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Abhoy K Ojha, Professor of Organizational Behaviour & Human Resource Management, and Jishnu Hazra, Professor of

Production & Operations Management, prepared this case for class discussion. This case is not intended to serve as an

endorsement, source of primary data, or to show effective or inefficient handling of decision or business processes.

transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet) –

without the permission of Indian Institute of Management Bangalore.

DYNAMIC TECHNOLOGIES (INDIA) LIMITED:

STRATEGIC INTEGRATION INTO THE AVIATION

AND AEROSPACE GLOBAL SUPPLY CHAIN

ABHOY K OJHA AND JISHNU HAZRA

This document is authorized for use only by MOHAMMED ALHASHIM ([email protected]). Copying or posting is an infringement of copyright. Please contact [email protected] or 800-988-0886 for additional copies.

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

Page 2 of 13

Ashwini Jethmalani, CEO and MD of Dynamic Technologies (India) Limited (DTIL), as usual, had

arrived early at the board room for a strategy meeting where he was soon joined by Nirmal Rego, the

Deputy Chief Operating Officer of DTIL’s Aviation Division and Kavita Krishnamurthy, Head Corporate

Communications. While they waited for the others, they prepared their own beverages from the range of

options available at the ‘‘beverage station’’ which was an integral part of the room. As they sipped on

their beverages, Ashwini shared with Nirmal and Kavita why he had insisted on a ‘‘beverage station’’

being part of the room and the story behind his emotional attachment to the idea.

Tea had played a big role in the business model of Ashwini’s first entrepreneurial venture during the

1980s, which he had launched with some friends while still a student in Mumbai (then Bombay) to earn

‘‘pocket’’ money. At that time, it was not common for offices to have their own duplication facilities, and

it was normal for office staff to avail the services of a vendor located in the same building or close by for

duplication of their documents. Ashwini and his friends noticed that very often the office staff would get

upset and irritated at having to wait for the services when the work load at the vendor’s outlet was too

much or when they needed some duplication to be done urgently. The friends identified this as an

opportunity to develop a new customer value proposition.

They invested in a couple of photocopying machines and rented a small space on the ground floor of a

multi-story office building at Nariman Point, the heart of Mumbai’s business district. There were other

small outlets including some that offered the same photocopying service on the same floor that were well-

established. There was very little that the friends could offer in terms of quality, speed, or price of service

that was not already being offered by the established vendors. However, they ‘‘tweaked’’ their business

model and created a small sitting space and offered tea to the office staff that brought work to the outlet.

This was sufficient to make their duplication outlet the vendor of choice. As the ‘‘key’’ decision makers

in terms of choice of vendor were the office staff, offering them value tilted the table in favor of their new

venture. The office staff had a place to sit and chit-chat among themselves, and also enjoyed tea while

they waited which made them less restless or upset about the wait even if occasionally the wait was

longer than desired. The lack of space available to the other vendors did not allow them to duplicate the

same facilities, providing Ashwini and his friends the inimitable competitive advantage in the relevant

market. This early lesson in business taught Ashwini the importance of business models and also helped

him develop the discipline to pay attention to small details that might make a difference in terms of

competitive advantage.

On March 20, 2010, Ashwini and his top management team were meeting to decide on a business model

for DTIL’s Aviation Division to enhance its strategic integration into the global supply chain of major

defense, aviation, and aerospace players such as Boeing, Juggernaut, and the like. On that day, the team

had to decide on a business model that would give them a foot in the door as a key supplier to Juggernaut

in the short run and an opportunity to be a big player in the aviation and aerospace industry in the long

run. The team was aware of the organization’s capabilities which were developed by working in the

Indian aviation sector for over 15 years and more recently as a Tier 2 supplier to Juggernaut, a major

European conglomerate in the sector. As a Tier 2 supplier, DTIL had worked with Flight Aerosystems,

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

Page 3 of 13

which was a Tier 1 supplier to many aviation majors, including Juggernaut. The management team now

needed to formalize a business model that would allow DTIL to progress to a Tier 1 supplier, where it

would have full responsibilities of the supplies without any intermediaries between it and Juggernaut.

