - Industry Partnership Jon Jones, Vice President, Raytheon Missile Systems Defense Acquisition University 21st Annual Acquisition Symposium June 8, 2004

  2. The State of Change • World security, economic and social environment changing • Radical factions likely to remain a threat to large democracies • Cost of the global war on terrorism is creating change and opportunity • Door open to jointness and commonality New industry-government partnerships required to speed the pace of new capability

  3. The Budget and the Deficit Pressures on the budget growing … • Rising US budget deficit • Non-defense needs (tax cuts, Medicare expansion, etc.) • Other defense needs (continuing OIF, O&M, other peacekeeping, etc.) • Rising foreign threats to peace • Homeland security threats • Proliferation of WMD 2005 supp. $?? B 2004 supp. $65.5 B 2003 supp. $62 B FY03 FY04 FY05 FY06 FY07 FY08 Budget pressure will further accelerate the need for transformation

  4. Aerospace Industry Profitability 25% 20% 15% Return 10% 5% 0% 1999 2000 2001 2002 1Q03*4 % of Sales % of Equity Source: AIA

  5. Contractor Incentives –A Buyer-Seller Cultural Divide What is a “reasonable” profit? BuyerSeller (H):Seller(S): Average: 9.3% 14.5% 8.5% Range: 3-9% 9-25% 7.5-10% What metrics is the seller measured by? Metrics: Cost Cash, ROE, Backlog, Schedule Margin, Growth, Sales Performance Customer Satisfaction, Quality Quarterly Performance We Need to Work Together to Narrow the Divide

  6. Aerospace Industry Workforce • Aerospace industry employment 586,000 in 2003 – a 57% reduction since 1989 • Average manufacturing employee is 51 years old; the average engineer, 54 years old • Approximately 27% of workforce will reach retirement eligibility by 2008 • Only 2.4% of nation’s R&D performing scientists and engineers work in aerospace industry We Must Reinvigorate Industry to Make Transformation Happen

  7. Accelerating Transformation • DoD requires flexibility and agility to meet commitments • Rapidly changing combat dynamic and worldwide operating presence dictate new thinking (requirements flexibility) • Investor demands increasing on industry • Worldwide competition • Consolidation, competition, new starts, changing environment • Business performance required to keep pace of technology development • Industry required to quickly provide combat capability • 10 Year fielding cycles should not be acceptable to either party • Requires business and requirement flexibility Cost becomes one of the major drivers

  8. Strength through Partnerships • Partnering between industry and DoD critical for this flexibility and agility • Align for mutual success • Taking “Best of Thought” throughout industry to provide integrated capability • Producing capability more quickly by understanding the existing architecture • Building systems that operate transparently with the competition • Alignment of requirements and technology • Being a fair partner/honest broker • Industry and DoD must provide reasons to team and cooperate Staying aligned and committed to the warfighter

  9. Looking Forward • Consider successes that leverage commonality and jointness • Outsourcing non-combat-related jobs to free up warfighter billets • Evolve to a new way of producing capability • Satisfying the DEMAND for weapons without long lead time Meeting the need with weapons on demand

  10. Weapons on Demand • Ability to rapidly turn on production capability • Preferred suppliers and partners • Simplified contracting process • Common factory • Strong common process and architecture • Provide full service capability • Cost effective disposition and total systems ownership • Valued, long term partners committed to whole life cycle support • Business stability can help provide warfighting flexibility Take it further…weapons as nodes in the net

  11. Wishful Thinking or Reality? • Maybe a little of both • Netted architecture exists with bandwidth to handle the detail • Weapons range is Increasing • Weapons on the net/killer UAVs may be the answer to creating weapons on demand • Smaller logistic footprint, more agile fighting force • Common factory producing weapons with interchangeable payloads • Swarming weapons/UAVs choreographed to take out targets in priority order • Robust battlefield situational awareness integrated in single operating picture • Focuses on supplementing the combined operating picture • But much needs to change to get there • Industry/DoD partnership, teamwork and trust • In the capitalist democracy we are all charged with protecting, profit should be a good word The environment is driving extraordinary change

  12. Summary • Changing world requires new types of partnerships • Many opportunities exist • New models can better serve our warfighters

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