Winning the global offset game: EMS providers can play a strategic role

BY Larry Stenger

Call them what you will—compensation, countertrade, reciprocal purchase obligation, or industrial participation—offset agreements between U.S. military contractors and foreign governments are a fact of life and a crucial aspect of a winning aerospace or defense bid.

Although the U.S. has no official offset policy and considers these trade practices a necessary evil, most other governments worldwide formally support offsets. In particular, emerging powers such as China, India, and Brazil require offsets from foreign contractors as a means of furthering national economic growth and technological advancement.

Offsets can take many different forms. These range from an agreement by the contractor to co-produce the components at a location within the foreign country to boost local employment and transfer technology expertise (direct offset), to an arrangement whereby the contractor assists the importing country in ways unrelated to the deal or industry (indirect offset).

Foreign governments carefully evaluate these different offset proposals to find the best offer among bidders. They may play one contractor against the others to obtain their demands. In a classic example, in 2003, Lockheed Martin agreed to deliver more than $9 billion in offsets (primarily job creation and technology transfer) to the government of Poland as a condition of the $6 billion sale of 48 F-16 fighter aircraft.

In view of shrinking opportunities and extremely tough competition for international sales, particularly in commercial aviation, contractors must strive to design offset agreements that not only address the specific demands of the foreign government, but also provide a favorable cost/benefit balance for themselves.

One proven approach is the use of electronic manufacturing services (EMS) providers with established facilities in the target nation. By engaging with an EMS provider, aerospace and defense contractors can design offsets featuring local employment, training, or technology transfer while avoiding many of the capital costs and time requirements for establishing their own plants or creating a joint venture with a local manufacturer.

Jabil employees look at online visuals reviewing real-time machine status reports for quality and productivity purposes.

Offloading offset requirements

Aerospace and defense contractors are looking to the BRIC (Brazil, Russia, India, and China) nations and other developing countries with deep pockets and strong industrial and military growth for potential sales of their products. In the process, they face the increasing popularity, sophistication, and prevalence of the offset as a tool of government procurement. Among the most common requirements of offset agreements are the creation of local jobs for economic stimulus (a key issue for many countries) and technology training or transfer to help an emerging industry sector compete more effectively in the global marketplace.

Unless the contractor already has a manufacturing facility in the country to which it seeks to export, these demands may be difficult to meet. Constructing a local manufacturing facility, hiring and training local workers, and putting systems in place to ensure a high level of quality and regulatory compliance might take years and would certainly call for a major capital investment. Another alternative—finding an in-country partner to do the manufacturing—also requires training, probable investment in equipment and facilities, and quality assurance and compliance efforts. In both cases, there could be a significant impact on time-to-market, as well as very real concerns about protection of intellectual property and the quality of outbound product during early production.

Many of these issues can be avoided by engaging with an EMS provider that is already established in China, Brazil, Poland, or other nations and has experience in the defense/aerospace electronics sector. By partnering with an EMS company, contractors can demonstrate to the foreign government that they are employing local workers, providing training in the latest technologies to these employees, and even using local suppliers of goods and services to support the operation.

Following are key advantages that EMS companies can provide to contractors drawing up an offset agreement:

  • Capital cost avoidance: Although a deal typically would not be won without a successful offset proposal, the costs involved with satisfaction of the offset detract from the overall value of the sale. Therefore, it is important for contractors to minimize these offset costs as much as they can. By using an EMS provider instead of making substantial capital investments for a new facility, contractors can deliver valuable benefits to the foreign government at a lower price point. For low-volume devices, in particular, manufacturers may find it cost-prohibitive to hire the experts and purchase the technologies that are required.
  • Faster time-to-market: An EMS provider with sophisticated expertise, technology, and equipment and highly trained staff can play a major role in accelerating time-to-market for aerospace or defense electronics. The EMS company can begin design, optimization, testing, or manufacturing more quickly. This factor can be extremely useful to the contractor in preparing a winning proposal.
  • Rapid prototyping: In contrast to normal production, creating a prototype often involves a hectic pace, many changes and low-volume supplies. Contractors that are proposing a new product or a customized version of an existing product to a foreign government may not be set up to deliver in a narrow window of opportunity. Attempting to develop a prototype using the regular manufacturing environment can be disruptive and challenging. An EMS provider with a new product introduction (NPI) facility or area within its plant can solve this issue. Such a company offers dedicated resources for prototyping to accelerate the process, procurement experts who know how to source a small number of components, and design optimization expertise to plan for and ensure a seamless transition to production.
  • Proven quality and compliance: Two of the big concerns about manufacturing in emerging countries are high quality standards and regulatory compliance, which are non-negotiable requirements for critical aerospace and defense systems. Due to their size, scope of work, and experience, many global EMS providers have the knowledge, quality processes, regulatory expertise, and controls to deliver consistent, high-quality components that meet Federal Aviation Administration (FAA) and European Aviation Safety Agency (EASA) regulations. From their experience operating in different countries, they often also have a broad and deep understanding of local regulations and requirements.
  • Supply chain optimization: Highly complex aerospace and defense components often call for hundreds of parts and materials, each with specific requirements, associated standards, and applicable regulations. A robust supply chain established, qualified, and managed by the EMS company can help contractors simplify production, ensure consistent quality, and provide alternatives in the case of an interruption. Further, with their high purchase volumes, economies of scale, and global scope, EMS partners can often drive down costs to help defray offset expenses.

FOR MORE INFORMATION visit Jabil Defense & Aerospace Services online at www.jabil.com.

 


Larry Stenger is global director of commercial aviation for Jabil Defense & Aerospace Services.