There was a possibility of it also becoming the single source supplier for the major company.

GLOBAL AVIATION AND AEROSPACE INDUSTRY: PROSPECTS AND

CHALLENGES

All major defense, aviation, and aerospace players were restructuring their manufacturing capabilities to

be competitive in the new global environment. Flattening or declining prospects in the traditional high

income economies required the original equipment manufacturers (OEMS) to seek other markets for

growth. There were increasing opportunities in the defense and civil sectors of other high growth

economies, including India. However, cost pressures in the traditional manufacturing hubs located in high

income economies required the OEMs to examine their supply chains. Also, there were price pressures as

the customers in the low income economies were relatively price sensitive and willing to choose cheaper

options. Fluctuating currency exchange rates made matters worse, particularly for European OEMS as the

Euro had been appreciating relative to the US dollar as most aviation transactions were conducted in US

dollars. Finally, owing to a decline in overall population, there was also a declining workforce in the

traditional aviation and aerospace hubs, which had forced the major players to reinvent themselves and

their supply chains.

There was a search for global partners who could match the high quality requirements of the industry and

adhere to the delivery schedules of the original suppliers, while substantially reducing the costs of doing

business in order to build or retain competitiveness in difficult market conditions. Further, the Indian

government had introduced the offset policy for its defense procurement which mandated that companies

that obtained government contracts had to obtain a minimum of 30% of the value of the contract from

India-based suppliers. This made it attractive for DTIL to present itself as the supplier of choice.

A studyi based on a survey of OEMs in the aviation industry suggested that global growth in the industry

would be close to or less than 2% annually. This, and other studies, indicated that while North America

and Europe would continue to be the largest markets, the growth in the industry would be skewed towards

other economies, particularly Asia, including India. According to another study,ii the fleet of airplanes of

regional airlines in North America comprised 41% of the global total in 2009 and would likely comprise

40% in 2029. The corresponding figures for Europe were 28% and 19% suggesting a relative decline in

the market size, and those for Asia Pacific (including China) were 16% and 22% suggesting an increase in

market size over 20 years. However, in terms of acquisition of new planes, the shift to Asia Pacific was

clearer. About 30% to 35% of the demand for new airplanes during 2010-2029 was expected to be from

Asia Pacific while North America and Europe were expected to meet a little over 20% of the demand

each during the same period.

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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The shift in the nature of global demand had encouraged the dominant players in the industry to adapt to

the new realities. About half the respondents from a surveyiii of OEMs indicated that managing costs was

a big priority, with those from the larger OEMs indicating that they would provide greater emphasis to

reducing costs in the coming years. Figure 1 indicates some of the actions that they were contemplating.

Reducing labor force and costs referred to the reduction in activities conducted in the traditional

manufacturing hubs located in the high income economies of North America and Europe. The next set of

actions suggested that new investments in the same centers would be curtailed. The next two actions

suggested that the OEMs would be looking for external suppliers and vendors to takeover some of the

activities that were traditionally conducted by them. Acquiring suppliers to stabilize costs referred to

attempts to restructure the supplier networks to locate vendors and suppliers in low wage economies.

Finally, sharing functions also suggested cooperative approaches including joint ventures and

collaboration with companies in low wage economies to share costs and risks. Similarly, another studyiv

also suggested that since growth in the industry would be driven by what it referred to as rising

economies (rather than emerging economies), the traditional aviation industry had to restructure its supply

chain operations to adapt to the new realities.

