When reviewing historical sales data, we can and should use an analytical approach to understanding the reasons for sales ups and downs. Both are equally important, though likely for very distinct reasons.
While the simple analysis below shows military programs, the same concepts apply to commercial aerospace or space.
We are often asked to look at sales decreases, but rarely asked to analyze increases. I remember being told once by a President that increases were likely due to "given away the farm" without concern for what went right and more importantly, not recognizing that the team did a good job. Frankly most manufacturers seem to be all too happy to accept the increases but are more focused with drops in business. Rightfully so, however we must understand all the reasons for both, so we can replicate the good and minimize other reasons.
In the following example we will look at one typical scenario which happens all too often.
For instance, looking at the Total Revenues by Decade graph below, this hypothetical company appears to be in ok shape. And Admittedly we are looking at decades (instead of yearly or quarterly to prove a point or two).
Before forecasting 2015 and without the details, it would give an erroneous impression that sales are growing (albeit minimally) and we can sleep "comfortably".
But an in depth analysis would uncover that this company is in for a big surprise in 2015 when sales are forecast out.
Once we analyze the revenues taking into account the programs that those same sales numbers belong to, we can now see in the Program Revenues by Decade graph that some of those programs are no longer in production. The case of the F-14 for instance, spares will no longer be seen due to the aircraft being mothballed and the few foreign sales were made to countries we can no longer sell to (due to ITAR restrictions), so we will no longer see any aftermarket sales, with minimal aftermarket sales from the other programs.
This leaves essentially a new production program (F-35) as the only true hope for growth and survival.
See F-35 Program Revenues by Product line graph which while it has a bright future, will have lots of potential competition since it is arguably the only viable (military) program in existence at this time. In short, without serious intervention, the forecast revenues for 2015 will be nearly half of the 2010 numbers and this should create some real soul searching on the part of management in order to avoid a serious catastrophe. But we all know this doesn't ever happen...does it?...
Well it happens all too often when we don't look past the obvious. Further examination into the make-up of the F-35 revenues shows that while product lines A, C and D are growing proportionately to the program production rates, product line B isn't. In fact, the 2015 numbers are forecast to be nearly half of what they should be. This can likely be attributed to no longer being sole source and additional sources getting qualified who are more eager to win the race to the bottom. Clearly this presents a problem which must be addressed immediately as the same future may be looming for other product lines or products.
This same analytical approach must be carried out for all product lines, specific products within product lines, programs, even regions, etc. in order to understand where a company really stands. Are you going to meet your sales goals or are you kidding yourself that no one else is going to play in your sand box?
Another reason that it is imperative that revenues are broken out by product lines and products is that the growth in one, may mask the drop in sales of another, even within the same program. This masking can be very deceiving and provide a false understanding of the competitive landscape. So, whenever possible, it is ideal for this process to be taken to lowest levels to fully understand the make-up of potential growth.
Do you have the right product and sales team mix or do you need help seeing thru the clouds...?