Defense manufacturing involves project manufacturing and most importantly, project accounting. This means any Enterprise Resource Planning (ERP) software for defense manufacturing must have a vigorous capability dealing with project management and project cost allocation.

Top-level defense vendors or original equipment manufacturers (OEMs) who are in direct partnerships with the federal government deal with contract vehicles that bear with complex project accounting requirements. These type of contracts are such as:

  • Cost Reimbursement and Cost-plus defense contracts which demand careful tracking of the project costs to set a certain limit.
  • Earned Value Management which is a system where circumstances of liquidity depend on the success of particular project milestones.
  • Time and Materials contracts tie the payments on direct labour hours, actual material cost and profit.
  • Performance-based Logistics where the manufacturer sells hours of operation and not the product in particular.

All these components compel a manufacturer to apply project account not just across the initial manufacturing process, but in the entire lifecycle of the product so that they can deliver the desired level of profit.

According to research done by the Department of Defense Manufacturing Technology Program, 60% of the value of systems and products delivered by tier-one vendors actually originate from tier-two defense manufacturers. They are the ones providing the components and subsystems for the OEM’s defense programs.

Manufacturing contractors supplying defense OEMs are now realising that the best course of their job is helping their clients meet the reporting and cost control requirements of the federal government. This way, they will be more attractive as business partners and eventually, they can win more clients.

Tier-two vendors also realise the more accurate they track their project cost, the more effectively they can generate pricing and proposals of new projects. The more demanding the lifecycle relates to contracting, the more one understands the importance of allocating these costs for initial manufacturing and maintenance.

The best Enterprise Resource Planning (ERP) software is crucial for aerospace and defense manufacturers who want to achieve the requirements of project accounting and reporting in complex procurement systems. It enables manufacturers to track cost liabilities over the course of the lifecycle of the product from assembly to subassemblies and throughout other components and systems.

This means that defense manufacturers must not only have the capacity to submit bids for competitive programs but also enable them to make profits. As the lifecycle proceeds, they must remain alert of how many additional resources the project requires to be completed, as well as all the resources the project uses until completion. The best ERP software should conveniently generate attractive and attainable proposals, commit capacity while generating pricing and timelines that report on the progress of the project’s milestones and completion.

Managing the Unknown

ERP software and Materials Requirements Planning (MRP) were tailored to match resources and the requirement of a mechanical manufacturing environment. They speculate some sense of uniformity but they’re still tailored around repetitive core functionalities rather than unreliable, dynamic projects.

Project-driven manufacturing not only involves known variables but also unknown ones. Software used in these circumstances should be devised specifically to manage project risk and allocating resources and calculating costs throughout various projects contending for the same productivity.

In aerospace and defense projects, risks may be components that are rendered overhead in the front office. This may be engineering, design or the project management schedule. The biggest challenge of them all is the employees in charge of delivering the manufacturing of the project as it is outlined. The work, cost of production, installation and maintenance should reflect the project requirement of each OEM and every defense program.

Missing the Mark

Manufacturers depend on the project management software in various aerospace and defense programs. Tools such as Microsoft Project are self-governing project management tools which are capable but still self-governing.

If you’re tracking load against resources without using ERP, you are simply not managing the project from a financial and costs view. You are using an operations tool that only includes manufacturing time and attendance or worker centres for engineers.

This kind of management may bring practical difficulties that may also get one banned from work. Recently, the need to manage project resources to suffice OEMs have become common in ERP software of aerospace and defense manufacturers.

This means OEMs direct the project accounting requirements to vendors where more value is directed towards. Lacking ERP that facilitates project cost allocation will only result in a lot of non-value-added work. A manufacturer may have a team trying to manage schedules but even using them full-time managers to coordinate the project, a manufacturer may face negative outcomes.

The manufacturer may discover after they have added up overtime or brought in contractors, the cost might exceed the allocated resources for a given section of the project. Having committed to delivering a task to a client, the work may have not been done as they have run out of working hours. This can create delays and sacrificing resources just to make up for the mistakes.

Solving Cost Allocation Problems

Solving the problem of cost allocation in complex project environments is often mistaken by tracking resources according to the number of hours and people available to allocate resources. To achieve a more reliable job, a manager should know the jobs they have now up to the next year. That way, they can allocate resources appropriately even in the right season.

The Solution

The optimum software tool will make things way better. Looking at which manufacturing discipline and capability one can drive towards the project, which engineers and skill sets available, or how many project managers and inventory one can rely on. Lacking full project allocation performance may result in dealing with the wrong demands and wrongfully allocating resources.