OPPORTUNITIES FOR THE INDIAN AVIATION INDUSTRY

There were tremendous opportunities for players in the Indian aviation industry to get integrated into the

supply chain of the global aviation and aerospace industry. A study comparing several countries in terms

of suitability to supply to the global industry ranked India better than comparison countries on several key

parameters as shown in Figure 2. The study suggested that the support provided by the government to

develop suppliers in the country contributed to the attractiveness of India as a location for sourcing. The

excellent supply of cost-effective labor was also an advantage. The infrastructure for the industry could be

better but was as good as other low income countries. The education system in the country ranked better

than other countries except for the United Kingdom. The cost advantage of sourcing from India was

comparable to several countries, while quality was expected to be on par with the United Kingdom. On

cultural compatibility, India ranked lower than the United Kingdom but higher than China, and on

English proficiency, it was as good as the United Kingdom and better than others. There were no

advantages owing to time difference and distance from OEMs across the countries.

The opportunities for the Indian aviation and aerospace industry to be integrated into the global industry

are shown in Figure 3. Although, the opportunities were many, Indian suppliers had largely restricted

themselves to CAD design and documentation and procurement assistance in the design phase, and as

Tier 3 suppliers in the component manufacture phase. Some companies, like DTIL, that had been Tier 3

and then Tier 2 suppliers, were aspiring to be Tier 1 suppliers of components.

Organizations with capabilities to offer services in the design phase had the potential to save costs for

OEMs primarily based on labor arbitrage. The cost of design infrastructure and software would be the

same as in a high cost economy but the availability of high skilled trained engineers available in India at

significantly lower compensation rates could contribute to saving costs. Some estimates suggest that the

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

Page 5 of 13

cost savings could be as much as 50%. However, with some enhancement in aviation and aerospace

domain knowledge and a better understanding of advanced manufacturing techniques and processes, these

organizations could also contribute to cost reduction in the remaining phases by developing components

that were better designed for manufacturing, performance, and maintenance.

Organizations in the component manufacturing phase could attempt to integrate seamlessly with the

global supply chain if they had a better understanding of the design and manufacturing processes of the

components that they wished to migrate from the traditional vendors to their own facilities in India.

Traditionally, many of the components were designed when contemporary CAD/CAM software was not

available. Indian suppliers had an opportunity to use the phased transfer of components from the OEMs or

vendors located in high income economies to redesign the components and systems for improved

performance. Also, the traditional manufacturing processes were designed around the need to operate in

high labor cost environments which dictated the design and also the extent of automation in the process.

Indian organizations had the opportunity to re-engineer the manufacturing process to make it more cost

effective for a lower labor cost environment. This might lower capital costs of operations even as lower

labor costs provide much of the cost advantage.

At this stage, opportunities to participate in the aircraft assembly phases might be restricted to large

players such as Hindustan Aeronautics Limited (HAL), which had some experience in the defense and

space sectors in collaboration with international OEMs. However, in the future, there might be

opportunities for many private sector players who had entered the arena in the other phases.

There were tremendous opportunities in the Maintenance, Repair and Operations (MRO) phase for Indian

companies. It was quite clearly a labor-intensive phase of the aviation and aerospace industry’s value

chain. It was attractive for several airlines operating in India who already conducted some of their own

MRO activities to expand into the market and offer cost-effective services to the global market.

DTIL: SMALL IS BEAUTIFUL

DTIL was founded by Karan Jethmalani, Ashwini’s father, in 1973 with operations in the engineering

industry. It primarily manufactured hydraulic pumps. By the mid-1980s, the company had grown to earn

revenues of about Rs. 16 million (approximately $1.29 million), but it also had a lot of debt on its balance

sheet. After completing his bachelor’s degree in commerce, Ashwini joined the family business in 1986

when he was barely 20 years of age. Gradually, he took charge of the technology-based company and

guided it into a business with revenues of more than Rs. 5 billion (about $125 million) in 2008-2009.

