5 Looking into the Future on JAS Gripen Spillovers
5.3 Distributed and Integrated Production as a Generic
5.2.4 A Networked Defense Enhances Spillover Intensity
The JAS 39 Gripen was defined from the beginning to be the backbone of a broader and integrated defense system in which the platform and its weapons capacity of course was central, but the combined effect of which was radically enhanced by operations decisions integrated within the world’s perhaps first, even though at the time primitive, “network-based” surveillance, information, and combat manage-ment system. But the groundwork for this at the time ambitious developmanage-ment project had been laid much earlier, and the Gripen system could not possibly have been engineered into the successful systems design that it became without its previous history of experimental development and learning.
The Saab Draken was the first combat aircraft in the world to be data-linked during the early 1960s to a land-based command central. A complementary “broad-band” data link was developed already during the first half of the 1960s that made the communication of radar pictures to land-based command centrals possible.
In 1982, the Saab 37 Viggen was equipped with a data link that connected aircraft to a land-based command central both ways in real time and Sweden was again first, in 1985, to introduce data communication between the aircraft. As one interviewed person expressed it, “In this technology we have been at least 15 years ahead of the Americans.”
In conjunction with this, new military tactics and battle methods, a “military art,” were developed that fully employed the new information capacities that the integrated and real-time-based aircraft system made possible. All that had, in fact, been foreseen by the military procurer FMV and worked into the Gripen specificatons in 1982.
As I have already observed, several econometric studies indicate that the more of electronics and software in product development the more intensive spillover flows.
This is quite well illustrated by Ericssons’s spectacular transformation from a land-based traditional telecom equipment producer to the world’s leading mobile telecom systems developer of today. It began with Ericsson’s development of military radio technology well before Gripen, but was carried through the 1980s and 1990s by Gripen systems-related digital microwave links and antennae technology.
5.3 Distributed and Integrated Production as a Generic
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sophisticated subsystems for even larger and complete systems products. It is a competence, or rather an art that can only be acquired through participating in such production and through systematic learning on the job. This ability to integrate many different technologies also underlines one unique competence advantage that the advanced firm has over the regular technical universities. It also emphasizes the ultimate competitive advantage the already industrial nations have over developing industrial economies. Learning can take place on the job and in the market.
With the development of systems products designs comes the art of modular-ization and distribution of both development and manufacturing over markets of subcontractors. Aircraft industry faced the need to outsource advanced develop-ment and production early. Too many technologies and too many components had to be integrated in too many different ways to make it possible for one firm to develop and produce everything needed for an entire aircraft. Above all, one firm could never be the best on more than a few of the many subsystems and component technologies that make up an entire aircraft or aircraft engine. So the art was to focus on the core systems of the product. Hence, the technique of modularizing the design and outsource entire complexes of components of the aircraft to subcontractors was pioneered in military aircraft industry. Subsystems and components represented large value so it was cost efficient earlier than in other industries to outsource to the most efficient producer, rather than to develop the components internally. Integrated production (Fredriksson 1994; Eliasson 1996b) is the art of integrating all these activities efficiently in the design and manufacturing processes. The more advanced the product, however, the less likely those specialized subcontractors can be found in the local neighborhood.
A global technology of organizing integrated production developed early as did various standards to facilitate the design and manufacturing processes. Still, most of what we see in the form of distributed production was neither feasible nor economical before the sudden leap forward in industrial technology that came with the integration of computing and communications (C&C) technologies around the mid-1990s. The Internet age was created. Obviously, the competence to participate in such a globally integrated production system requires long orga-nizational learning and experience accumulation.7 Such learning can only be efficiently organized through active participation in a dynamically competitive subcontracting system (item 3 in Table 1, See page 39).
