Managing an MRO supply chain made up of multiple players spanning a global network of facilities and line stations can be a complex and challenging enterprise.

For instance, a common problem for an MRO provider is ensuring the availability and delivery of necessary replacement parts and maintenance materials on time and at the location where they are needed.

Should a disruption occur, keeping the part from reaching its destination on time, the customer will be affected by the delay, and the provider of the part in turn will incur additional expedited shipping costs to ensure the component reaches its destination as soon as possible. This scenario is also particularly bad news for the MRO, which typically wants the part immediately because it often does not hold much inventory in order to minimize costs.

Underpinning these situations is a cost-conscious environment, given the relatively small margins associated with the commercial aftermarket. “Customers are looking to reduce their cost by all means,” says Didier Granger, CEO of OEMServices, which provides MRO services encompassing aircraft components and logistics covering the supply chain between the OEMs and the airlines. “But they [airlines]  also want to upgrade the quality of their purchases at the same time, because they know that the quality of their aircraft and the value of their inventory will be linked to these choices.”

The Impact of COVID-19

The partial shutdown of commercial air transport due to the COVID-19 crisis, which resulted in nearly 80% of the global passenger fleet being grounded in May, not only battered airline revenues but inevitably disrupted the global supply chain. “Manufacturers’ lead times have started to increase, and the OEMs are also finding it hard to achieve their normal five-day turnaround, all of which affects MROs,” says Lee Kelsey, director at UK-based Farsound Aviation, which specializes in component supply and supply chain consulting and includes Iberia and HAESL as customers. “Total acquisition costs [of components] are also becoming more important as both airline maintenance divisions and non-airline-affiliated MROs have cut overhead due to COVID-19.” Another consequence is payment deferrals on MRO services and parts from airlines looking to preserve liquidity.

Naturally, shifting demand brought about by COVID-19 is leading to different supply chain approaches, particularly from MROs seeking better cross-border and time-zone connectivity. By embracing digital innovation, MROs hope to gain greater visibility into their operations—a process that could accelerate further due to the changes brought about by the pandemic. This trend is already being seen by Eric-Jan Schmidt of ILS, which has provided an inventory locator service for more than 35 years. He says demand for certain services has increased since the outbreak of the novel coronavirus. Specifically, he is seeing greater interest in ILS’ IPC Analyzer, which helps both buyers and sellers gauge their respective opportunity windows for selling, dismantling costs and resale values. “A direct result of the large number of aircraft parked is the likely increase of frame and engine retirements and the demand and supply impact this will have for specific products in specific geographic regions or segments,” he says. In addition, Schmidt has seen growing requests for inventory-stocking support, mainly from parts-stocking companies. “Particularly those with large inventories increasingly need real-time fair market value data to support their credit facilities,” he says.

Most MRO operations use enterprise resource planning (ERP) systems for functions such as sales quoting and accounting, along with more specialized MRO management software developed to track maintenance orders and organize inventory. Farsound’s Kelsey says that having an ERP system tailored to fit an organization is extremely important, given all the changing data companies are continuously receiving. He says Farsound invested heavily in a Microsoft Dynamics Nav package a few years ago. “We have tailored our business around this, and as we expand, we can grow within Microsoft Dynamics,” he explains. As is becoming increasingly common, the company has since moved this ERP system up to the cloud, enabling remote usage anywhere across the world and around the clock.

Citing the primary challenges of running an MRO supply chain as obtaining parts just in time, managing lead times for parts availability and general overspending, Vincenzo Quaranta, head of maintenance and engineering at Alitalia, runs its operation using two main tools that specifically target greater visibility into its aftermarket business. The airline uses SAP software to manage and monitor its orders and inventory, along with other functions such as finance and human resources.

Alitalia’s MRO activities are tied together by AMOS MRO management software, developed by Swiss Aviation Software, which the carrier rolled out in 2011. Operating within a broad framework, the package covers both long-and short-term planning and minimum equipment list management, up to the creation and management of work packages, orders and task-card issuance both for aircraft and components. “It’s also helping us in managing stock levels and [issuing] relevant repair orders for removed components, both for internal repair departments and for external repair stations,” Quaranta says.

Since rolling out the AMOS product some nine years ago, Alitalia says the consolidated MRO software has brought about markedly improved visibility. “Previously, we were using around 27 different types of software to manage maintenance activities not linked to each other and therefore completely ineffective in gaining visibility on maintenance operations. Also, [it helps] in areas such as rebuilding the maintenance history of a certain component, in case of need such as back-to-birth traceability,” he adds.

Quaranta believes systems like these give its maintenance division, which has a roughly 60/40% third-party/in-house Alitalia fleet MRO split, enough visibility across its operation but says other initiatives are underway to drive this objective further. “We use our enormous amount of maintenance data and correlate between them to create predictive algorithms that allow us to build preventive and predictive maintenance tools,” Quaranta says.

For airlines operating on a smaller scale without the in-house maintenance setup of their larger contemporaries, juggling the right software with tailored maintenance contracts serves an especially critical function. Guy Borowski, head of engineering and maintenance at Canada-based Flair Airlines, says that being a small carrier with a fleet of just six aircraft means it seeks to take advantage of economies of scale when acquiring parts from its vendors. Much of its parts supply emanates from German MRO Lufthansa Technik, with an agreement covering pool access, home-base kit and repair and overhaul services, while its management software is supplied by RAAS from AIS. “Our rotable contract takes much of the complexity out of our parts supply management and allows us to benefit from scale that we would otherwise not enjoy,” Borowski says.