DTIL produced highly engineered products in the automotive and aviation sectors. It supplied hydraulic

pumps and valves, for global industrial, agricultural and construction equipment (IACE) companies. In

the automobile sector, it provided automobile parts such as chassis, turbo chargers, and castings to

European and Korean automobile companies. In the aviation sector, it supplied high precision

components to Indian defense manufacturers, including HAL, and in the aerospace sector to ISRO. More

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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recently, it had supplied machined and assembled components to Juggernaut. The IACE business

contributed about 20%, the automotive sector about 66%, and aviation and aerospace sector about 14% of

the revenues of the company. However, the aviation and aerospace business contributed over 50% of the

operating profits while the IACE business contributed 30% and the automotive business contributed the

remaining of about 20%. The company had plants in six locations in India and abroad. It employed over

50 scientists and 500 engineers who were supported by larger number of skilled and semi-skilled workers.

The aviation division was launched in 1995. In the early years, the division participated in several projects

of the DRDO (an Indian Defence R&D organization), including Lakshya, the pilotless target aircraft.

DTIL was also involved with the HJT-36, the intermediate jet trainer, for which it provided some key

machined components and several jigs for HAL. It collaborated with HAL on the Sukhoi MKI fighter

bomber for which it provided many mission critical components. In addition, DTIL developed several jigs

for HAL. The involvement of DTIL in the design, development and manufacture of these components and

jigs allowed it to develop capabilities and capacity to move up the learning curve.

By the early 2000s, Ashwini and his team of managers started preparing the organization for integrating

into the global supply chain of the aviation and aerospace industry. The hydraulics business of the

organization had already been successful in going global after it acquired an established but small

European manufacturer. Similarly, the automotive division had already penetrated the automotive global

supply chain after the acquisition of a Korean supplier. The major break for the aviation division of DTIL

came in May 2006 when they received certification to supply to Juggernaut. Following that, in December

2006, they received a RFQ from Flight Aerosystems to collaborate with it to supply flap track beam (see

Appendix 1) assembly systems to Juggernaut. This was an opportunity for DTIL to integrate into the

global supply chain of a Tier 2 supplier of global majors.

After evaluation of offers from several from vendors in India and outside, Flight Aerosystems selected

DTIL as a partner. Later, it became known that DTIL was selected despite a lower cost offer from a

public sector company as Flight did not think the company would meet the rigorous quality and schedule

requirements. It was also known that DTIL had been selected over the offer from a well-established

private sector major in India, which had recently entered the domain. The offer was twice as expensive as

Flight’s internal estimates, indicating that the organization probably did not understand the industry cost

structure, and appeared quite bureaucratic despite being in the private sector. DTIL was seen as the

organization with the right balance of domain knowledge to meet quality and schedule requirements, and

the agility to deal with the transition process.

In May 2007, the letter of intent was received and by December 2007, DTIL received the required

certifications and approvals to supply. The project started in 2008 when the DTIL engineers were trained

by Flight in April and the plant was built in Bangalore and machineries and jigs were installed by

October. The formal contract between Flight and DTIL was signed in March 2009. In other words, for

about 15 months, DTIL invested in plant, machinery, and people without a formal contract. During this

time, it was implicit that if the contract was not signed, then Flight would buy back the machinery while

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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the remaining investment would be DTIL’s risk. These 15 months also demonstrated the entrepreneurial

zeal at DTIL, with Ashwini having the appetite to take a calculated risk but also communicating to Flight

and Juggernaut the seriousness of their intent to pursue this opportunity.

According to the initial contract, Flight would supply the machined components to DTIL who would

assemble the components of the flap track beam in the Bangalore plant and hand them back to Flight who

in turn would supply it to Juggernaut. Two months after signing the contract, DTIL received the first set

of input components from Flight in May 2009. By June 2009, the first set of flap track beam assemblies

were completed and handed over to Flight Aerosystems and commercial production was approved on

completion of the first article inspection. By October, all the jigs were in place in the Bangalore plant.

