Turning Risk into Profit: A Path to Performance-Based Logistics Maturity
Performance based logistics (PBL) is quickly becoming a standard feature in the aerospace and defense (A&D) landscape. This new approach to customer support and sustainment (CS&S) presents A&D companies with a significant opportunity to boost their revenues and margins. However, it also exposes them to unprecedented risk.
A performance based environment presents new challenges and requires a broad range of new capabilities, and in many cases a new business model, that are very different from an original equipment manufacturer’s (OEM’s) traditional business. Companies that treat performance based logistics as nothing more than "business as usual" may quickly find themselves looking up from a very deep hole.
On the other hand, those that see the big picture and tailor their business to this new environment could very well capture market share and become more profitable than ever. However, PBL is not a magic cure-all. Companies that aggressively pursue and win these contracts may find themselves struggling to meet their strategic and financial objectives if they are not set up correctly.
Develop a PBL strategy to know what game you want to be in and communicate it widely, both internally and externally. Understand the capabilities that will be required to effectively execute the strategy and what core competencies you want to exploit. Define the gaps in your capabilities and build a holistic approach for closing them that incorporates procedural, organizational and technological requirements. Educate the entire organization on what it will take to be profitable, and don’t underestimate the culture shift that will be required.
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