5.3.1 The Nature of Complex Products
Two critical parts of a globally competitive engineering firm of today are (1) advanced product design and marketing competence and (2) ability to organize integrated production over global markets. One way of dealing with complexity in product development and manufacturing is to decompose the product into a number of subsystems and components (modules), all with exactly defined interfaces, the development and manufacturing of some of which are outsourced to subcontractors,
and then bring all subsystems together for final “assembly.” The art of designing and making all component systems fit in the end is often referred to as systems integration and to do it well the design has to be guided by a competently conceived systems architecture of the whole. Systems integration (see case immediately below) requires that each subsystem be designed with an understanding of its role in the whole product. Integrated production has therefore developed as a sophisticated way of distributing some of the production over markets of specialized subcontrac-tors without losing control of the development and manufacturing of the entire product and the final quality control. In fact, the extremely elaborate quality control associated with all stages of distributed and integrated production of aircraft has gradually diffused through engineering industry at large and is one of the reasons why we now rarely hear about “monday cars” in automobile industry. We rather hear about bad quality brands, or automobile makers that have not learned the art of quality control. There is little of such experience-based hands-on competence to learn in the classrooms of technical or commercial universities. The knowhow is a matter of organizing specialized teams of engineers such that each responsible team integrates its subsystem smoothly into the entire product system (the air-craft). This requires an implicit understanding of the whole of each participating team. In US aircraft industry, one often refers to a design team8 of some 1,000 academically educated engineers (In Sweden a smaller number). A design team defines the minimum range of competences needed to move the development of an aircraft up to a prototype. Within the design team there are about 100 specialist areas, the number depending on the definitions, and what kind of aircraft that is being designed. For the military and civilian activities of Saab there were once a common denominator of 80% of those specialties.9 A critical part of the compe-tence of this design team is embodied in its organization and ways of work. Hence, it is impossible to recruit a whole team in the market. It takes decades to develop such a team. Once broken up, it may be impossible to reconstitute. A too fast turnover of the competent members of the team, furthermore, tends to break up the internal self-organizing capacity that defines a large part of the competence of the team.10 This experience-based knowhow diffuses as people move between jobs and firms in the market. An aircraft, hence, is not only a very complex product.
It is multidimensional in the sense that it is composed of (1) the product itself as a physical entity, (2) many years of service, maintenance, and upgrading, and (3) a “cloud of valuable spillovers” that unfortunately, for the producer, is close to impossible to charge for. Advanced firms, such as the aircraft manufacturers, therefore, generate different indirect (spillover) benefits over and above the product itself being purchased. In the short term local employment will be created, but this carries local value only if the extra people employed cannot be gainfully employed else-where and the effects are only temporary. Sustainable production and export growth can only be achieved as a result of a sustainable increase in overall productivity generated by the spillovers.
I will illustrate the role of distributed and integrated production in Saab aircraft and VAC engine development and manufacturing and identify how military technology has diffused into advanced civilian manufacturing.
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5.3.2 Integrated Production
The overriding organizational competence that I have called “integrated production”
(Fredriksson 1994; Eliasson 1996b) and that is generic to engineering industry, was first developed in aircraft industry and is currently becoming the critical engineering technology associated with concepts such as modularization, outsourcing, and distrib-uted production and that is increasingly carrying the globalization of production in the world economy.
Integrated production or systems integration makes it possible for very advanced firms to focus on what they are good at; for instance, product development and global marketing and later systems installation, operations, maintenance, servicing, and upgrading, sometimes outsourcing all or most of physical manufacturing. The reason is that a large global firm cannot excel in developing and manufacturing everything. Complexity sets limits to how many different competence areas that can be accommodated within one hierarchy. When the production of large parts of the systems product has been distributed over the market of specialized subcontractors the critical competence is to integrate the various subsystems back into a product without losing control of costs and quality. As mentioned, this organizational compe-tence is fairly new and mistakes abound.11 This modern organization of production is however here to stay and firms are learning. The firm has to focus on what it is best at. At the same time the outsourcing of large and complex subsystems jobs creates many opportunities for the development of a local specialized subcontracting industry, provided the local business environment is geared up to support that.
There is also another macroeconomic benefit of this distributed production technology.
It breaks up local monopolies and subjects firms, and not least labor, to increased global competition and holds back inflation. This is one reason globalization has been a bad word in some political circles in the industrialized world.
Integrated production has been made possible through the integration of electronics and mechanical technologies making software engineering a critical engineering technology. Integrated production makes it possible to achieve a holistic view of both the product and of the production process (item 1, Table 8) and allows, as well, for a geographical distribution of both product development and manufacturing.
“Concepts and integration” are terms increasingly used to describe the development of an advanced global engineering firm of today. Simulation techniques (for instance, computational prototyping), furthermore, make “optimization” of complex designs (items 5 and 6) possible. Maintenance and repair problems can also be solved ahead of time (items 3 and 7) and costly ex post product modifications and corrections avoided (item 9). On the whole, C&C technology has made more efficient as well as flexible coordination in space, over geographical distance and over time possible.
The economic benefits of this increased coordination capacity and flexibility are the largest for very complex and costly products that are produced under very complex circumstances, notably aircraft. Hence, the organizational technology of integrated production was first developed in aircraft industry and is now diffusing to other advanced parts of engineering industry. Integrated production is increasingly
becoming a critical competence element that determines the ability of firms to participate in the global production networks increasingly built on modularization and outsourcing.
5.3.3 Systems Effects in Integrated Production
Modern computer and communications (C&C) technology allows the distribution of production over markets of specialized subcontractors and again the reintegra-tion and assembly into a complete product. Through specializareintegra-tion in the develop-ment and manufacturing of components and subsystems economies of scale can be achieved in component production as well as in the final integration. The total systems productivity improvement is however dependent on achieving the right (optimal) organization of the entire (global) production system. This is not easy and many bold attempts have failed. The wrong parts have been outsourced or the entire systems integration has been badly organized. The critical lesson learned by many outsourcing companies is that the sum of all individual improvements may cancel altogether, and even turn negative, if you put them together in the wrong way.