The first set of units was dispatched in November, 2009. By early 2010, nearly 150 units were supplied

on schedule with zero rejections. With DTIL’s success in the first phase of the supplier relationship as a

Tier 2 supplier, Juggernaut was willing to explore the next phase of the partnership with it as a Tier 1

single source supplier. This would require DTIL to go back to the drawing board to take on greater risk

but also an opportunity to move up the value chain.

BUSINESS MODEL DECISION FOR THE FUTURE

The first phase of the supply of the component for Juggernaut had been in partnership with Flight

Aerosystems. DTIL was a Tier 2 supplier as it did not have a direct interface with the client but was only

supplying through Flight. In this phase, the complex machining activity continued to be performed by

Flight and its other partners in Europe, and DTIL was provided with the fully machined parts and focused

on the labor-intensive assembly activities. However, the success of this phase provided confidence to

Juggernaut to consider DTIL not just as a Tier 1 supplier but the single source supplier for the entire

family of its single aisle aircraft. A Tier 1 supplier implied that Juggernaut would provide a contract for

the component for which DTIL would ‘‘own’’ the component and have compete responsibility for the

performance of the component. However, the status of a single source supplier was even higher. Not only

would Juggernaut source directly from DTIL, it would stop sourcing from any other vendors. In other

words, it was prepared to develop an exclusive partnership with DTIL to supply a core component for the

entire family of single aisle commercial aircraft. This offer demonstrated the confidence Juggernaut had

developed in the capabilities of DTIL as a potential partner. Now, DTIL needed to respond to the request

for a new level of relationship with an offer that would make it very attractive for Juggernaut to accept

and at the same time create opportunities for the future of DTIL.

At the meeting, G. Natarajan, the COO of the aviation division suggested that DTIL could prepare a

proposal based on the same model that had already been in operation in the first phase. Natarajan had

joined DTIL after retiring from HAL and had been very instrumental in establishing the systems and

processes for the first phase of the component project. However, he did not have aspirations to take on

more value-added machining operations that were done by partners of Flight. He argued that all the

operational issues had already been sorted out in the earlier phase and no major changes would be

required to the operations as long as the suppliers of machined components continued with the old

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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relationships even without the involvement of Flight. Natarajan had developed very good working

relationships with his counterparts in the European partners of Flight during the first phase and he felt

comfortable that some of them would be willing to partner with DTIL in the next phase. This required

very little additional capital expenditure, which appealed to Ashwini. However, this business model did

not excite him as it did not suggest the possibilities of long-term financial growth for the company. There

was a possibility that DTIL might continue in the same level of activities for a long time, which was not

an attractive proposition.

Nirmal Rego, the Deputy COO suggested a model that was dramatically different, and required almost all

the activities to be performed in the DTIL Bangalore plant. He had joined DTIL from the automotive

division of DTIL in the middle of his career, and had aspirations to quickly move up the value chain

which would benefit the company as well as him and his team. He believed that DTIL had already

mastered the activities that had been transferred to it. Transferring the high-end machining operations that

were performed by other vendors to DTIL facilities would help the organization build new capabilities

and provide new opportunities for engineers and managers to learn and grow. With an established cost-

effective base in Bangalore, DTIL would be a formidable player. Like Natarajan, Nirmal also felt

comfortable in engaging the earlier vendors. He believed that some key persons from those partners could

be involved to assist in the setup of the operations in Bangalore. Ashwini liked the idea, and knew that if

he could pull it off, the business model had lucrative long-term prospects. However, Ashwini was

concerned about three things. The first was the possibility that the relationship with Juggernaut might hurt

if the transition did not happen smoothly. At this stage, he was worried that Juggernaut’s assessment of a

potential failure of DTIL to maintain quality and schedule might prevent Juggernaut from elevating the

relationship. On the other hand, if he could retain some of the old partners in Europe, he could assure

Juggernaut of good quality even if the costs were somewhat high and exerted pressure on his margins.

