Supplier development in aerospace and defence industry for BAE system

Abstract

India’s defence industry is still in its primary stages of development. India has traditionally been a heavyexporter of defence vehicles like tanks and heavy artillery guns. Its only few years back, that changes indefence procurement policy have been introduced and steps are being taken to ‘make’ the systems inhouse. This has brought forward a major problem in the land based defense industry – inadequatesuppliers.Although after the opening up of defense sector to private players, there was a huge rise in indigenousdefence suppliers, the numbers are still lacking. In 2007 there were around 5500 defense suppliers inIndia, supplying 25-30% of components to the state owned defence manufacturers like HAL and BEL. Butmost of them are very small suppliers and have constrained capacities, and with the entry of largeorganizations like Mahindra & Mahindra, Tata, L&T, Kirloskar Group in defense manufacturing, need ofsuppliers is all the more aggravated.Another prominent issue in Indian defense supplier landscape is the fragmented presence of thesesuppliers. Unlike automotive industry which has three main hubs in India – Gurgaon, Chennai and Pune– and all the OEMs and suppliers are concentrated; the suppliers for defence manufacturers do not haveany such hubs. This creates problems for the manufacturers in procurement and subsequently efficiencyof supply chain reduces. Also there is a problem of lack of technological knowhow among the existingIndian defence suppliers. Most of them do not make use of the latest technologies and remain unawareof the updates in existing technologies. This leads to a slight reduction in quality and also oldertechnology pose capacity constraints for them.