This is only an application of Adam Smith’s (1776) principle of work specialization.
The way large systems productivity effects can be achieved with the support of modern C&C technology is illustrated in Table 9.
There are five principally different stages of improvement to consider. In the pre-C&C production organization, information flows were normally coupled with
Table 8 Integrated production allows the following advantages over regular production 1. A holistic view of production processes is achieved based on functional modules, exactly
defined interfaces, precise measurement and extreme quality control. Competently organized design teams make delegation of work combined with central control of product performance characteristics
2. Development and manufacturing can be distributed geographically and outsourced over many subcontractors
3. The holistic view minimizes expensive mistakes (design errors, bulky devises, and badly organized manufacturing flows)
4. Product development and manufacturing processes can be integrated
5. Among many possible ways of organizing production, it becomes possible to choose one of the best
6. Simulation techniques (computational prototyping) makes efficient product solutions possible from the beginning. Large cost reductions can be achieved
7. Maintenance and modernization problems can be anticipated and solved already at the design stage
8. The manufacturing process can be organized for one-piece production, short production runs, as well as volume production.
9. Quality control becomes more efficient and can be reduced. Costly after production adjustments can be avoided
Source: (Eliasson 1995:48ff )
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physical production flows. Sometimes, information flows were slow and tied up production. If information flows could be speeded up over the given physical production structure (item 1 in Table 9) productivity gains could be registered. The productivity effects were however usually small. A classical example referred to was that CAD systems were often used as electronic drawing boards, and that the users never learned what else such systems could do. If physical production flows could be speeded up (without changing the information flows) productivity improvements could also be registered (item 2). There is a large engineering literature on the optimal organization of a workshop.
C&C technology, however, opened up new ways of decoupling information flows from physical flows and improving one, holding the other constant (items 3 and 4).12 Finally, the real opportunity came when all could be done simultaneously.
And this is what defines the productivity potential of well-organized global production.
The heralded benefit of CAD/CAM systems such as Catia (see Chap. 7) is to be supportive in achieving that.
With globally organized production organizations where information and physical flows are decoupled comes the additional benefit of flexibility. Product specifica-tions can be reorganized in real time and even though this may reduce physical productivity as traditionally measured, the flexibility adds value to the product and that value should be added to the productivity measure, and will influence profit-ability. This establishes integrated production as a separate and critical engineering organizational technology.
5.3.4 Systems Integration: An Illustration
Figure 4 illustrates how Gripen military aircraft development and assembly inte-grates at least ten different subsystems/functions. We have (1) the aeronautical engineering of the physical aircraft structure and (2) the on-board computer system.
We have noted already that on-board electronics is what gives the fourth generation of combat aircraft its extreme flexibility when it comes to engineering different functionalities. Also in the later post-1992 period, further development, compared to the original development of the Gripen aircraft, the electronics part of total cost has been raised from about one-third to at least two-thirds.
Table 9 Systems effect categories at different levels of aggregation 1. Speed up info flows over given structures (rationalization) 2. Speed up physical flows over given structures (rationalization) 3. Reorganize info flows
4. Reorganize physical flows
5. Do all simultaneously (integrated production)
Source: Eliasson (1998). Information Efficiency, Production Organization and Systems Productivity – quantifying the effects of EDI investments; in Macdonald, Madden, Salama (eds.), Telecommunications and Socio-Economic Development. Amsterdam: North-Holland, 1998
The handling of the aircraft in the air, furthermore, combines the functions of (1) and (2) with (3) human–machine interaction (information) systems. JAS 39 Gripen is extremely easy to fly, which means that the pilot can focus on his military tasks. This ease of handling is partly a matter of how the cockpit instrumentation and controls have been organized, but also, and more importantly, of how the control hierarchy of the entire aircraft has been designed and how much control can be delegated to the computers in different situations. This defines the principal user design. Before the aircraft is ready for operational service, however, all (4) internal systems within the aircraft have to be made internally compatible, (5) be tested and verified, (6) structures developed and installed, and (7) a whole series of aircraft manufactured.
All the above (8) has to be integrated with a critical eye to lifelong maintenance, and (9) the need for, and availability of supporting systems, including all informa-tion necessary for the networked defense. Coordinainforma-tion of target identificainforma-tion on an attack mission with information sources and (10) weapons system and delivery is a separate art in itself that has a wider application area for the police, disaster preparedness, rescue operations, and fire defense. Here, the art is to be capable of simultaneous online visualization of complex situations that require immediate decisions. Simulation is the technique increasingly used to achieve (and to practice) such holistic overview.