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Airlines Not Focused On Aftermarket Supply Chain Risks

Many airlines apply a degree of risk assessment and due diligence at the Tier One level, but simply have no idea at all about “the guy who supplies the O-rings for the pumps” that the Tier One operator then goes on to fit on their aircraft, one expert says.

SINGAPORE— Many airlines risk serious disruption to their MRO operations from a lack of basic risk analysis, executives said at the  MRO Asia conference here. 

“In many instances, the supply chain operators and the airline operator are simply not aligned in their objectives,” warned Team SAI President and COO Dave Marcontell.

Marcontell said that many airlines apply a degree of risk assessment and due diligence at the Tier One level, but simply have no idea at all about “the guy who supplies the O-rings for the pumps” that the Tier One operator then goes on to fit on their aircraft. This is a problem in the making, he said.

Likewise, DHL’s supply chain expert and director of Resilience 360 system analysis group Tobias Larsson, said his research shows only around 15% of airline executives have identified where the key risks lie when it comes to the parts and equipment that keep their aircraft flying.

“But we also found that some 73% of companies had some kind of [supply chain] disruption, at least 93% of company CEOs feel they are unprepared for supply chain disruption, and around 90% are not exactly sure how long it would take to recover from any disruption,” he added.

These figures, combined with a push by OEMs towards providing one-stop MRO for future customers, are combining push down inventory levels and increase overall business risks, Larsson said.

Both speakers at the conference warned that the only sound approach to these issues is to plan for supply chain disruptions before the event, not after it has happened.

Supply chain mapping—even for such simple things as public holidays, or the possible spread of an emerging, short-term threat like Ebola—can be used to predict more accurately a disrupton’s impact on the bottom line, Larsson said.

That in turn can be used to estimate a baseline figure for what he calls “the risk cost,” for any particular event or disruption. But at the moment, both commentators warn that too few carriers are looking at the issue.

“Today, MRO costs make up about 18% of the ticket costs for airlines,” Marcontell said. “But even so many airlines don’t seem to understand the increased risks that are coming with [MRO] supplier consolidation and changes in supply chains.”

TAGS: Asia Pacific
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