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Digital Transformation and Indian Defence Industry

'Industry 4.0' is  an approach that uses advanced technologies to control over the entire product lifecycle keeping in mind to make the entire process cost effective by reducing the production costs while improving product quality and production scalability and individualization by means of digitalization of product and production. The author analyses impact on Indian Defence Industry....

Fourth Industrial Revolution or more commonly known as 'Industry 4.0' is basically an approach that uses advanced technologies such as Information and Communication Technologies (ICT), Cyber-Physical Systems (CPS), to reinvent products and services from design and engineering to manufacturing and support, expedite operational efficiency and organizational growth. In short, it is control over the entire product lifecycle - from conception to production and supply chain - but keeping in mind to make the entire process cost effective by reducing the production costs while improving product quality and production scalability and individualization by means of digitalization of product and production.

Essentially there are nine technology trends/elements that form the building blocks of Industry 4.0 that make it possible to gather and analyze data across machines, thereby, creating a more efficient process. Refer below given Fig.

Digitisation Scenario

A PWC Survey  Industry 4.0: Building the Digital Enterprise'  indicates that currently, India (27%) is slightly behind the global average (33%) in terms of level of digitisation. While advanced digitisation and integration of horizontal value chain (i.e. with suppliers, customers and other value chain partners), digital business models and customer channels are progressing a little slowly, increased progress is expected in five years. Most Indian companies expect to reach a digitisation level of around 65% in five years as against 72% globally. Refer Fig. 2.

The major benefits and challenges that are and will be faced by organizations implementing digitisation are illustrated in Fig. 3.

Digital Transformation in Indian Defence Sector

Digitisation in defence sector basically is the application of the advanced digital technologies for developing new innovative and cost-effective products and services, improvising the existing products by way of using connectivity and sensors, and creating advanced manufacturing processes. Amongst the nine elements - the Industrial Internet of things (IIoT), autonomous robotics, bio data analytics and augmented reality solutions for land, sea and air- are the topmost technology solutions that the defence firms worldwide have started using for decision making and would further benefit the defence industry.

Deployment of digitalised technology across manufacturing course, processes and machinery will enable the firms to not only track the production process from start to finish but also analysing data across machines, and get real-time feedback on raw material availability, equipment condition etc., resulting in efficient processes and higher-quality products at optimized costs, thereby increasing the revenue growth. For ex. captured data by placing sensors on equipments such as landing gear, engines on an aircraft can effectively help the  defence companies to reduce the lifetime maintenance costs. Further, application of sensors will result in taking note of possible failures and create predictive maintenance schedules to order parts, thereby implementing replacements and reducing the cost of replacements. Another example is usage of remote 3-D printing for supply chain optimisation.

In India, however, digital transformation in the defence sector still has a long way to go. Notably, the defence sector doesn't even touch the half of the total level of digitisation in India which stands at 27%. It really needs to catch up. One of the main reasons for India lacking behind in implementing digitalisation is because of the fact that the Indian Defence sector is predominantly dominated by the DRDO and other production agencies of the Government, namely, Ordnance Factories and the DPSUs. These Government sponsored agencies have not been able to keep pace with changing technology. For example, so far life cycle related information is being compiled by manual data recording by these agencies; such manual interventions are subject to human error and bias. Moreover, these agencies are not keen to look at such advantages offered by digitalisation and improve themselves, rather they continue with their traditional methods only overlooking the fact that the traditional supply chain in defence product had knowledge gaps, lack of real time information in the era of increasing user's expectations and cost effectiveness.

Further, pace of technological change and lack of technology know-how (through Transfer of Technology (ToT) are two of the major factors that have been acting as the key technological and strategic obstacles for Indian defence industry to move on the path of digitalisation. It is to be seen that most of the majors systems required by our defence forces are still being imported either directly or through Transfer of Technology (ToT). Further, bulk of the present weaponries in the inventory are either outdated or need to be upgraded/modernized. There, thus, exists a large capability gap in the technology and equipment held by defence forces vis-a vis what is needed.

Notably, the ToT experience reveals that the technology absorption has been inordinately slow leading to continued dependence on foreign OEMs/collaborators. Most of the 'technology transfer' that happens in the Indian defence, only relates to the manufacture of the item within the country and therefore concerns only the technology involved in manufacturing. The foreign manufacturers hardly provide any insight into the technology for design or modifications of the part. Furthermore, the production agencies  the DRDO/OFBs in the past also never have bothered to acquire knowledge including the “know-how' and “know-why” of developing a certain class of equipment, resultantly, not been to absorb the technology, and being satisfied with a role of mere assembler. Some of the reasons attributed are incompetence, poor management and short-sightedness of these production agencies. Experience of DPSUs - Hindustan Aeronautics Limited (HAL) in terms of production of the MiG series aircraft and Sukhoi-30MKI combat aircrafts and Mazagon Dock Limited (MDL) for producing Scorpene submarines under Project 75 are some programmes wherein there has been poor high skill absorbing capability. Such restraints have restricted indigenisation like in the case of Sukhoi-30MKI aircraft wherein indigenisation was achieved around 50 percent only by value of each aircraft.

Further, Transfer/Paid technology acquired so far has stagnated at the basic level and not matured as there is seen an issue of disconnected supply chain. Foreign procurements such as MiG series aircrafts, T-72 and T-90 Tanks, Bofors guns, Jaguar aircraft, and various helicopters are some of the cases to substantiate this fact. In each case, the degree of indigenisation kept rising, but critical components or materials continued to be imported. Thus, even for an upgrade of the systems, DRSO/ DPSUs have been critically dependent on the original licensors. DRDO/ Ofs/ DPSUs have failed to master the acquired technologies even with regards to spare parts and improve upon them, necessitating further ToTs with each purchase. Resultantly, India never achieved the stated goal of acquiring the capability to make the next upgrade or novel model on its own.

On the other hand, using digitalisation by Private sector especially product centric ones who are moving towards providing full life cycle products and services; the digitalisation provides them a platform for much easier handling and recording of information which when needed is available without much searching coupled with the rapid introduction of complementary services, and greater customer relationship. If India wants to move on the path of being a digitised country in defence sector then it is imperative that the country moves towards self reliance and develop cutting edge technologies/weaponries. And this is only possible if the Government boosts private sector participation in defence programmes as seen that the private sector has the capability and basic technology and has also demonstrated exploitation of technology such as Larsen & Turbo (L&T), Mahindra& Mahindra (M&M) who are developing various technologies/defence items like K9 Vajra howitzer gun, M77 howitzers respectively through effective ToT absorption and implementation of digitisation in their manufacturing processes. Apart from these, there are many private companies that are experimenting with digital capabilities. They are prioritizing and investing significantly in digitalisation and have gained a competitive edge/advantage over DRDO/Government owned production agencies.

Way Forward

Both the Indian public and private sector needs to take appropriate steps and speed up in adopting digitalisation across functions such as manufacturing, supply chain, logistics and procurement. It is anticipated that the companies can enhance their operating profits by at least 43% at less than 10% of the planned capital expenditure. A PWC Survey  'Industry 4.0: Building the Digital Enterprise' - anticipates cumulative benefits from digitisation in the next five years in India by industrial products companies highlighting the following:

However, as defence companies shift from digital strategy to digital operations, they will need to attend to certain challenges and concerns as well like developing cross-functional digital teams and building confidence/trust and sharing in digital technologies. Till date, numerous stakeholders lack trust in sharing data. There is a need to evolve a collaboration model. Also, blockades such as data ownership remain till date which needs to be catered.

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