The second was the expenditure on establishing a plant in the context of high borrowing costs in India. He

believed that the capacity was available in Europe where capital costs were lower. The third was the costs

associated with transportation. Procuring high volume and weight of raw materials from Europe, shipping

them to Bangalore, and then shipping finished components back to Europe looked problematic.

Ashwini suggested a business model that tried to blend the two models but with more clarity of the value

proposition for Juggernaut. He suggested that DTIL should think of conducting as much of the labor-

intensive activity in India and the capital-intensive activity in a facility close to Juggernaut’s final

assembly operation. He believed that DTIL had developed capabilities and processes acceptable to

Juggernaut which could not be replicated elsewhere as cost effectively. He also believed that rather than

attempt to build capital-intensive capacity in Bangalore, he could find a partner in Europe, which was

well-established in the supply chain, with spare capacity, to perform capital-intensive activities. The cost

of capital in India relative to Europe supported this argument. Although, it would not improve the cost

efficiencies or effectiveness, it would ensure that quality issues were avoided. Another reason that

Ashwini thought that this model might work was the stringent quality requirements for raw material

(aluminum and or titanium alloys) required for the aviation industry that would have to be sourced from

Europe. Given that normally 80% to 90% of the metal block was scooped out using skiving machines,

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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transporting raw material to Bangalore would likely add unnecessarily to costs. It would be cheaper to

transport machined parts which would be about 10% to 20% of the original metal block in terms of

weight. Further, the market for scrap, which was about 80% of the raw material, was not well-developed

in India. Working capital requirements would have also significantly increased because of long lead times

and high inventory. Moreover, Indian ports and customs were notoriously inefficient in terms of time and

would have further added to the cost.

Ashwini looked at the sheet of paper (Table 1) that provided him back-of-the-envelope estimates of

various costs. Although, he thought he could convince others about the viability of the model he favored

in the short run, he needed to make a case by developing a more detailed end-to-end cost comparison for

the three business models. He also had to think in terms of the long run. Would any European firm agree

to cooperate with an organization that was potentially going to take it out of business? Could DTIL make

it attractive for the owners of the partner firm to sell their business? Also, if the owners did sell the stakes,

would DTIL be able to retain the talent or would it be purchasing an empty shell? What would be the

management structure that would allow the India operations and European operations to work seamlessly

to meet global quality standards while reducing costs and maintaining delivery schedules? If the model

did not look sustainable, he might have to re-examine the models suggested by Natarajan or Nirmal. He

also wondered that since the final assembly had to be finally delivered to a plant in Europe, would it be

worthwhile considering the option to perform all the activities, purchase of raw material, machining of

components, and assembly of components in Europe.

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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Figure 1

Action by aviation OEMS to manage costs

Source: Global Defense and Aerospace Outlook published by KPMG (2013)

Figure 2

Comparison of countries on certain parameters

India China Russia UK Czech

Republic

Poland Indonesia

Government Support *** * * * * * **

Labor Pool *** ** ** ** ** ** **

Infrastructure ** ** ** *** * * **

Education System *** ** ** *** * * **

Cost Advantage *** *** *** * ** ** ***

Quality *** ** ** *** ** ** ***

Cultural Compatibility ** * * *** ** ** **

Time/Distance Advantage *** *** *** *** *** *** ***

English Proficiency *** * * *** ** ** ** Legend: *** Very Good ** Good * Poor

Source: Company internal documents

Reducing labor force/costs

Cutting back and/or delaying

planned investments

Exiting unprofitable or

non-core product lines

Exiting unprofitable or

non-core business units

Acquiring suppliers to

stabilize input costs

Sharing functions and/or

facilities with other

companies

P e

rc e

n ta

ge r

e sp

o d

e n

Actions contemplated to manage costs

All respondents Large OEM respondents

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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Figure 3

Opportunities in Indian aviation and aerospace industry

Source: New Face of the A&D Industry: Victors, Victims and Survivors by AT Kearney (2013)

