How Blockchain Works Graphic Source: IFS Labs

Blockchain In MRO Could Happen Sooner Than You Think

Blockchain could clear hurdles for some of the aviation aftermarket’s biggest hurdles, but has Bitcoin given blockhain a bad reputation?

Transferring aircraft from one operator to another costs commercial aviation about $1 billion each year. A significant fraction of that sum is spent on creating, storing, managing, transporting and verifying aircraft and component records essential to safety, aircraft value and regulatory approval. Moreover, time spent verifying records can delay transfers, which costs revenue, while missing and unverifiable records incur costly rework.

Digitizing all paper records would help, and the industry is slowly moving in that direction. Two hurdles to digitization are a reluctance to share confidential maintenance data, such as pricing, and aviation’s sluggish adoption of true electronic signatures.

Blockchain, which accumulates records in distributed electronic ledgers across a wide number of participants, was developed in 2008 to manage the cryptocurrency Bitcoin. The platform’s distributed ledger approach is now being applied more broadly, and it might leap those two hurdles to aviation use.

Blockchain uses cryptography instead of signatures to ensure security and could collect only the maintenance data that is essential to safe transfers, not sensitive information companies want to keep private. “The potential gain is huge,” says Oliver Wyman Partner David Marcontell.

IFS

How Blockchain Works

The potential stretches beyond aircraft transfers. Blockchain could ensure correct configuration management, from original design through the aftermarket; track MRO staff training, experience and qualifications; and validate that data produced by the Internet of Things originates from the right things.

But application of such new technology presents its own challenges. As with anything that touches airline safety, implementing it will take time.

Distributed Ledgers

Blockchain is a continuously growing list of records, called blocks, that are permanently linked into a chain. Aftermarket blocks would contain data on aircraft parts: where they came from, which airline operated them for how many hours, when and if they failed, who repaired them and when and much else. The data could be entered manually by authorized staff or automatically by enterprise resource planning (ERP) or maintenance management systems.

Once entered according to the rules, data would be distributed to all participants in the blockchain. It could not be changed without a consensus of all participants. Cryptography would make misinformation extremely difficult, and the distribution of data among many companies would make it very difficult to hack.

Those characteristics are valuable. “Distributed ledgers make sense if there is a large, complex supply chain with multiple points of potential failure, high risk of cyberattacks, high costs and multiple organizations involved,” summarizes Bas de Vos, director of IFS Labs. “The technology provides a single picture of the truth to all parties involved.”

De Vos says data on component installation and repair could slowly build a complete maintenance history of an asset, back to birth or last overhaul as appropriate. If a part malfunctions, technicians can use that history and number of flight hours to decide whether to replace or repair it. And changes in aftermarkets will make complete histories especially important. “With 3D-printed parts entering the supply chain soon, the ability to quickly track a single part to its origin to ensure it isn’t counterfeit will become even more necessary,” de Vos explains.

“It could get rid of the middleman and reduce transaction costs,” says Vijay Takanti, senior vice president of product development at Exostar, which helps manage supply chains for aircraft manufacturers. His colleague, supply chain director Kevin Van Lowe, notes blockchain also could enable tapping lower-cost sources by removing worries about substandard or counterfeit parts. That might be especially helpful in sourcing from less-developed countries where the local infrastructure is not robust. 

Kevin O’Sullivan of SITA Lab also argues for efficiency effects. Blockchain “would replace paperwork and time-consuming manual duplication, storage, certification, sharing and searching of paper. It would streamline processes around aircraft maintenance.” But O’Sullivan notes a limitation: “Blockchain simply proves its data has not been tampered with. It does not prove data is correct at point of entry.” That assurance relies on managing the identities of companies and individuals that enter the data. “If an account is compromised, it is easy to add fraudulent data,” he says.

Even setting aside security issues, Blockchain guarantees only that an entry has met its business rules: The entering company has a valid account, owns the part or is licensed to repair the part. It does not guarantee that the part has been repaired.

But de Vos says this risk, of nonperformance or poor performance, is also present today with paper or digital records. “The big advantage of blockchain is it’s more transparent. I can never go back and change what I have done. Everyone knows I said that I did the inspection,” de Vos notes. And if the repair has not been done, the guilty party can be caught promptly.

The Challenges

Choices and hurdles remain. Blockchain started out as a platform for Bitcoin and other cryptocurrencies. It was a public or “permissionless” electronic ledger. Use for secure aircraft part transactions would likely require a private or permissioned ledger. That is, participation would be limited to companies in the aviation supply chain that meet certain requirements.

Precise requirements will depend on governance. “The governance model is very important,” Takanti stresses. It will determine who can participate, what level of participation is allowed for each member, how consensus is achieved on blocks in the chain and any changes in rules, what cryptography tools are used and a myriad of technical details, such as how large the blocks are in the chain.

All these questions are vital to the security, flexibility and efficiency of the solution. For example, the size of each block determines the speed at which new data can be confirmed and made part of the permanent chain. And overly large blocks can stress desktop PCs, limiting participation.

Takanti says another hurdle to adoption is blockchain’s reputation, developed in the Bitcoin application, for protecting the anonymity of participants. Bitcoin’s distributed ledger is public, open to all and protective of privacy. An aviation aftermarket version would be limited in membership and intensely focused on clearly identifying each person and company that participates in the distributed ledger. 

Regulatory approval would obviously be necessary. The FAA says it “does not endorse or approve any particular tool industry uses or might use for tracking or tracing parts.” But local FAA inspectors decide whether the methods each company uses ensure safety. Other civil aviation agencies would also have to be on board to make the approach work in a global aftermarket. Over time, regulators will have to learn to trust the particular version of blockchain adopted for aviation and how it is used to accept the solution.

Where To Start

Companies could begin by using blockchain for transactions that do not affect safety. The tool can first be used within one company and then extended to partners, proving the security of the system in steps. De Vos thinks it is important for aviation companies to work out the best business rules first, before trying to bring regulators on board.  

There is no lack of support and expertise in this field; IFS, Accenture, SITA and Microsoft are just a few of the companies eager to help aviation exploit the potential of blockchain.

Microsoft has now developed the architecture in its Azure cloud to enable speedy and easy implementation of new blockchain business uses, explains blockchain specialist Richard Knight. An enterprise framework named after the codebreakers at Bletchley Park could manage the cryptographic keys essential to the security of aviation aftermarket use, and Azure’s middleware could provide analytics, artificial intelligence and machine learning tools needed to build out the solution. Knight says Azure is already supporting blockchain projects or tests in a variety of sectors beyond cryptocurrencies, including government, retail and manufacturing.

How soon will aviation and the aftermarket begin this adoption process?

Ramco Systems is developing a prototype for handling part repairs and transactions for AFI-KLM E&M. Ramco has demonstrated its blockchain with manual entry of repair and removal actions.

IFS Labs recently did a proof-of-concept demonstration of how blockchain or distributed ledgers can be integrated with aviation ERP systems. “The project helped demonstrate how the technology can be used for asset management, mapping supply chains, tracking part shipments and even logging and verifying commercial maintenance work,” de Vos says.

SITA has had high-level blockchain discussions with aviation stakeholders including associations and aircraft manufacturers. “The consensus is that it is a valid use case,” O’Sullivan says. He adds that there are similar efforts going on in other industries where the provenance of objects is important, for example, in tracking diamonds.

Takanti says pilot programs already are moving forward in applying blockchain to supply chains and customs movements in Europe, and the U.S. Exostar is talking to technology partners about using blockchain in aftermarkets and will next approach its current customers. “It could happen sooner that we all realize,” he says.

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