More Military & Aerospace Electronics Current Issue Articles
More Military & Aerospace Electronics Archives Issue Articles


Get All the Military Aerospace Electronics News Delivered to Your Inbox or Your Mailbox

Subscribe to Military Aerospace Electronics Magazine or email newsletter today at no cost and receive the latest information on:


  • C4ISR
  • Cyber Security
  • Embedded Computing
  • Unmanned Vehicles


Get All the Military Aerospace Electronics News Delivered to Your Inbox or Your Mailbox

Subscribe to Military Aerospace Electronics Magazine or email newsletter today at no cost and receive the latest information on:


  • C4ISR
  • Cyber Security
  • Embedded Computing
  • Unmanned Vehicles

Military & Aerospace Photos

Most Popular Articles

Related Products

Flexible Printed Circuit Board

Flexible Printed Circuit Boards are one of the most popular types of circuit boards used in a var...

Rigid Printed Circuit Boards

Rigid printed circuit boards can only meet diverse industrial applications if the best materials ...

Printed Circuit Board Assembly

Printed Circuit Board Assembly (PCB ASSY) is as critical a process as circuit board manufacturing.

BiSlide® Stages

Velmex manual or motorized BiSlide positioning stage's modular design makes it highly configurabl...

UniSlide® Stages

UniSlide Assemblies deliver precise movement in one, two or three dimensions with linear motion. ...

Velmex VXM™ Motor Controller

Velmex VXM Controller Systems are integral components of the power systems that efficiently drive...

Velmex XSlide™ Stages

The Velmex XSlide Assembly is a compact positioning stage highly suitable for high performance in...

XPand6020 | Small Form Factor (SFF) System Featuring XPedite5205 Running Cisco IOS® and XPedite7450

The XPand6020 is a Small Form Factor (SFF) system that features an XPedite5205, which runs Cisco ...

Micro Borescope Ultra Thin

German made, it is the best choice for extremely small inspection areas, with diameters as small ...

Video Borescope ORION

Ø 4mm (0.16”) to 10mm (0.44”)Working Lengths: up to 30 meters (98')3.5” color LCD display, with 7...

Related Companies

A-FLEX

Provides customized Printed Circuit Board fabrication in California. The entire process can be customized according t...

Uniforce Sales and Engineering

Provides solutions to machine vision and image acquisition in many applications, including in the fields of medical, ...

Velmex Inc

Manufactures linear and rotary motion-control positioning equipment for scientific, research, photonics, machining an...

TASC Technical & Assembly Services Corporation Electronic Equipment Manufacturing

Electronic Manufacturing sub-contractor. Circuit Board assembly, Cable Assembly, Wire Harness Assembly, Box Build Ass...

General Atomics Aeronautical Systems Inc

GA-ASI is a leading manufacturer of proven, reliable Remotely Piloted Aircraft (RPA) systems, radars, and electro-opt...

BellowsTech LLC

Develops, designs and manufactures metal bellows using edge welded bellows technology. Expertise in design, machining...

HC Controls Inc

Specialists in design, installation, commissioning, calibration, training and support services to aero engine test fa...

Curtiss-Wright Defense Solutions

About Curtiss-Wright Defense Solutions Curtiss-Wright Defense Solutions (CWDS) is a long established techno...

Medit Inc

Supplies remote visual inspection devices. The company is one of the important players in the industry, serving clien...

DDC-I Inc

Offers complete solutions for embedded software developers with a focus on mission- and safety-critical applications....
Wire News provided by   

Press Releases

CURTISS-WRIGHT AWARDED CONTRACT BY SIERRA NEVADA CORPORATION

Curtiss-Wright Corporation today announced that its Defense Solutions division has received a contract from Sierra Nevada Corporation (SNC) to supply its small form factor ...

Innovative Integration Announces the FMC-Servo

Camarillo, CA June 19, 2015, Innovative Integration, a trusted supplier of signal processing and data acquisition hardware and software solutions, today announced the FMC-S...

METADATA SUPPORT ENHANCES INDUSTRY-LEADING HD VIDEO MANAGEMENT SYSTEM FROM CURTISS-WRIGHT

Curtiss-Wright Corporation today announced that its Defense Solutions division has further enhanced its innovative VRD1 high definition (HD) video management system (VMS) w...

Webcasts

Harsh Environment Protection for Advanced Electronics and Components

This webinar will offer an opportunity to learn more about ultra-thin Parylene conformal coatings – how they are applied, applications they protect today, and the properties and benefits they offer, includin...

New Design Tools That Help You Develop Radar That Sees the Un-seeable and Detects the Undetectable

Xilinx EW/ISR System Architect, Luke Miller, has new tricks and he’s going to tell you all about them in a new Xilinx Webinar—for free. His Webinar will cover new ways to implement Radar functions including ...
Sponsored by:

All Access Sponsors


Mil & Aero Magazine

June 2015
Volume 26, Issue 6
file

Download Our Apps



iPhone

iPad

Android

Follow Us On...



Newsletters

Military & Aerospace Electronics

Weekly newsletter covering technical content, breaking news and product information
SUBSCRIBE

Cyber Security

Monthly newsletter covering cyber warfare, cyber security, information warfare, and information security technologies, products, contracts, and procurement opportunities
SUBSCRIBE

Defense Executive

Monthly newsletter covering business news and strategic insights for executive managers
SUBSCRIBE

Electronic Warfare

Quarterly newsletter covering technologies and applications in electronic warfare, cyber warfare, optical warfare, and spectrum warfare.
SUBSCRIBE

Embedded Computing Report

Monthly newsletter covering news on embedded computing in aerospace, defense and industrial-rugged applications
SUBSCRIBE

Unmanned Vehicles

Monthly newsletter covering news updates for designers of unmanned vehicles
SUBSCRIBE