Even so, he says Flair Airlines is reviewing ways to manage its maintenance more effectively as its fleet grows and may look to some of the broader ecosystem packages in the future. He identifies several areas ripe for greater visibility across the Edmonton-headquartered carrier’s supply chain, including: “Visibility and availability of used parts, availability of low-use, high-dollar items without having to purchase them, and the ability to identify pending failures and improved troubleshooting.” 

Expanded Offerings

Naturally, demand for greater visibility is leading to expanded options from specialist software vendors but also from well-resourced MROs looking to bolster their digital service offerings. These maintenance providers include Lufthansa Technik, which, as part of its ongoing digital efforts, brought its open-source data-sharing platform Aviatar to market in 2017. The platform offers a suite of products for airlines, MRO providers, OEMs and lessors ranging from predictive maintenance to fulfillment and automated solutions to improve customer access to pool stock, material planning solutions and dedicated home-base stocks.

“We run a big database that includes operational, material-related and supply-chain-related information for components from more than 5,000 aircraft on a regular basis,” says Frank Martens, head of customer development for digital products at Lufthansa Technik. “Every change of pattern, whether it is flight schedules of airlines, new component modifications or changes in our supply chain, is fed into our self-learning algorithm and is utilized to optimize our material stock.”

The predictive maintenance part of the offering is widely seen as a boon for forecasting failures, thus giving inventory managers better foresight about where to stock parts by region. However, industry adoption of predictive maintenance platforms remains sluggish. “The number of airlines using predictive solutions is limited but growing fast,” Martens says. “Many visionary airlines are looking at such solutions right now, but the offerings of real predictive maintenance are limited. Many are just offering digital results without a direct connection to maintenance actions.”

Given the abundance of data generated by their new-generation aircraft types, along with the high volumes of parts stocks being moved around to different locations, airframe OEMs are also developing a series of digital offerings. To much fanfare, Airbus launched its Skywise open-source data platform in 2017 aimed at connecting inflight, engineering, and operations data in a single ecosystem. Three years after its launch, its user base has grown to more than 100 airlines.

In the same year, Boeing rolled out its AnalytX solution, which, unlike Skywise, was less of a data platform and more a collection of digital solutions and services including more than 130 related applications. One of these is its maintenance-focused application Airplane Health Management, which identifies maintenance needs in advance using predictive algorithms before delivering the needed components.

Duane Wehking, vice president of digital solutions and information technology and data analytics business partnerships for Boeing Global Services, believes that in the commercial aviation segment, collecting, analyzing and leveraging data produced by aircraft will be paramount in increasing efficiency for maintenance work, improving safety and reliability, managing MRO records and lowering overall operating costs. “Commercial airlines spend 2-4% of their revenues upgrading information services and analytics solutions, and we see this continuing to grow,” he says.

Blockchain

If predictive maintenance can provide ways to better forecast component failures, then blockchain is seen by some as the answer to improving supply chain transparency and traceability across a part’s life cycle. Characterized as a shared ledger offering users a complete, time-stamped record of transactions and processes within it, the technology is only just beginning to be adopted across aviation.

Nevertheless, interest in the concept is evident, with AFI KLM E&M, Honeywell and GE Aviation just some of the aftermarket players developing blockchain-related platforms in the past few years with specialist partners. The technology took another step forward in the aftermarket this year through the formation of the SITA-led MRO Blockchain Alliance, comprising more than a half-dozen aviation entities including an MRO (HAECO Group), airline (Cathay Pacific) and software vendor (Ramco Systems).

While acknowledging that blockchain is in its infancy, Borowski of Flair Airlines nevertheless believes these types of developing technologies, along with other platforms, will be positive for the MRO supply chain. “Technology will allow collaboration among multiple entities to improve efficiencies and lower costs,” he says. “Safety stock at individual entities will continue to decrease, and data will drive operational decisions that could improve an airline’s reliability.”

Consolidated Services?

Many in the commercial aftermarket, including Alitalia’s Quaranta, expect the COVID-19 crisis will inevitably lead to the acceleration of digitalization of many MRO processes. “This includes the supply chain, through the utilization of new technologies and digital applications, such as big data and predictive maintenance,” he says.

This view is shared by OEMServices’ Granger, who foresees more functionality being added across digital supply chain tools as the segment seeks to become better connected across multiple entities. “The need is to create links that connect the diversity of the systems and the various entities that operate these systems, including airline engineering departments, MRO providers and vendors,” he says.

What is certain is that supply chain management product suppliers will continue to grow their offerings. From the perspective of an OEM, Boeing’s Wehking believes the development of integrated products that support airline operators is on the horizon. “Currently, airline engineers or crew members use multiple applications to complete their daily tasks. Integrating these various products into a single interface will be more efficient,” he says. “It can also become a learning product that features embedded machine learning to analyze local data and derive insights in real time. Prediction models can move beyond day of operations to weeks or months in advance.”

ILS, meanwhile, will look to further expand its product line. Having developed four new platforms this year alone, Schmidt says more products are likely, with recent customer demand centering on applications of its intelligence and data solutions to navigate liquidity-related business needs. Among these, he anticipates more applications for part-pedigree tracing and autonomous procurement, further developing personalized predictive algorithms and building its supply chain hub with integrated workflows designed to optimize processes and user experiences.