 Final Assembly

 Fuselage and body

 Empennage or tail

assembly

 Design of complex

aero-structure, aero

engine components

 Design optimization,

mission critical

software and

embedded systems

for avionics and

aircraft product life-

cycle management

 Testing

infrastructure and

services

 CAD design and

documentation

 Procurement

assistance

 Engine component

MRO

 Airframe component

MRO

 MRO for Tier 1

components

 MRO for Tier 2 and

3 components

 Line maintenance

and modifications

Tier 1 Suppliers

 Power systems and

propulsion devices

 Avionics

 Landing gear assembly

 Wing assemblies

Tier 2 Suppliers

 Hydraulic systems

 Flight controls

 Electrical power systems

Tier 3 Suppliers

 Castings and forgings

 Structural sheet metal

components

 Wiring harness and other cabling

Design Component

Manufacturing

MRO Services

Aircraft

Assembly

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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Table 1 Cost estimates for activities and transportation for manufacture and assembly of

Flap Track Beam in Europe and India

Activity in Europe Activity in India

Capital Costs for High-End Machinery & Equipment

Cost of machinery & equipment $ 3,000,000 $ 4,500,000

Cost of installation of machinery and equipment Free $ 45,000

Cost of capital impact on one unit 3% 14%

Raw Material Costs (for one unit) Cost of raw material (per kg). Assume 100 kg of Aluminum and 30 kg of Titanium alloy is required per unit.

Aluminum Alloy $ 15 $ 20

Titanium Alloy $ 90 $100

Cost and time for delivering to Machining Centers Europe India to Europe Europe to India India

By air Cost (Time 4 days) $ 250 $ 600 $ 600 NA

By surface Cost (Time 10 days) $ 150 NA NA $ 100

By Sea Cost (Time 45 Days) NA $ 300 $ 300 NA

Cost of Machining (for one unit)

3 Axis Machining $ 50 $ 30

5 Axis Machining $ 110 $ 140

Net Revenue from scrap disposal $0 .05 per kg $ 0

Cost and time for delivering to Assembly Center Europe India Europe India

By air Cost (Time 4 days)

$ 175 $ 500 $ 500 NA

By surface Cost (Time 10 days) $ 100 NA NA $ 100

By sea Cost (Time 45 days) NA $ 200 $ 200 NA

Assembly (for one unit)

Cost of assembly $ 27,615 $ 17,365

Direct labor and other costs $ 35 $ 15

Indirect labor and other overhead costs $ 25 $ 7

Cost and time to ship assembly to Broughton, UK

By air Cost (Time 4 days) $ 1500 $ 2500

By Surface Cost (Time 10 days) $ 1000 NA

By Sea Cost (Time 45 days) NA $ 800

Technical Training In-House $75,000

Source: Company sources (both company name and numbers are disguised)

Dynamic Technologies (India) Limited: Strategic Integration into the Aviation and Aerospace Global Supply Chain

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Appendix 1 Flap Track Beam

Flaps are moving parts at the trailing edge of wings that are used to increase/decrease lift during take-off

or landing as required. They are fixed below the wings and enclosed in flab track fairings (see left image

below) that provide the outer cover for the mechanisms. When retracted the flap is aligned with the fixed

wing and when extended it provides a drag (see right image below). The flap mechanism is mounted on a

flap track beam (see image at bottom), which is attached to the wing and also facilitates the extension and

retraction of the flaps as required. The beam consists of several machined parts and components that have

to be assembled together.

Source: https://www.quora.com/What-are-these-projected-things-on-an-aircraft-wings

Source: Company documents

i 2013 Global Defense and Aerospace Outlook published by KPMG ii 2011 The Changing Face of the Aerospace & Defense Industry by Capgemini iii 2013 Global Defense and Aerospace Outlook published by KPMG iv 2013 New Face of the A&D Industry: Victors, Victims and Survivors by AT Kearney

https://www.quora.com/What-are-these-projected-things-on-an-aircraft-wings