Imagine an aerospace manufacturer pouring millions into R&D for next-gen propulsion, while quietly bleeding costs in the back office. IT, finance, HR, compliance — all essential, but often treated as a flat “overhead” charge spread across programs.
The result? Cross-subsidies, blurred accountability, and hidden inefficiencies. In an industry where margins often hover around 2–5%, those invisible leaks can be the difference between survival and stagnation.
Why the Old Model Doesn’t Work
Traditional cost allocations spread overhead like butter: unevenly, and often wastefully. One program consumes more IT, another leans heavily on compliance, but both get charged the same. That lack of transparency doesn’t just distort costs — it discourages efficiency.
Shared services become a “black box” cost, rather than a strategic lever for competitiveness.
Rethinking Shared Services: From Cost Center to Value Driver
More aerospace leaders are now turning to activity-based allocations, where costs are linked directly to usage drivers — number of transactions, hours of system usage, headcount, or regulatory requirements.
The shift is powerful:
- IT Services: One aerospace supplier cut IT overhead by 25% after introducing usage-based allocations. Business units suddenly became conscious of consumption, leading to leaner systems and smarter demand.
- Procurement: By consolidating sourcing and linking costs back to programs, companies see 15–20% savings, with extra capital freed for supplier negotiations.
- Finance & Compliance: Automation and fairer cost drivers deliver 10–15% reductions, while also streamlining processes for regulatory reporting.
Industry benchmarks suggest that shared service transformations can reduce support costs by 20–30% overall. In aerospace, that’s money that could be redirected into innovation, safety, and performance.
Beyond Cost: The Cultural Payoff
The real magic happens when cost allocations start changing behavior. When program leaders see the true cost of their support services, they ask different questions:
- Do we really need bespoke HR support for every program?
- Could we standardize IT platforms across the business?
- Is automation a smarter investment than another layer of headcount?
What was once “just overhead” becomes a lever for continuous value optimization. Transparency fuels accountability — and accountability fuels efficiency.
The Bigger Picture
In a sector defined by complexity, precision matters — not just in engineering, but in finance. Shared service cost allocations may not make the front page of Aviation Week, but they could quietly fund the next wave of aerospace breakthroughs.
When every dollar has a flight plan, companies stop treating shared services as baggage and start treating them as fuel for growth.
The future of aerospace will be built on innovation, but financed through efficiency. Cost allocations are one of the simplest, most overlooked levers to get us there.
